2025 (1) TMI 7 - AT - Service Tax

Refund allowed for unutilized Cenvat credit under Section 142(3) despite procedural lapses in GST transition

GE Power Systems India Pvt Ltd Versus C.S.T. -Service Tax - Ahmedabad

CESTAT Ahmedabad allowed the appeal for refund of unutilized Cenvat credit under Section 142(3) of CGST Act, 2017. The appellant inadvertently failed to ... Refund of unutilized Cenvat credit under Section 142(9)(b) of the CGST Act, 2017 - rejection on the ground that there is no enabling provision under the Excise Act, where refund of closing balance of Cenvat credit can be allowed in cash - HELD THAT:- There is no dispute that the refund claim sought by the appellant is in respect of the amount of Cenvat credit which was already accrued as on 30th June, 2017. The only mistake on the part of the appellant is that due to inadvertent mistake that they could not carry forward part of the amount of Cenvat credit and therefore, for the same they claimed the refund. It is found that even if the appellant could not declare the Cenvat credit in the ST-3 return for the period April 2017 To June 2002 but, subsequently they have revised the ST-3 return wherein the differential amount of Cenvat credit was incorporated and due to this reason the Cenvat credit of Rs. 1,11,37,766/- could not be carried forward as form GST TRAN-1 was already filed prior to revision of the ST-3 return. Only for this reason refund claim of admitted Cenvat credit accrued prior to 30.06.2017 cannot be rejected. The appellant is eligible for refund in terms of section 142 (3) of CGST ACT, 2017. From the plain reading of the above provision of Section 142 it can be seen that those amount of Cenvat credit which could not be transferred under GST after 01.07.2017, the same is refundable under the existing Act. In the present case due to non mention of part amount of Cenvat Credit in ST-3 return for April–June 2017 same could not be transferred to TRTRAN-1 - the refund cannot be rejected because the amount of Cenvat credit could not be transferred to TRAN-1 under GST. Reliance can be placed in M/S. GIGAMON SOLUTIONS PVT. LTD. VERSUS COMMISSIONER OF GST & CENTRAL EXCISE, CHENNAI [2024 (6) TMI 1111 - CESTAT CHENNAI] where it was held that 'the appellant has paid the tax under the erstwhile law. In the present case, the claim is only for refund and not proceedings for assessment or adjudication. In such a scenario, sub-section (3) of section 142 gets attracted. Rejection of the refund claim is not legally valid and merits to be set aside.' Conclusion - The appellant is eligible for refund in terms of section 142 (3) of CGST ACT, 2017. Procedural lapses should not defeat substantive rights; specific provisions in the CGST Act override general provisions in the Excise Act. Interest is payable on delayed refunds under Section 11BB of the Excise Act. Appeal allowed. 1. ISSUES PRESENTED and CONSIDEREDThe core legal issues considered in this judgment are:Whether the appellant is entitled to a refund of unutilized Cenvat credit under Section 142(9)(b) of the CGST Act, 2017, despite not carrying forward the credit to the GST regime via Form GST TRAN-1.Whether the procedural lapse of not including certain credits in the original ST-3 return can invalidate the appellant's claim for a refund of Cenvat credit.The applicability of Section 11B of the Central Excise Act, 1944, in conjunction with Section 142(9)(b) of the CGST Act, 2017, for claiming refunds.The entitlement of the appellant to interest on the refund amount under Section 11BB of the Excise Act.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Entitlement to Refund of Unutilized Cenvat CreditRelevant Legal Framework and Precedents: The appellant argued that Section 142(9)(b) of the CGST Act provides for a refund of unutilized Cenvat credit when the credit could not be transitioned into the GST regime. The appellant cited precedents such as the decision in M/s Gigamon Solutions Pvt Ltd, which supported the refund of Cenvat credit in cash.Court's Interpretation and Reasoning: The court noted that the refund claim was for Cenvat credit accrued before the GST regime and that Section 142(3) of the CGST Act allows for such refunds. The court emphasized that procedural lapses should not negate substantive rights.Key Evidence and Findings: The appellant's revised ST-3 return showed additional Cenvat credit, which was not carried forward due to the prior filing of Form GST TRAN-1. The court found this sufficient to establish entitlement to a refund.Application of Law to Facts: The court applied Section 142(3) and 142(9)(b) of the CGST Act, concluding that the appellant's inability to carry forward the credit did not preclude a refund claim.Treatment of Competing Arguments: The court dismissed the revenue's argument that procedural errors in filing Form GST TRAN-1 barred the refund, emphasizing the legislative intent to protect accrued rights.Conclusions: The court concluded that the appellant was entitled to a refund of the unutilized Cenvat credit.Issue 2: Procedural Lapse and Impact on Refund ClaimRelevant Legal Framework and Precedents: The appellant argued that procedural lapses should not defeat substantive rights, citing precedents supporting the view that substantive credit cannot be denied on procedural grounds.Court's Interpretation and Reasoning: The court agreed that a procedural lapse, such as not including certain credits in the original ST-3 return, should not invalidate a legitimate refund claim.Key Evidence and Findings: The court found that the appellant had followed the correct procedure for claiming the refund under the CGST Act, despite the initial omission.Application of Law to Facts: The court applied the principle that substantive rights should not be defeated by procedural errors, supporting the appellant's claim.Treatment of Competing Arguments: The court rejected the revenue's argument that procedural errors barred the refund, emphasizing the need to honor substantive rights.Conclusions: The court concluded that the procedural lapse did not affect the appellant's entitlement to a refund.Issue 3: Applicability of Section 11B of the Excise ActRelevant Legal Framework and Precedents: The appellant argued that Section 11B of the Excise Act, when read with Section 142(9)(b) of the CGST Act, supports the refund claim.Court's Interpretation and Reasoning: The court found that Section 142(9)(b) of the CGST Act specifically provides for such refunds, overriding the general provisions of the Excise Act.Key Evidence and Findings: The appellant's refund application was based on Section 142(9)(b) of the CGST Act, which the court found applicable.Application of Law to Facts: The court applied the specific provisions of the CGST Act, supporting the appellant's claim.Treatment of Competing Arguments: The court dismissed the revenue's reliance on the absence of specific provisions in the Excise Act, highlighting the overriding nature of the CGST Act provisions.Conclusions: The court concluded that the refund claim was valid under the CGST Act.Issue 4: Entitlement to Interest on RefundRelevant Legal Framework and Precedents: The appellant claimed interest under Section 11BB of the Excise Act for delayed refunds.Court's Interpretation and Reasoning: The court noted that interest is payable on delayed refunds under Section 11BB, starting three months from the refund application date.Key Evidence and Findings: The appellant's refund application was filed on 28.06.2018, and the court found the delay in processing entitled the appellant to interest.Application of Law to Facts: The court applied Section 11BB, determining the appellant's entitlement to interest from the expiry of three months post-application.Treatment of Competing Arguments: The court did not find any compelling arguments from the revenue to deny interest.Conclusions: The court concluded that the appellant was entitled to interest on the refund amount.3. SIGNIFICANT HOLDINGSPreserve Verbatim Quotes: 'The appellant is eligible for refund in terms of section 142 (3) of CGST ACT, 2017.'Core Principles Established: Procedural lapses should not defeat substantive rights; specific provisions in the CGST Act override general provisions in the Excise Act; interest is payable on delayed refunds under Section 11BB of the Excise Act.Final Determinations on Each Issue: The appellant is entitled to a refund of unutilized Cenvat credit and interest on the refund amount under the applicable legal framework.