2026 (2) TMI 616 - AT - Customs

Refund of CVD/SAD on excess imports allowed in cash under transitional CGST provisions; unjust enrichment objection rejected

Appellant is entitled to cash refund of CVD/SAD paid on excess imports under the transitional provisions of the CGST Act because duties were cenvatable at ... Entitlement to refund of CVD/SAD paid on excess imports claimed u/s 27 - excess import quantity of raw materials imported under Advance Authorization Licenses - refund in cash u/s 142(3) of the CGST Act, 2017 - cash refund of admissible credit u/s 142(6)(a) of the CGST Act, 2017 - non-availability of CENVAT credit post-GST - unjust enrichment - HELD THAT:- The appellant filed refund claim under Section 27 of the Customs Act towards CVD paid on MEIS Scrips under the provisions of Para 3.02 of Foreign Trade Policy 2015-20, on excess import quantity of raw materials imported under Advance Authorisation Licenses. After 01.07.2017, in GST regime, no credit of such duty was available, therefore, the Appellant filed refund claim for same. In Epigral Limited vs. UOI [2025 (3) TMI 1405 - GUJARAT HIGH COURT], the Hon'ble Gujarat High Court has held that in view of the Section 142(3) of CGST Act, 2017 any refund accruing to the petitioners after 01.07.2017 is required to be refunded in cash. The Hon'ble High Court further held that it is apparent that the respondent authorities could not have referred to and relied upon the provisions of section 142(8)(a) as the same would not be applicable to the facts of the case as the petitioners did not deposit the amount of duties in any recovery proceedings but the petitioners had voluntarily deposited the amount of duties on reconciliation of the imports made by the petitioners with the Advance Authorisation and EPCG license entitlement. Therefore, the case of the petitioners would be squarely covered by provisions of Section 142(3) of the CGST Act which provides for considering the refund claim of the petitioners as per the existing law at the relevant time when import was made in the year 2016. In view of the settled legal position, learned Commissioner has failed to appreciate the provisions of Section 142(3) and (6)(a) in its correct perspective and the learned Commissioner has erred in rejecting the appeal of the appellant. I am of the view that refund application filed by the appellant is in accordance with the provisions of Section 142(3) and (6)(a) of the GST Act and the department was bound to allow the refund application of the appellant and the refund application was rejected without any justification. Unjust enrichment - HELD THAT:- Appellant had submitted that the provisions of unjust-enrichment are not applicable on the ground that the amount of refund is disclosed as receivable in the balance sheet of 2017-18 and also not claimed as expenditure in Profit and Loss Account of 2017-18. Further, the appellant had put-forth certificate of Chartered Accountant certifying that incidence of CVD paid on excess quantity of duty from raw materials imported, is not passed on to any other person before the Adjudicating Authority. Therefore, concept of unjust enrichment is not applicable in the present case.​​​​​​​ Thus, the impugned order passed by learned Commissioner (Appeals) is not sustainable and the appeal is liable to be allowed. Issues: (i) Whether the appellant is entitled to refund of CVD/SAD paid on excess imports (claimed under Section 27 of the Customs Act, 1962) in cash under the transitional provisions of Section 142(3) and Section 142(6)(a) of the Central Goods and Services Tax Act, 2017; and (ii) Whether the concept of unjust enrichment bars the refund in the present facts.Analysis: The statutory framework invoked comprises Section 142(3) and Section 142(6)(a) of the Central Goods and Services Tax Act, 2017 which provide for disposal of refund claims arising under the existing law and require any amount eventually accruing to be paid in cash, and for refund of admissible credit in cash respectively. The claim relates to CVD/SAD paid on excess quantity imported under Advance Authorization licenses when, under the erstwhile regime, such duty was cenvatable. The claimants paid the duties for a period when cenvat credit rules existed; following the GST regime credit for such duty was no longer available, engaging the transitional refund provisions. Relevant precedents of this Tribunal and High Court interpreting Section 142(3) and related provisions recognise entitlement to cash refund where duties were cenvatable at the relevant time but credit cannot be availed post-GST. On unjust enrichment, the factual record includes disclosure of the refund receivable in the relevant financial statements and a chartered accountant certificate that the incidence of duty was not passed on to any other person, which addresses the criteria for denying refund on unjust enrichment grounds.Conclusion: The refund application is admissible under Section 142(3) and Section 142(6)(a) of the Central Goods and Services Tax Act, 2017 and the claim for refund of CVD/SAD is to be allowed in cash; the objection of unjust enrichment is not sustained on the facts presented.