Refund of Cesses In Cash Not Allowed

1. FACTS OF CASES:

1. M/s Mylan Laboratories Ltd (appellant) is engaged in the manufacture of pharmaceutical and is 100% EOU. The appellant was availing the benefit of CENVAT credit under CENVAT Credit Rules 2004. The appellant filed a refund claim dated 04.01.2018 seeking refund of Rs 28,600/- of its unutilised balance of cesses lying in balance as on 30.06.2017 in CENVAT credit account as the new CGST Act has come into effect from 01.07.2017.

2. After the introduction of CGST Act, a provision has been made in the CGST Act for transfer of balance of CENVAT credit as input tax credit under CGST Act. However, there is no provision of transfer of balance of cesses into credit ledger of CGST. Therefore, they have claimed refund of unutilised balance of cesses in cash.

2. ISSUE FOR CONSIDERATION

Whether refund of cesses in cash is allowed.

3. CONTENTION BY APPELLANT

The cesses shall be refunded under Section 11B of the Central Excise Act, 1944 read with the provisions of the Cenvat Credit Rules, 2004 as the same cannot be transitioned to the GST regime.

4. CONTENTION BY DEPARTMENT

1. It was contented that education cess and secondary and higher education cess are to be taken and utilized for the purpose of payment of the said cesses only.

2. Education Cesses are not levied under the GST Act, the same is not meant to be transitioned to the electronic credit register in the GSTN.

3. The definition of ‘eligible duties and taxes’ as per the explanation 3 under Section 140 of the CGST Act, 2017 was amended with retrospective effect from 01.07.2017 whereby it is specified that cesses are excluded from the definition of ‘eligible duties and taxes’, Thus, the credit is ab initio not available for utilization for GST.

4. As per the transitional provisions specified under CGST Act, the credit balances not transitioned to GST regime shall lapse.

5. There is no provision in the Cenvat Credit Rules, 2004 or the provisions of Section 11B of the Central Excise Act, 1944, mandating refund of the impugned cesses.

5. RATIO DECIDENDI BY HON’BLE CESTAT

The Hon’ble CESTAT relying on the judgement of Gouri Plasticulture Pvt Ltd VS CCE Indore – 2019-TIOL-1248-HC-MUM-CX-LB has held that there is no provision in the CENVAT Credit Rules 2004 or the Central Excise Act 1944 to allow cash refund of cesses lying in balance in the CENVAT Credit.

Thus, cash refund of cesses lying is not allowed.

SOURCE: M/s MYLAN LABORATORIES LTD 2020-TIOL-576-CESTAT-HYD