The enactment of GST Law has marked 4 years and yet the most buzzing issue that has always been in talks is Transitional Credit be it the availment or the retrospective amendment of Section 140 or the refund of the cess.
Of late various rulings/judgements have come into picture on the issue of refund of EC, SHEC and KKC balances. Though the judgements have been both in favour of the taxpayer as well as against taxpayer; However, there seems a ray of hope for refund of such cesses.
An effort has been made to examine whether refund of such cess could be filed on the current date by the assesses who were unable to avail credit of cess under GST law or who subsequently reversed the cess availed based on amendment in GST law barring any time limit under CEA or Limitation Act.
Extract of section 142(3)
(3) Every claim for refund filed by any person before, on or after the appointed day, for refund of any amount of CENVAT credit, duty, tax, interest or any other amount paid under the existing law, shall be disposed of in accordance with the provisions of existing law and any amount eventually accruing to him shall be paid in cash, notwithstanding anything to the contrary contained under the provisions of existing law other than the provisions of sub-section (2) of section 11B of the Central Excise Act, 1944:
Provided that where any claim for refund of CENVAT credit is fully or partially rejected, the amount so rejected shall lapse:
Provided further that no refund shall be allowed of any amount of CENVAT credit where the balance of the said amount as on the appointed day has been carried forward under this Act.
Section 142(3) of CGST Act provides that refund filed by any person before, on or after 1st July 2017, for refund of any amount of CENVAT credit would be granted in accordance with the provisions of the erstwhile law and any refund amount would be paid in cash, notwithstanding anything to the contrary contained under the provisions of erstwhile law other than the provisions of sub-section (2) of section 11B of the Central Excise Act, 1944:
It could be concluded that only section 11B(2) of the Central Excise Act, 1944, would be relevant for filing refund claim. Further, Section 11B(1) of CEA states that refund application has to be filed within one year from the date of payment of the duty. Since only provision of section 11B(2) is applicable under GST, the time limit mentioned in Section 11B(1) cannot be said to be applicable for claiming refunds relating to pre-GST regime under GST regime.
Further, where the time-limit in CEA is not applicable, we would examine whether Limitation Act would apply:
In the case of SUBHAS AND COMPANY Vs CGST 2020-TIOL-1109-HC-KOL-GST, It was held that
"In absence of any specific provisions under the Act, we would have to hold that in terms of the residuary provisions of the Limitation Act, the period of three years should be the guiding principle and thus a period of three years from the appointed date would be the maximum period for availing of such credit."
However, In the case of Essar Bulk Terminal Salaya Ltd [2018 (363) E.L.T. 262 (Tri. - Ahmd.)], it was held that provisions of Limitation Act would not be applicable to issues arising under Central Excise Act, 1944 or Finance Act, 1994. Application/Interpretation of time limits prescribed in exercising particular right vested under different provision of Act or Rules cannot be uniformly applied to all circumstances under said Act or Rules. This was affirmed by the Gujarat High Court in 2019 (25) GSTL 521 (HC).
Further, In the case of Hongo India (P) Ltd [2009 (236) ELT 417 (SC)], it was held that applicability of provisions of the Limitation Act to be judged not from the terms of the Limitation Act, but by the provisions of Central Excise Act relating to filing of reference application. It’s the duty of Court to respect the legislative intent and limitation cannot be extended by giving liberal interpretation and invoking Section 5 of Limitation Act, 1963. It could be concluded that even the limitation act is not appliable.
There is no provision in the GST law that such credits would lapse. The credit is a vested right and cannot be taken away. CCE, Pune vs. Dai Ichi Karkaria Ltd. 1999 (112) E.L.T. 353 (S.C.), Eicher Motors Ltd Vs Union of India 1999(106) E.L.T. 3 (S.C), Filco Trade Centre Pvt Ltd Vs. Union Of India 2018-TIOL-120-HC-AHM-GST; Commissioner v. Bhavin Textiles - 2008 (221) E.L.T. 44 (Guj.)
Credit is property and taking away without specific provision is violation of article 300A of Constitution of India. The various decisions in the context of Tran credit can be referred. A.B. Pal Electricals Pvt. Ltd. v. Union of India — 2020 (33) G.S.T.L. 8 (Del.); Brand Equity Treaties Limited v. Union of India - 2020 (38) G.S.T.L. 10 (Del.)
Any construction to deny the refund violates Section 174(2)(c) of CGST Act, 2017 which says that repeal of existing laws do not take away the vested right accrued
The following decisions held that such amount is refundable
DB decision in case of BHEL vs. CCT, Bhopal 2020-TIOL-1341-CESTAT-DEL followed in Schlumberger Asia Services Ltd Vs CCE & ST 2021-TIOL-313-CESTAT-CHD - relying on Kar HC decision in Slovak Trading case.
In the case of BHEL vs. CCT, Bhopal 2020-TIOL-1341-CESTAT-DEL (Relevant case law attached) it was held that
There is no dispute that on 01/07/2017, the cesses credit validly stood in the accounts of the assessee and very much utilizable under the existing provisions - The appellants could not carry over the same under the GST regime - Thus the appellants were in a position where they could not utilize the same - Bench agrees that the credits earned were a vested right in terms of the Apex Court judgement in Eicher Motors case - 2002-TIOL-149-SC-CX-LB and will not extinguish with the change of law unless there was a specific provision which would debar such refund - It is also not rebutted by the revenue that the appellants had earned these credits and could not utilize the same due to substantial physical or deemed exports where no Central Excise duty was payable and under the existing provisions, had the appellants chosen to do so they could have availed refunds/ rebates under the existing provisions - There is no provision in the newly enacted law that such credits would lapse - Thus merely by change of legislation, suddenly the appellants could not be put in a position to lose this valuable right - Thus Bench finds that the ratio of Apex court's judgment is applicable as decided in cases where the assessee could not utilize the credit due to closure of factory or shifting of factory to a non-dutiable area where it became impossibly to use these credits - assessee is eligible for the cash refund of the cessess lying as cenvat credit balance as on 30/06/2017 in their accounts - impugned order-in-appeal is without any merit and is, therefore, set aside - appeal is accordingly allowed.
In the case of Schlumberger Asia Services Ltd. v. Commissioner of CE & ST, the appellant is in appeal against impugned order wherein the refund claim filed by them of Education Cess, Secondary & Higher Education Cess and Krishi Kalyan Cess lying unutilized in their cenvat credit account on 01.07.2017 when GST Regime came into force has been denied - A SCN was issued to the appellant that in terms of Section 140 of CGST Act, 2017 the appellant is not entitled to carry forward the cenvat credit in GST Regime; therefore, the refund claim filed on 30.08.2019 is barred by limitation - The amendment to Section 140 came after one year of switching to GST Regime on 30.08.2018 which is applicable retrospectively - In that circumstances how the appellant could have filed the refund claim within one year from 01.07.2017 till 30.08.2018, when there was no provision of law existed, when amendment itself takes place on 30.08.2018, therefore, the relevant date of filing refund claim shall be 30.08.2018 and within one year of the said date, the refund claim has been filed by appellant - In that circumstance, the refund claim filed by appellant is not barred by limitation - The refund claim is allowed which is subject to verification of records.
However, the Single Member of CESTAT, Hyderabad in BHEL vs. CCT, Secunderabad 2020 (41) G.S.T.L. 465 (Tri. - Hyd.) held ineligible – relying on LB decision of Bom HC in case of Gauri Plasticulture P. Ltd. v. Commissioner - 2019 (30) G.S.T.L. 224 (Bom.)
Conclusion
Taxpayer could file a refund application to its Jurisdictional ACCE or DCCE. The claim should be supported by documents and evidence to substantiate the application. There is no form prescribed for filing the refund claim, however, Form R (old form) was being used for making an application. Taxpayers could file the refund application through Form R. The refund application should be accompanied by a complete set of documents to establish that the amount in relation to a refund are collected from or paid by taxpayer to the government and that the incidence of duty has not been passed on to the customer. In short, there is no unjust enrichment. Taxpayer should clearly state the facts and grounds to substantiate the refund claim.
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