2022 (10) TMI 191 - AT - Central Excise

Tribunal grants refund despite IT issues, upholds substantive right to credit under Central Excise Act.

The Tribunal allowed the appellant's appeal, granting a cash refund of unutilized Cenvat credit under Section 11B of the Central Excise Act, 1944, despite ... Refund of unutilized Cenvat credit - time limitation as per Section 11B (2) (c) of the Central Excise Act, 1944 - Section 174(2) read with Section 142 of the CGST Act - HELD THAT:- At the time of implementation of GST Regime, the legislature had perceived as to what would happen to the credit of tax lying in stock as on the date of the introduction of GST, or to the credit balance lying unutilized. Therefore, in order to avoid the double taxation on the goods lying with the business person the Central govt under its wisdom, to pass on the benefit of the unutilized credit whether in inputs or otherwise as closing balance as appeared in ER-I Return filled by the assesses, has introduced above mentioned Transitional Provisions under Chapter XX in GST Act, 2017. The appellant has filed the present refund claim under Section 11B and not under Rule 5 of CCR read with Notification No. 27/2012. Further, it is also found that after the introduction of GST, if the appellant could not transfer the excess debit into TRAN-I, the only option for the appellant remains is to file a refund claim under Section 11B read with Section 142(5). Further, it is found that the impugned order has not disputed the eligibility of credit debited in excess - the appellant is opined to have rightly filed the refund of the amount debited Cenvat credit lying unutilized in his account on the last day of erstwhile Central Excise Act regime i.e. on 30.06.2017 under Section 11B of Central Excise Act, 1944. Further, as per Section 174(2)(c) of CGST Act, the appellant cannot be affected of its right, privilege, in availing credit merely in respect of refund rejected on account of limitation being passed after 27.12.2017. Further, the change in taxation regime should not affect the credit availment right of assessee. Hence the appellant is rightly entitled for the credit and also refund. The refund of said amount in cash remains the only possibility under transitional provisions of GST Act. Those provisions are to protect the claim under Section 11B of erstwhile Act - the appellant is held entitled for refund of amount in question. Appeal allowed - decided in favor of appellant. Issues Involved:1. Whether Section 11B of the Central Excise Act, 1944 can be invoked for cash refund of unutilized Cenvat credit.2. Whether the appellant attempted to file FORM GST TRAN-1 within the stipulated time frame and the implications of IT glitches on this process.Detailed Analysis:Issue 1: Invocation of Section 11B for Cash Refund of Unutilized Cenvat CreditThe appellant, a manufacturer of name plates and plastic printed stickers, had unutilized Cenvat credit amounting to Rs. 11,23,276 as of June 30, 2017, which could not be transitioned to the GST regime due to technical glitches. The appellant filed a refund claim under Section 11B of the Central Excise Act, 1944. The adjudicating authority rejected the claim on the grounds that Section 11B does not permit a cash refund of unutilized Cenvat credit. However, the appellant argued that the refund falls under Section 11B (2) (c) of the Act, which allows for the refund of credit of duty paid on excisable goods used as inputs.The Tribunal observed that Section 11B (2) (c) explicitly provides for the refund of credit of duty paid on inputs. The Tribunal also noted that the GST Act's transitional provisions under Sections 140 and 142 allow for the transfer or refund of unutilized credit. The Tribunal cited several precedents where courts have upheld the right to a cash refund of unutilized Cenvat credit, including decisions from the High Courts of Karnataka, Punjab and Haryana, and Rajasthan.The Tribunal concluded that the appellant's claim for a refund under Section 11B was valid and that the rejection of the claim was wrong and against statutory provisions and judicial precedents. The Tribunal emphasized that the right to credit is a substantive right and cannot be denied on procedural grounds.Issue 2: Attempt to File FORM GST TRAN-1 and IT GlitchesThe appellant attempted to file FORM GST TRAN-1 before the due date but was unsuccessful due to IT glitches. The appellant subsequently wrote to the Nodal Officer requesting permission to file the form, but this request was not granted. The Tribunal noted that the appellant had complied with the procedures outlined in Circular No. 39/13/2018-GST dated April 3, 2018, which provided relief for taxpayers unable to file TRAN-1 due to IT issues.The Tribunal referenced several judicial decisions that supported the appellant's position, including rulings from the High Court of Kerala, which held that taxpayers should be allowed to complete the filing of TRAN-1 if they were unable to do so due to system errors. The Tribunal also noted that the GST Act's transitional provisions are designed to protect claims under Section 11B of the erstwhile Central Excise Act.The Tribunal concluded that the appellant's inability to file TRAN-1 due to IT glitches should not result in the denial of the refund claim. The Tribunal held that the appellant was entitled to a cash refund of the unutilized Cenvat credit under the transitional provisions of the GST Act.ConclusionThe Tribunal found that both grounds for rejecting the refund claim were unsustainable. The Tribunal set aside the order of the Commissioner (Appeals) and allowed the appellant's appeal, granting the refund of the unutilized Cenvat credit. The decision emphasized the importance of upholding substantive rights and ensuring that procedural issues do not unjustly deny taxpayers their entitlements.Order PronouncedThe order was pronounced in the open Court on October 4, 2022, allowing the appeal and setting aside the impugned order.