Procedural delay in reversing the credit will not disentitle the assessee from claiming refund

The Hon'ble CESTAT, Bengaluru, in the matter of M/s Chariot International Pvt. Ltd. v. Commissioner of Central Tax [Central Excise Appeal No. 20158 of 2020 dated June 17, 2021] set aside the order passed by the Commissioner (Appeals) disallowing the refund claims of the assessee on the ground that credit reversal in Form GSTR-3B pertains to GST credit and not CENVAT credit. Held that, procedural delay will not disentitle the assessee from claiming refund when credit had been reversed in Form GSTR-3B.

Facts

M/s Chariot International Pvt. Ltd. ('the Appellant') is engaged in the manufacture and export of granite slabs and tiles classifiable under Chapter sub-heading 68022390 of Central Excise Tariff Act, 1985 ('the CETA') and avails the Central Value Added Tax ('the CENVAT') credit of service tax paid on input services used in the manufacture of their finished goods under the provisions of CENVAT Credit Rules, 2004 ('the CCR').

The Appellant had filed three refund applications for refund of CENVAT credit under Rule 5 of the CCR read with Notification No. 27/2012-CE (NT) dated June 18, 2012 ('Notification No. 27'), for which a Show-Cause Notice ('SCN') was issued to the Appellant, rejecting the refund claims on the ground that the Appellant has not debited the amount in the CENVAT register as required under para 2(h) of the Notification No. 27, for which, the Appellant filed reply to the SCN and submissions before the Assistant Commissioner ('the Adjudicating Authority'/ 'A.A.')

Subsequently, the A.A.vide Order-in-Original('OIO') sanctioned the refund claim filed by the Appellant, but the Revenue Department filed three appeals against OIO, before the Commissioner(Appeals) ('the Respondent'), wherein, an order dated December 16, 2019 ('the Impugned Order') was passed setting aside the OIO anddisallowed the refund claims of the Appellant on the ground that credit reversal in Form GSTR-3B pertains to GST credit and not CENVAT credit by invoking Section 142(3) and Section 142(4) of the Central Goods and Services Tax Act, 2017 ('the CGST Act').

Being aggrieved, the Appellant has filed this appeal.

Issue

• Whether procedural delay in reversing the credit in Form GSTR-3B will disentitle the Appellant from claiming the refund?

Held

The Hon'ble CESTAT, Bengaluru, in Central Excise Appeal No. 20158 of 2020 dated June 17, 2021, held as under:

• Noted that, the A.A. allowed the refunds by holding that non-reversal of the credit at the time of filing refund claims is only a minor procedural lapse and reversal is ensured before sanctioning of the refund; hence the delay was condoned. Further noted that, the Appellant is eligible to claim refund and has debited the amount claimed in the Form GSTR-3B.
• Observed that, the Hon'ble Tribunal has consistently held that credit reversed without being utilized considered as if credit has not been taken. Hence the credit reversed in GSTR-3B tantamount to not been taken credit in Section 142(1) of the CGST Act.
• Stated that, the A.A. in OIOhasheld that the belated debit was only a procedural lapse and technical in nature, but the Respondent in the Impugned Order has not considered this aspect and has simply quoted few judgments of the courts holding that exemption notification should be construed strictly.
• Opined that, the Respondent failed to examine whether the conditions violated by the Appellant is a procedural condition of a technical nature or a substantive condition. 
• Relied on the judgement of the Hon'ble CESTAT, Mumbai in the case of Sandoz Pvt. Ltd. CCE, Belapur [2015(325) ELT 387 (Tri. Mum.)and held that the Impugned Order rejecting the refunds is not sustainable in law.
• Held that, the Appellant has reversed the credit in the GSTR-3B, but there was only a delay in debiting the CENVAT credit and this delay is procedural delay and will not disentitle the Appellant from claiming the refund.

Relevant Provisions

Para 2(h) of the CCR read with Notification No. 27

'2.0 Safeguards, conditions and limitations.- Refund of CENVAT Credit under rule 5 of the said rules, shall be subjected to the following safeguards, conditions and limitations, namely:-

(h) the amount that is claimed as refund under rule 5 of the said rules shall be debited by the claimant from his CENVAT credit account at the time of making the claim.'

Section 142 (1), Section 142(3) and Section 142(4) of the CGST Act

'142.Miscellaneous transitional provisions.

142. (1) Where any goods on which duty, if any, had been paid under the existing law at the time of removal thereof, not being earlier than six months prior to the appointed day, are returned to any place of business on or after the appointed day, the registered person shall be eligible for refund of the duty paid under the existing law where such goods are returned by a person, other than a registered person, to the said place of business within a period of six months from the appointed day and such goods are identifiable to the satisfaction of the proper officer:

Provided that if the said goods are returned by a registered person, the return of such goods shall be deemed to be a supply.'

'(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: (1 of 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.'

'(4) Every claim for refund filed after the appointed day for refund of any duty or tax paid under existing law in respect of the goods or services exported before or after the appointed day, shall be disposed of in accordance with the provisions of the existing law:

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.'