2024 (5) TMI 192 - AT - Central Excise

Appeal dismissed for Education Cess Cenvat credit refund denial under Section 140 CGST Act 2017

M/s. NMDC Limited Versus Commissioner of C.G. ST. - Raipur

CESTAT New Delhi dismissed the appeal challenging refund denial of Cenvat credit on Education Cess and Higher Secondary Education Cess. The tribunal held ... Refund of Cenvat credit availed on Education Cess and Higher Secondary Education Cess carried forward as on the appointed day i.e. 30.06.2017 in terms of Section 142(3) of the CGST Act 2017 - Section 11B of Central Excise Act, 1944 read with 142(3) of the Central GST Act 2017 - violation of principles of natural justice - time limitation - HELD THAT:- Cess is commonly employed to connote a tax with a purpose or a tax allocated to a particular thing suggested by the name of the cess. In the present case, it is related to education. Cess is generally for such levy which is for some special administrative expense as shall be suggested by the name of the cess. Education cess was levied by virtue of Finance Act No. 2 of 2004 in Section 92 to 94 thereof to be charged as a duty of excise with an objective to fulfill commitment of the government to provide a finance universalized quality basic education. No doubt the Cess are the part of the excise duty - the levy of EC and SHEC was however dropped and deleted by the Finance Act, 2015. Whether the cess are cenvitable? - HELD THAT:- The definition of 'eligible duties and taxes' as per the explanation 3 under Section 140 of the CGST Act, 2017 was amended with retrospective effect from 01.07.2017 whereby it is specified that cesses are excluded from the definition of 'eligible duties and taxes', Thus, the credit is ab initio not available for utilization for GST. In view of the above, cesses are not be transitioned through TRAN-1, as per the transitional provisions specified under CGST Act, the credit balances not transitioned to GST regime shall lapse, and, as such, the argument of the appellant the impugned credits never lapse, as there is no provision retaining the same is not sustainable. The appellant cannot circumvent the said legal provision through the route of 142 (3) of the CGST Act. As the amount of Cenvat credit balance of E. Cess & SHE Cess of Rs.7,97,27,333/- (of which refund had been filed by the appellant) was included in the carried forward amount by the appellant as on the appointed day i.e. 01.07.2017, in terms of Section 142(3) of the CGST Act 2017, refund of the same is not admissible to the appellant. Thus, it is clear that “taking” of the input credit in respect of Education Cess and Secondary and Higher Educatiion Cess in the Electronic Ledger after 2015, after the levy of Cess itself ceased and stopped, does not even permit it to be called an input Cenvat credit and therefore, mere such accounting entry will not give any vested right to the Assessee to claim refund of the said amount - there is no error when Commissioner (Appeals) has held that there is no provision in the Cenvat Credit Rules, 2004 or in Central Excise Act, 1944 to allow cash refund of cesses lying in he balance in Cenvat credit. Once it is not allowable, question to refund the same does not arises mere transitioning it to TRAN-1 shall not create any light to what was not allowable. Violation of principles of natural justice - HELD THAT:- The appellant had filed the written submissions dated 02.01.2020 before original adjudicating authority. Personal hearing was also attended. There is no denial that notices of hearing were issued by Commissioner (Appeals) as well. Though appellant could not appear before him, without going into the plea by receipt of those notices, it is observed that Commissioner (Appeals) has duly considered the appellant’s reply dated 03.12.2017 and all the grounds of appeal taken by appellant. Hence it is not agreed that principles of natural justice have been violated. Time limitation - HELD THAT:- There are no reason to differ from the findings arrived at in the impugned order. Appeal dismissed. Issues Involved:1. Cash refund of Cenvat credit of Education Cess and Secondary Higher Education Cess.2. Violation of principles of natural justice.3. Time bar issue.Summary:1. Cash Refund of Cenvat Credit of Education Cess and Secondary Higher Education Cess:The appellant filed a refund claim of Cenvat credit availed on Education Cess and Higher Secondary Education Cess carried forward as on the appointed day, 30.06.2017, in terms of Section 142(3) of the CGST Act 2017. The department rejected the refund claim, stating that no refund shall be allowed if the balance was carried forward under the Act. The Tribunal observed that Cess is a tax allocated for a specific purpose and is part of excise duty. The levy of EC and SHEC was dropped by the Finance Act, 2015. The Tribunal held that the Cenvat Credit Rules, 2004, restricted the utilization of Education Cess and Higher and Secondary Education Cess to their respective outputs and not against normal excise duty. The definition of 'eligible duties and taxes' under Section 140 of the CGST Act, 2017, excludes cesses, making the credit ab initio not available for GST utilization. Section 142(3) of the CGST Act mandates that no refund shall be allowed if the balance was carried forward. The Tribunal concluded that mere accounting entries do not entitle the appellant to a refund, and transitioning the credit to TRAN-1 does not create a right to refund.2. Violation of Principles of Natural Justice:The appellant claimed a violation of natural justice, arguing that personal hearing intimations were received belatedly. The Tribunal noted that the appellant had filed written submissions and attended personal hearings. The Commissioner (Appeals) had issued hearing notices and considered the appellant's reply and grounds of appeal. The Tribunal found no violation of natural justice principles.3. Time Bar Issue:The Tribunal upheld the findings of the Commissioner (Appeals) regarding the time bar issue and found no reason to differ from the impugned order.Conclusion:The Tribunal dismissed the appeal, upholding the Commissioner (Appeals)' decision that there is no provision in the Cenvat Credit Rules, 2004, or the Central Excise Act, 1944, to allow a cash refund of cesses lying in balance in Cenvat credit. The appeal was dismissed, and the order was pronounced in the open court on 02.05.2024.