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

CESTAT Chandigarh dismissed appeals seeking refund of unutilized Krishi Kalyan Cess (KKC) under section 142(9)(b) of CGST Act, 2017. The Tribunal followed its Division Bench decision in Lupin Ltd. and Bombay HC ruling in Gauri Plasticulture Pvt. Ltd., holding that non-utilized Cenvat credit cannot be claimed as cash refund. Despite earlier favorable decisions in Bharat Heavy Electricals Ltd. and Slovak India Trading Co., the Tribunal noted these were stayed by Madhya Pradesh HC pending appeal, ruling appellants not entitled to KKC refund.

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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 Tax
The 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.

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