Transitional Cenvat credit refund: procedural failure to carry forward credit into GST cannot defeat cash refund and interest.

Untransitioned Cenvat credit accrued under the erstwhile regime was held refundable in cash under the GST transitional refund mechanism where the credit could not be carried forward only because the revised return was filed after TRAN-1. The Tribunal treated that inability as a procedural consequence and not a bar to substantive refund, and applied the provision requiring disposal of such claims under the existing law. Once the refund was maintainable, interest on delayed payment was also held payable from the prescribed date after receipt of the refund application. The rejection of the refund claim was therefore unsustainable, with consequential relief granted to the assessee.

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Issues: (i) Whether the appellant was entitled to cash refund of the untransitioned Cenvat credit under the transitional provisions of the GST regime; (ii) Whether interest was payable on the refunded amount.

Issue (i): Whether the appellant was entitled to cash refund of the untransitioned Cenvat credit under the transitional provisions of the GST regime.

Analysis: The refund claim related to Cenvat credit that had accrued before the appointed day and could not be carried forward to GST only because the revised ST-3 return was filed after Form GST TRAN-1 had already been submitted. The governing transitional provision provides that claims for refund of Cenvat credit under the existing law are to be disposed of under that law and the amount eventually accruing is to be paid in cash, subject to the statutory carve-out. The inability to transition the amount through TRAN-1, when the credit was otherwise admissible and had accrued under the erstwhile regime, was held to be only a procedural consequence and not a valid ground to deny refund. The Tribunal followed earlier decisions treating transitional credit as a protected accrued right and held that the claim was covered by the transitional refund mechanism.

Conclusion: The appellant was held entitled to cash refund of the untransitioned Cenvat credit, in favour of the assessee.

Issue (ii): Whether interest was payable on the refunded amount.

Analysis: Once the refund claim was held to be maintainable and payable in cash, the statutory provision for interest on delayed refund applied from the expiry of the prescribed period after receipt of the refund application. No separate disqualification for interest was accepted.

Conclusion: Interest on the refund amount was held payable in accordance with law, in favour of the assessee.

Final Conclusion: The rejection of the refund claim was unsustainable, and the assessee was held entitled to refund with consequential relief, including interest as applicable.

Ratio Decidendi: Where Cenvat credit had accrued under the erstwhile regime but could not be carried forward into GST for procedural reasons, the transitional refund provision mandates cash payment of the admissible amount and such substantive entitlement cannot be defeated merely because TRAN-1 was filed before the revised return.

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