GST transition refund credit reversal in GSTR-3B can satisfy debit requirement when old return mechanism is unavailable

During the GST transition, refund of accumulated CENVAT credit under Rule 5 could not be denied merely because the refund amount was not debited in the pre-GST return format. Where ST-3 filing had ceased and the assessee reversed the equivalent credit in books and through GSTR-3B, and the Board's circular treated such reversal as non-availment of credit, the debit requirement in paragraph 2(h) of Notification No. 27/2012-C.E.(N.T.) was satisfied on a practical and substantive basis. A purely technical objection to the absence of the old return mechanism was therefore unsustainable, and the refund claim was allowed.

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Issues: Whether refund of accumulated CENVAT credit under Rule 5 of the CENVAT Credit Rules, 2004 could be denied for non-debit of the refund amount in the return when the assessee had reversed the equivalent credit in books and through GSTR-3B after the transition to GST.

Analysis: The claim arose in the transitional GST period, when filing of ST-3 returns had ceased and the ACES system did not provide a mechanism to debit the refund amount. The assessee had voluntarily reversed the entire credit carried forward in TRAN-1 through GSTR-3B, and the Board's circular clarified that reversal in GSTR-3B amounts to non-availment of credit. In these circumstances, the requirement in paragraph 2(h) of Notification No. 27/2012-C.E.(N.T.) dated 18.06.2012 was held to be satisfied on a practical and substantial basis, and the contrary view taken by the lower authorities was found unsustainable.

Conclusion: The denial of refund was held to be contrary to law and the refund claim was allowed in favour of the assessee.

Final Conclusion: The refund rejection orders were set aside and the assessee succeeded on the refund claim with consequential relief under law.

Ratio Decidendi: In the GST transition period, reversal of the equivalent credit in GSTR-3B can satisfy the refund-debit condition where the statutory return mechanism is unavailable, and a refund under Rule 5 cannot be denied on a purely technical non-compliance with the pre-GST debit format.

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