2024 (7) TMI 1404 - AT - Service Tax

Appeals for unutilized Krishi Kalyan Cess refund under section 142(9)(b) dismissed following precedent decisions

M/s SBI Cards And Payment Service Ltd and M/s SBI Business Process Management Service Pvt Ltd Versus Commissioner of CGST & CE, Gurugram

CESTAT Chandigarh dismissed appeals seeking refund of unutilized Krishi Kalyan Cess (KKC) under section 142(9)(b) of CGST Act, 2017. The Tribunal followed ... Rejection of refund of unutilized Krishi Kalyan Cess (KKC) u/s 142(9)(b) of the CGST Act, 2017 - HELD THAT:- This Tribunal in the case of Bharat Heavy Electricals Ltd. [2019 (4) TMI 1896 - CESTAT NEW DELHI] has held by relying the judgment in the case of Slovak India Trading Co. Pvt. Ltd. [2019 (4) TMI 1896 - CESTAT NEW DELHI] that assessee is eligible for cash refund of cesses lying as Cenvat credit balance as on 30.06.2017 in their accounts; but this judgment was appealed against by the department before the Hon’ble Madhya Pradesh High Court and the Hon’ble Madhya Pradesh High Court admitted the appeal - Further, the Hon’ble High Court in the meantime has directed that the refund granted by the Tribunal shall remain stayed till the final output of the appeal. The Division Bench of this Tribunal in the case of Lupin Ltd. [2023 (3) TMI 741 - CESTAT HYDERABAD] has decided the issue of refund of KKC accumulated prior to 01.07.2017 holding that 'we reject the amount of refund for KKC RS 5.46,759/-, following the ruling of Larger Bench in the case of Gauri Plasticulture Pvt. Ltd [2019 (6) TMI 820 - BOMBAY HIGH COURT] wherein it was held that a non-utilised portion of Cenvat credit cannot be claimed as refund in cash, distinguishing the ruling in Union of India v. Slovok India Trading Company [2006 (7) TMI 9 - KARNATAKA HIGH COURT], as not a declaration of law under Article 141 of the Constitution.'. Since, the Division Bench of this Tribunal in case of refund of KKC has decided in favour of Revenue, therefore, by following the ratio of the said decisions, it is opined that the appellants are not entitled to the refund of the KKC - appeals dismissed. Issues Involved:1. Entitlement to refund of unutilized Krishi Kalyan Cess (KKC) under Section 142(9)(b) of the CGST Act, 2017.2. Eligibility of interest on the refund of service tax.Issue 1: Entitlement to Refund of Unutilized Krishi Kalyan Cess (KKC)The appellants, subsidiaries of the State Bank of India, sought a refund of unutilized KKC under Section 142(9)(b) of the CGST Act, 2017. They argued that the accumulated Cenvat credit of service tax, including KKC, was a legitimately accumulated balance. The department did not dispute the admissibility of this credit. The appellants revised their Service Tax return (ST-3) for April 2017 to June 2017, leading to an increase in Cenvat credit, including KKC. They filed for a refund of this additional credit.The department rejected the refund application, arguing that there was no provision in the existing law to refund KKC in cash. The appellants cited several judicial precedents to support their claim for a cash refund of KKC after the advent of the GST regime. They emphasized that the credit of KKC could only be utilized to set off liability against KKC and that the levy of KKC was abolished w.e.f. 01.07.2017, leaving the KKC credit unutilized in their CENVAT account.The Tribunal considered the submissions and relevant case laws, including the Larger Bench Order in M/s G4S Secure Solutions (India) Pvt. Ltd. and the Division Bench decision in M/s Lupin Ltd. The Tribunal noted that the refund of unutilized Cenvat credit, including KKC, was not permissible under the existing law as per the Larger Bench's interpretation. The Tribunal also acknowledged the stay granted by the Hon'ble Madhya Pradesh High Court on the Bharat Heavy Electricals Ltd. decision, which had allowed the refund of cesses lying as Cenvat credit balance.The Tribunal concluded that the appellants were not entitled to the refund of KKC, following the Division Bench's decision in M/s Lupin Ltd., which held that non-utilized Cenvat credit of KKC could not be claimed as a refund in cash. Consequently, the appeals for the refund of KKC were dismissed.Issue 2: Eligibility of Interest on the Refund of Service TaxThe department filed an appeal against the grant of interest on the refund of service tax, arguing that the amount of interest, if calculated, would exceed Rs. 50 lakhs, necessitating a decision by the Division Bench. The Tribunal segregated the department's appeal from the appellants' appeals and listed it before the Division Bench for a future hearing.Conclusion:The Tribunal dismissed the appeals for the refund of unutilized KKC, following the Division Bench's decision in M/s Lupin Ltd. The department's appeal regarding interest on the refund of service tax was segregated and listed before the Division Bench for a future hearing.