Section 140 CGST Act prohibits carry forward of accumulated education and krishi kalyan cess credits from July 2017

The Commissioner (Appeals) CGST, Jaipur dismissed the appellant's refund claim for carry forward credit of cesses. The adjudicating authority correctly rejected the claim based on amended explanation 3 of Section 140 of CGST Act, 2017, which prohibited carrying forward accumulated credit of cesses from July 1, 2017. The Madras HC in Sutherland Global Services case confirmed that Education Cess, Secondary Higher Education Cess, and Krishi Kalyan Cess cannot be carried forward or set off against GST output liability. Since transition of cesses to GST credit ledger is inadmissible, cash refund is also impermissible under Section 54 of CGST Act, 2017.

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Issues Involved:
1. Admissibility of refund claim for cesses carried forward through TRAN-1 and reversed in GSTR-3B.
2. Applicability of Explanation (3) to Section 140 of the CGST Act, 2017.
3. Relevance of case laws cited by the appellant.
4. Legal position on refund of unutilized cesses under GST regime.

Detailed Analysis:

1. Admissibility of Refund Claim for Cesses Carried Forward Through TRAN-1 and Reversed in GSTR-3B:
The appellant filed a refund claim under Section 54(1) of the CGST Act, 2017 for Rs. 5,72,604/- pertaining to inadvertent reversal of cesses carried forward through TRAN-1 and later reversed in the GSTR-3B return for August 2018. The adjudicating authority rejected the refund claim, stating that cesses credit cannot be carried forward through TRAN-1 as per Explanation (3) to Section 140 of the CGST Act, 2017, which was inserted via the Central Goods and Services Tax Amendment Act, 2018 and made effective from 1-7-2017. Consequently, the refund claim was deemed inadmissible.

2. Applicability of Explanation (3) to Section 140 of the CGST Act, 2017:
The adjudicating authority referenced Explanation (3) to Section 140, which explicitly excludes any cess from being carried forward in the GST regime. The appellant argued that this provision should not affect the refund claim, as the credit of cesses was validly earned and not explicitly withdrawn by the legislature. However, the adjudicating authority maintained that since the credit of cesses could not be carried forward, the refund of the same under the GST regime does not arise.

3. Relevance of Case Laws Cited by the Appellant:
The appellant cited the cases of M/s. Eicher Motors Limited v. Union of India and M/s. Bharat Heavy Electricals Ltd. v. Commissioner Central Goods and Services Tax, Central Excise, and Customs, Bhopal, arguing that these cases supported their claim for refund of unutilized cesses. The adjudicating authority dismissed these references, stating that they pertain to the old regime (Central Excise) and do not hold relevance under the GST regime. Furthermore, it was noted that the decision in the case of Bharat Heavy Electricals Ltd. is under appeal and has not attained finality.

4. Legal Position on Refund of Unutilized Cesses Under GST Regime:
The adjudicating authority highlighted that there is no explicit provision under Section 54 of the CGST Act, 2017 for the refund of such credit. The Hon’ble Madras High Court, in the case of Commissioner of CGST & Central Excise v. Sutherland Global Services Pvt. Ltd., held that the assessee was not entitled to carry forward and set off unutilized cesses against GST output liability. This judgment supported the view that once the transition of cesses to the GST credit ledger is held inadmissible, cash refund of the same is also not permissible.

Conclusion:
The appeal was dismissed on the grounds that the adjudicating authority rightly rejected the refund claim based on the provisions of Section 140 (Explanation 3) and Section 54 of the CGST Act, 2017, and relevant judicial precedents. The appellant's arguments and cited case laws were found to be inapplicable under the GST regime. The judgment emphasized that the legislative intent and judicial interpretations do not support the refund of unutilized cesses carried forward through TRAN-1 and reversed in GSTR-3B.

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