Excise duty rebate/refund transitioned into GST: refund must be paid in cash, not CENVAT credit, with s.11BB interest

The dominant issue was whether a rebate/refund under the erstwhile Central Excise regime, carried into GST, had to be paid in cash or could be granted as CENVAT credit, and whether interest under s. 11BB of the Central Excise Act, 1944 was payable. The HC held that s. 142(3) of the CGST Act, 2017 mandates that any amount eventually accruing must be paid in cash, overriding contrary provisions of the existing law except s. 11B(2) of the Central Excise Act. Consequently, the authorities were directed to refund the duty amount in cash (not by credit) along with accumulated interest as per law within four weeks.

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Issues Involved:
1. Quashing and setting aside impugned orders.
2. Refund of rebate amount with interest u/s 11BB of the Central Excise Act, 1944.
3. Applicability of Section 142(3) of the CGST Act, 2017.

Summary:

The petitions sought to quash and set aside impugned orders dated 7.9.2018 and 16.7.2020 in WP/729/2021, and orders dated 25.7.2018, 26.7.2018, 3.8.2018, and 24.6.2020 in WP/1228/2021. The petitioner also sought a refund of Rs. 10,48,11,737/- and Rs. 21,92,162/- respectively, with interest u/s 11BB of the Central Excise Act, 1944.

The petitioner challenged the orders directing re-credit of excess duty paid in the CENVAT credit account. The petitioner argued that u/s 142(3) of the CGST Act, 2017, any refund payable post-GST regime should be paid in cash, as the CENVAT regime had ended.

The respondents contended that the amount paid by the petitioner was a voluntary deposit and should be returned in the manner it was initially paid.

Section 142(3) of the CGST Act, 2017, states that any refund of CENVAT credit, duty, tax, interest, or any other amount paid under the existing law should be paid in cash. The court found that the petitioner's claim falls under this provision, and the amount should be refunded in cash.

The court ruled that the respondents should have directed the sanctioning authority to refund the amount in cash instead of crediting it to the CENVAT account. The court made the rule absolute in terms of prayer clauses (a) and (b) of both petitions.

The amount, along with accumulated interest, should be paid within four weeks of the order being uploaded. The petitioners are not required to communicate this order to the respondents as they were represented by advocates.

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