The amount in the CENVAT credit account should be refunded in cash

The Hon’ble Bombay High Court in the case of COMBITIC GLOBAL CAPLET PVT. LTD., (EARLIER KNOWN AS UNISULE PVT. LTD.,) VERSUS THE UNION OF INDIA, PRINCIPAL COMMISSIONER RA AND EX-OFFICIO ADDITIONAL SECRETARY TO THE GOVERNMENT OF INDIA MUMBAI, THE COMMISSIONER OF CENTRAL TAX, & CENTRAL EXCISE (APPEALS) , RAIGAD, THE ASSISTANT COMMISSIONER, MARITIME REBATE, CGST & CENTRAL EXCISE, BELAPUR.  - 2024 (6) TMI 498 - BOMBAY HIGH COURT  directed the Revenue Authority to rule the sanctioning authority to refund the amount in the CENVAT credit account in cash instead of crediting it to the CENVAT account.

Facts:

M/s Combitic Global Caplet Pvt. Ltd. (“the Petitioner”) was engaged in the manufacture and export of medicaments falling under Chapter 30 of the First Schedule to the Central Excise Tariff Act, 1985. The Petitioner had an amount of Rs.10,48,11,734/- in his CENVAT account.  The Petitioner filed an application under Section 35EE of the Central Excise Act, 1944(“the Central Excise Act”) before the Principal Commissioner of RA and Ex-officio Additional Secretary (“the Respondent”) for the refund of the excess duty paid.

An Order dated September 7, 2018 (“the Impugned Order”) was passed by the Respondent, directing the original authority to allow re-credit of excess duty paid by Petitioner in its CENVAT credit account amounting to Rs.10,48,11,734/-.

However, the Respondent vide Order dated October 5, 2018, held that the Government holds any amount paid in excess of duty liability on one's own volition cannot be treated as duty and has to be treated as a voluntary deposit with the Government. This deposit is required to be returned in the manner in which it was paid as the said amount cannot be retained by the Government. Therefore, it was directed to re-credit in the CENVAT credit account from which it was paid subject to compliance with the provisions of Section 12B of the Central Excise Act.

The matter was referred to the Appellate Authority, wherein Order August 22, 2019, was passed and it was held the amount was permitted to be re-credited under Section 11B of the Central Excise Act read with Rule 18 of the Central Excise Rules, 2002. 

Further, an Order dated July 16, 2020 (“the Impugned Order”) was passed by the Commissioner of Central Tax & Central Excise (Appeals), upholding the recredit of the rebate amount to the CENVAT credit account.

All the Orders were Impugned on the ground that Section 142(3) of the Central Goods and Services Tax Act, 2017(“the CGST Act”) clearly says, w.e.f 1st July 2017, in view of the effect of change in the regime, i.e., when the GST regime was introduced, any refund that was payable to Petitioner has to be paid in cash.

Hence, aggrieved by the Impugned Orders, the Petitioner filed the present writ petition.

Issue:

Whetherthe amount in the CENVAT credit account should be refunded in cash?

Held:

The Hon’ble Bombay High Court in COMBITIC GLOBAL CAPLET PVT. LTD., (EARLIER KNOWN AS UNISULE PVT. LTD.,) VERSUS THE UNION OF INDIA, PRINCIPAL COMMISSIONER RA AND EX-OFFICIO ADDITIONAL SECRETARY TO THE GOVERNMENT OF INDIA MUMBAI, THE COMMISSIONER OF CENTRAL TAX, & CENTRAL EXCISE (APPEALS) , RAIGAD, THE ASSISTANT COMMISSIONER, MARITIME REBATE, CGST & CENTRAL EXCISE, BELAPUR.  - 2024 (6) TMI 498 - BOMBAY HIGH COURTheld as under:

• Observed that, even if, the Petitioner had made a voluntary deposit, that amount has to be shown as CENVAT credit in the account of the Petitioner. In the alternative, it would certainly come under the category “or any other amount paid”. Therefore, either way, the amount paid by the Petitioner, admittedly, has to be refunded.
• Held that, Section 142(3) of the CGST Act very clearly says “any amount eventually accruing shall be paid in cash”. In the circumstances, the Respondents should have directed the sanctioning authority to refund the amount of duty refundable to the Petitioner in cash instead of credit in the CENVAT account, 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. Hence, the amount was to be paid with accumulated interest in accordance with the law. 

Our Comments:

Section 142 talks about “Miscellaneous transitional provisions”. According to Section 142(3) of the CGST Act, every claim for refund filed by any person before, on, or after the appointed day, for a 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.  However, where any claim for refund of CENVAT credit is fully or partially rejected, the amount so rejected shall lapse. Further, 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.

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