In Kirloskar Toyota Textile Machinery Pvt. Ltd. v. Commissioner of Central Tax, Bengaluru South GST Commissionerate [Central Excise Appeal No. 20320 of 2020 dated August 19, 2021] Kirloskar Toyota Textile Machinery Pvt. Ltd (Appellant) has filed the current Appeal against Order-In-Appeal No. 328/2020 dated June 23, 2020 (OIA) which upheld the order of rejection of refund of unutilized education Cess (EC) and Secondary and Higher Education Cess (SHEC) under Section 140(1) of the Central Goods and Services Tax Act, 2017 (CGST Act)
The Appellant contended that accumulated credits of Cesses were not transitioned into Goods and Services Tax (GST) regime due to specific restriction under Section 140(1) of the CGST Act. The Appellant therefore had to resort to the option of refund under existing law to avoid lapsing of credit.
Relied on judgments M/s. Bharat Heavy Electricals Ltd. Vs. Commissioner of CGST [2020-TIOL-1341-CESTAT-DEL] and The Union of India v. Slovak India Trading Company [2006 (201) ELT 559 Kar dated July 7, 2006] wherein the appeal was allowed to the assessee on the matter of refund of Cesses.
The Hon’ble CESTAT, Bangalore observed that the decisions relied on by the Appellant are provided by the Division Bench of CESTAT, New Delhi which would prevail over the decision rendered by Single Member of the CESTAT relied on by the Department.
Further noted that the case of Slovak India Trading Company (supra) is bound to be followed which was also relied on in the case of M/s. Bharat Heavy Electricals Ltd. (supra) by holding that the refund of the Cesses can be granted, which couldn’t be transitioned into GST.
FULL TEXT OF THE CESTAT BANGALORE ORDER
The present appeal is directed against the impugned order dated 23/06/2020 passed by the Commissioner of Central Tax (Appeals), Bangalore whereby the appeal of the appellant is dismissed and the order of rejection of refund passed by the Assistant Commissioner was upheld. Briefly the facts of the present case are that the appellant is engaged in the manufacture of parts and accessories of textile machinery and also renders Commissioning and Installation Services. Appellant is engaged in export of service without payment of tax under LUT and they are also availing the benefit of cenvat credit facility availed under Cenvat Credit Rules, 2004. Since the appellant is engaged in export, there is an accumulated balance of unutilized credit of Education Cess (EC) and Secondary and Higher Education Cess (SHEC) available in the books. With the introduction of GST, these credits of cess were restricted to be transitioned into GST by virtue of Section 140(1) of the Act. Accordingly, the appellant did not carry forward accumulated credit of cess amounting to Rs. 36,53,362/-(Rupees Thirty Six Lakhs Fifty Three Thousand Three Hundred and Sixty Two only) in Tran-1. As these accumulated credit could not be utilized towards taxable supplies under existing law and also not transitioned into GST, appellant preferred a refund claim on 29/06/2018 under Section 11B of the Central Excise Act. Refund claim was filed within one year from the introduction of GST. The original authority as well as the appellate authority have rejected the refund application mainly on the ground that transfer of cess is restricted under Section 140(1) of the CGST Act, 2017. Hence, the present appeal.
2. Heard both the parties and perused the records.
3. Learned consultant submitted that the impugned order is not sustainable in law as the same has been passed without properly appreciating the provisions of the refund under the existing law and without considering the judgments delivered on the refund of cess by the Tribunal and the High Court. He further submitted that the appellant being exporter of goods made without payment of tax under LUT was entitled to claim the accumulated credit of EC and SHEC in terms of Rule 3(7) of Cenvat Credit Rules, 2004 which allows the appellant to take cenvat credit on Education Cess and Secondary and Higher Education Cess and since these credit could not be utilized for payment of output liability and hence the appellant filed the refund claim under Section 11B of the Central Excise Act. He further submitted that there is no express provision for lapsing of Education Cess and Secondary and Higher Education Cess credit and therefore the appellant is rightly entitled to refund of Education Cess and Higher Education Cess. He also submitted that the impugned order while rejecting the refund of Education Cess has relied on the transitional provision under 140(1) to deny the refund claim of credit of cess assuming that the refund is filed under GST whereas the present claim is not filed under Section 142 of GST but is filed under Section 11B of the Central Excise Act. He further submitted that with the introduction of GST, assessee in respect of balance of cenvat credit lying in his account was left with only three options which is also admitted in para 6 of the impugned order viz. (a) refund of cenvat credit in terms of existing law (b) transfer to the ITC Ledger of GST regime through Tran-1 and lapse of cenvat credit. He further submitted that these accumulated credits of cess were not transitioned into GST due to specific restriction under Section 140(1), the appellant had to resort to the option of refund under existing law to avoid lapsing of credit. He further submitted that this issue of refund of cenvat credit of cesses has been considered by the Division Bench of the Delhi Tribunal in the case of M/s. Bharat Heavy Electricals Ltd. Vs. Commissioner of CGST reported in 2020-TIOL-1341-CESTAT-DEL. wherein the Division Bench of the Tribunal after relying upon the decisions of the Apex Court in case of Eicher Motors Vs. UOI reported in 1999 (106) E.L.T. 3 (S.C) and Apex Court decision in Samtel India Vs. CCE reported in 2003 (155) E.L.T. 14 (S.C) and also the decision of the Karnataka High Court in the case of Slovak India Trading Co. Pvt. Ltd. reported in 2006 (201) E.L.T. 559 (kar.) has allowed the appeal of the assessee relating to refund of cesses under the existing law. Learned consultant further submitted that the findings in para 9 of the Order-in-Appeal that the claim was time-barred, the appellant submits that this issue goes beyond the scope of original show-cause notice as this issue was never raised at the time of show-cause notice and the original authority has also not given any findings on the issue of limitation and therefore the findings in the impugned order regarding time-bar is not sustainable in view of the following decisions:
