2021 (12) TMI 284 - AT - Central Excise

CESTAT allows appeal, grants 21 lakh refund to appellant under GST Act Section 142

The CESTAT allowed the appeal in favor of the appellant, setting aside the Adjudicating Authority's decision to reject the refund claim of &8377; 21 ... Deposit made under protest - pre-deposit under section 35F of the Central Excise Act - refund under Section 142 of the CGST Act - distinction between deposit and duty paid - non-appropriation by Revenue and restitution of deposit upon setting aside demandDeposit made under protest - pre-deposit under section 35F of the Central Excise Act - distinction between deposit and duty paid - non-appropriation by Revenue and restitution of deposit upon setting aside demand - Refundability of the portion of amounts paid during investigation (Rs. 15 Lakhs of the claimed Rs. 21 Lakhs) which were not treated as pre-deposit under section 35F and were retained by the Department after the demand was set aside. - HELD THAT: - The Tribunal held that amounts paid during the course of investigation are deposits made under protest and not payments of duty unless specifically appropriated by the Revenue. The Board's Circular No.984/08/2014, relied on by the Department, clarifies that amounts in excess of mandatory pre-deposit are not to be treated as pre-deposit under section 35F; nonetheless the appellant's wider payments during investigation (aggregate Rs.66 Lakhs) included an amount which could not properly be treated as duty where the demand itself was subsequently set aside. The Tribunal followed the principle in EBIZ . Com Pvt. Ltd. v. CCE that the Revenue acts as custodian of such deposits and, once the demand is vacated, cannot unjustly retain the deposit. The pre-deposit portion (Rs.44 Lakhs) had been refunded; the remaining Rs.15 Lakhs formed part of the appellant's monies for which there was no liability and therefore had to be refunded. The Commissioner (Appeals) was found to be wrong in characterising that sum as duty and in invoking section 11B. [Paras 6, 8]Rs. 15 Lakhs, paid during investigation and not appropriated as duty, must be refunded to the appellant; the rejection of this portion was set aside.Refund under Section 142 of the CGST Act - distinction between deposit and duty paid - Whether Rs. 6 Lakhs shown as closing balance in ER-1 for June, 2017 which was not carried forward via TRAN-1 to the GST regime is refundable in cash under Section 142 of the CGST Act. - HELD THAT: - The Tribunal observed that the closing balance of Rs.6 Lakhs in ER-1 as on June 30, 2017 (immediately prior to GST commencement on July 1, 2017) was not carried forward to GST through FORM TRAN-1 and thus effectively remained as cash with the Department. In terms of Section 142 of the CGST Act, such balance cannot be treated as transferred credit and must be refunded in cash to the assessee. The adjudicating authority's denial for want of proof of debit into the credit ledger was therefore incorrect in law. [Paras 7, 8]Rs. 6 Lakhs shown as closing ER-1 balance for June, 2017 and not transferred to GST is refundable in cash under Section 142 of the CGST Act.Final Conclusion: The Tribunal allowed the appeal, setting aside the rejection of the refund claim of Rs.21 Lakhs: Rs.15 Lakhs (deposit made during investigation and not appropriated as duty) and Rs.6 Lakhs (closing ER-1 balance of June, 2017 not transferred to GST) are to be refunded to the appellant. Issues:Refund claim rejection of &8377; 21 Lakhs upheld by Commissioner (Appeals) - Appeal before CESTAT - Appellant's contention of wrongly considered payment of duty and balance &8377; 6 Lakhs - Appellant's argument under section 142 of CGST Act - Department's reliance on Circular No.984/08/2014 - Applicability of section 11B of Central Excise Act - Rejection of &8377; 6 Lakhs for lack of proof in credit ledger - Entitlement of appellant for refund of &8377; 15 Lakhs and &8377; 6 Lakhs - Final decision on refund claim.Analysis:The case involved the rejection of a refund claim of &8377; 21 Lakhs by the Commissioner (Appeals), upheld by the Adjudicating Authority, which was challenged before the CESTAT. The appellant argued that the rejection was incorrect, emphasizing that &8377; 15 Lakhs was wrongly considered as a payment of duty and the remaining &8377; 6 Lakhs was rejected without proof of debit in the pre-GST regime. The appellant cited section 142 of the CGST Act to support their claim for refund. The Department relied on Circular No.984/08/2014 and the applicability of section 11B of the Central Excise Act to justify the rejection. However, the CESTAT found that the appellant was not liable to pay the total amount of &8377; 66 Lakhs, as a significant portion had already been refunded as pre-deposit. The CESTAT emphasized that the &8377; 21 Lakhs was not part of the pre-deposit and should be refunded to the appellant, as the duty demand had been set aside. The Tribunal also highlighted a previous court decision to support the appellant's claim that the amount was a 'deposit made under protest' and not duty paid.Regarding the rejection of the &8377; 6 Lakhs, the CESTAT observed that the amount was shown as a closing balance in the pre-GST regime and not transferred to the GST regime. As per Section 142 of the GST Act, this amount had to be refunded to the appellant in cash. Therefore, the Tribunal concluded that the appellant was entitled to a refund of both the &8377; 15 Lakhs paid in cash during the investigation and the &8377; 6 Lakhs from the Cenvat Credit Account. The Adjudicating Authority's decision to reject the refund claim of &8377; 21 Lakhs was set aside, and the appeal was allowed in favor of the appellant. The order for refund was pronounced in the open court on 03.12.2021.