TaxTMI 
TaxTMI 
2024 (7) TMI 541
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....Central Goods and Services Tax Act, 2017 [the CGST Act] subject to verification of unjust enrichment. 2. Shakti Pumps is engaged in the manufacture of submersible pumps, power driven pumps, centrifugal pumps and solar pumping systems. It is registered with the Good and Service Tax department, but before the introduction of the CGST Act it was registered with the Central Excise department. 3. Shakti Pumps was availing CENVAT credit of duty paid on the input goods as well as on the service tax paid on input services which were used in manufacture of the final products in terms of rule 3 read with rule 4 of the CENVAT Credit Rules, 2004 [the 2004 Credit Rules] and it also filed the statutory monthly ER-1 returns. 4. The Central Government, from time to time, publishes Foreign Trade Policy [FTP] under the powers conferred upon it by section 5 of the Foreign Trade (Development & Regulation) Act, 1992. The objective of the FTP is to make exports from India more competitive. In furtherance of this objective, Chapter 4 of the FTP provides for various Duty Exemption Schemes such as the Advance Authorization [AA] Scheme and Duty-Free Import Authorization to enable duty free import of i....
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.... availing CENVAT Credit under the CENVAT Credit Rules, 2004; xxxxxxxxx" (emphasis supplied) 6. To avail the said benefit, Shakti Pumps applied for and was issued five AA's for import of raw materials and components such as solar pump drive, stainless steel sheets, coils and CRNGO. The items imported under the aforesaid AA's without payment of duty were, however, not fully consumed by Shakti Pumps in the manufacture of the finished export goods within the period specified in the respective AA's. 7. On account of shortfall in the fulfillment of its export obligation within the time specified in AA, Shakti Pumps suo-motu discharged the appropriate CVD and SAD amounting to Rs. 1,35,10,358/- through several challans. Shakti Pumps also suo-motu paid CVD and SAD amounting to Rs. 1,10,44,821/- on import of solar pump controllers, solar pump inverter, frequency inverter and solar pump drive due to objections having been raised by the department. 8. The Goods and Services Tax regime was implemented w.e.f. 01.07.2017 wherein taxes such as Central Excise and Service Tax were subsumed into the CGST Act. The CVD and SAD that were paid under the erstwhile regime were replaced with Inte....
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....ng the allegations made in the show cause notice. Reliance was also placed on various adjudication orders as well as orders passed by Commissioner (Appeals) wherein cash refund of CVD and SAD paid after 01.07.2017 was granted under section 142(3) of the CGST Act read with section 11B of the Excise Act. 14. The Assistant Commissioner, by order dated 11.02.2020, however, rejected the refund claims. 15. Feeling aggrieved, Shakti Pumps filed an appeal on 09.06.2020 before the Commissioner (Appeals) and the Commissioner (Appeals), by order dated 08.07.2020, allowed the refund of Rs. 2,45,55,179/- in cash. The Commissioner (Appeals) recorded a finding that there could be no doubts that Shakti Pumps was eligible for CENVAT credit and, therefore, the Assistant Commissioner committed an illegality in rejecting the claim. The Commissioner (Appeals), therefore, held that Shakti Pumps would be entitled to refund in cash of CVD and SAD in terms of section 142(3) of the CGST Act, subject to verification of unjust enrichment by the sanctioning officer. 16. It is stated that pursuant to the said order passed by the Commissioner (Appeals), the sanctioning officer verified the condition of unj....
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....e notification. Had the intention been to allow CENVAT credit, the legislature would have provided for such a provision in the notification. In this Connection reliance has been placed on the judgment of the Supreme Court in Union of India vs. Ind-Swift Laboratories Ltd [2011 (265) E.L.T. 3 (S.C.)]; (vii) Shakti Pumps had not complied with the provisions of the 2004 Credit Rules and so it would not be eligible to avail CENVAT credit and refund thereof; and (viii) The transitional provisions under section 142 of the CGST Act in respect of CENVAT credit would be applicable only when CENVAT credit was taken prior to 30.06.2017. 19. Ms. Sukriti Das, learned counsel appearing for the respondent, however, contended that Shakti Pumps was entitled to claim cash refund of CENVAT credit paid under the existing law in terms of section 142(3) of the CGST Act and made the following submissions to support this contention: (i) In terms of the provisions of rule 3(1) read with rule 9 of the 2004 Credit Rules, as applicable prior to 1.7.2017, Shakti Pumps was entitled to claim CENVAT credit of CVD and SAD paid on imports, including CVD and SAD paid as a consequence of the non-fulfillment....
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....te of registration on provisional basis, subject to such conditions and in such form and manner as may be prescribed, which unless replaced by a final certificate of registration under sub-section (2), shall be liable to be cancelled if the conditions so prescribed are not complied with." 27. Section 140 of the CGST Act came into force on 01.07.2017. Sub-section (1) of section 140 is reproduced below: "140 (1) A registered person, other than a person opting to pay tax under section 10 shall be entitled to take, in his electronic credit ledger, the amount of CENVAT credit of eligible duties carried forward in the return relating to the period ending with the day immediately preceding the appointed day, furnished by him under the existing law within such time and in such manner as may be prescribed: Provided that the registered person shall not be allowed to take credit in the following circumstances, namely: (i) where the said amount of credit is not admissible as input tax credit under this Act; or (ii) where he has not furnished all the returns required under the existing law for the period of six months immediately preceding the appointed date; or (iii) where the ....
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....ll not be admissible as input tax credit under this Act." 29. Chapter XXI of the CGST Act deals with Miscellaneous matters. Section 173, which is contained in Chapter XXI, deals with amendment of the Finance Act. It came into force on 01.07.2017 and is reproduced below: "173. Amendment of Act 32 of 1994 Save as otherwise provided in this Act, Chapter V of the Finance Act, 1994 shall be omitted." 30. Section 174, which also came into on 01.07.2017, deals with repeal and saving. Sub-section (1) and clause (f) of sub-section (2) are reproduced below: "174. Repeal and Saving (1) Save as otherwise provided in this Act, on and from the date of commencement of this Act, the Central Excise Act, 1944 (1 of 1944) (except as respects goods included in entry 84 of the Union List of the Seventh Schedule to the Constitution), the Medicinal and Toilet Preparations (Excise Duties) Act, 1955 (16 of 1955), the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957), the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978, and the Central Excise Tariff Act, 1985 (5 of 1986 (hereafter referred to as the repealed Acts) are hereby repealed. (2)....
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....an-1 was open on the common portal, but due to human error the two payments could not be included. As the 2004 Credit Rules were framed under the Excise Act, the appellant could not have claimed CENVAT credit in respect of the input service under the provisions of the CENVAT Credit Rules after 01.07.2017 as they ceased to exist. 34. Section 142, as noticed above, deals with Miscellaneous Transitional Provisions. Sub-section (3) provides that every claim for refund filed by any person before, on or after the appointed day, for refund of any amount of CENVAT credit or any other amount paid under the existing law, shall be disposed of in accordance with the provisions of the existing law and any amount eventually accruing to him shall be paid in cash, notwithstanding anything to the contrary contained under the provisions of existing law, other than the provisions of sub-section (2) of section 11B of the Central Excise Act. However, no refund shall be allowed of any amount of CENVAT credit where the balance of the said amount as on the appointed day has been carried forward under the CGST Act. 35. Thus, under sub-section (3) of section 142, the claim for refund of any amount of CE....
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....gainst payment of CVD and SAD but after 01.07.2017, such CENVAT Credit, could not be availed and Refund for the said Credit Facility, is applied in terms of Sections 142(3) and 142(6)(a) of the CGST Act, 2017. xxxxxxxxx 11. From the reading of the Transitional Provisions, under CGST Act, 2017, it is clear that Refund of CENVAT Credit, accruing as per earlier Law, is to be paid in Cash. 12. We would also like to place on record that the Assistant Commissioner, Central GST & Central Excise, Division-VII, Vadodara-l Commissionerate, vide Order-in-Original No., Div-Vii/41/RR Kabel/Ref/17-18, dated 20.06.2018 (ANNEXURE:1, hereto), has granted Refund in Cash, under the provisions of Section 142(3) of CGST Act, 1944, read with, Section 11-B of Central Excise Act, 1944, to M/S. R.R. Kabel Limited, WAGHODIA, VADODARA, who have paid CVD and SAD, towards excess Import & Export Obligation Discharge Certificate, against some Advance Licences. Here also, the Claimant was admissible to CENVAT Credit of CVD and SAD, under erstwhile CENVAT Credit Rules, 2004 but since the payment was made on 15.12.2017, under GST Regime, they were not in a position to avail CENVAT Credit. 14. In view of....
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....notification allowed it to avail CENVAT credit. 43. It is also not possible to accept this contention of the learned authorised representative appearing for the department. Shakti Pumps was entitled to avail CENVAT credit under the 2004 Credit Rules and it did so. There was no necessity for a clause to be inserted in the notification that CENVAT credit would also be available if CVD and SAD are subsequently paid because the conditions of the notification have not been satisfied. 44. Reliance placed by the learned authorised representative on the judgment of the Delhi High Court in Rai Agro Industries is misplaced. The question that fell for consideration before the High Court in the Writ Petition filed by Rai Agro Industries was whether the demand made by the department for payment of interest on the deferential customs duty payable on the import of machinery under Export Promotion Capital Goods Scheme was valid. In regard to the issue as to whether the demand for payment of interest was legally sound and enforceable against the Writ Petitioner, the High Court noticed that two facets of this question were required to be examined. The first aspect was as to whether the High Cour....
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.... the rate ordinarily applicable re-emerge. Consequently non-payment of the differential would attract payment of interest in terms of the statutory provisions referred to above." (emphasis supplied) 46. In the present case, it is not in dispute that Shakti Pumps had not only deposited CVD and SAD on account of non-fulfilment of the export obligation contained in the AA but had also paid interest. This decision would, therefore, not come to the aid of the department. 47. Learned authorised representative appearing for the department also placed reliance upon the judgment of the Supreme Court in Ind-Swift Laboratories to contend that in the absence of any stipulation in the notification, allowing CENVAT credit in case of default, would be rewarding Shakti Pumps and against the intention and stipulation in the notification. 48. The decision of the Supreme Court in Ind-Swift Laboratories does not help the department. The High Court had read down the provisions of rule 14 of the 2004 Credit Rules, which rule deals with recovery of CENVAT credit wrongly taken or erroneously refunded. The relevant paragraphs of the judgment of the Supreme Court are reproduced below: "16. A bare....
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....dit. In the instant case, as noticed above, Shakti Pumps could claim refund of CENVAT credit in terms of the 2004 Credit Rules even if clause (iv) of the notification dated 01.04.2015 issued by the Central Government did not contain such a provision. In any view of the matter, this was not even the allegation made in the show cause notice that was issued to Shakti Pumps when the refund applications were filed. It is, therefore, not open to the department to raise this issue for the first time in this appeal. 50. Learned authorised representative also submitted that the provisions of section 142(6)(a) of the CGST Act were wrongly relied upon. 51. It is seen from the order passed by the Commissioner (Appeals) that the refund of CENVAT credit in cash has been granted under section 142(3) of the CGST Act. Section 142(6)(a) of the CGST Act, which deals with proceedings of appeal, review or reference relating to claim for CENVAT credit, would not be applicable and any reference to this section in connection with the claim of unjust enrichment is a mere mistake, because even otherwise the claim of unjust enrichment has also to be examined. under section 142(3) of the CGST Act. 52. I....
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....d. This amount was, therefore, not reflected in the ST-3 Return. The CGST Act came into force w.e.f. 01.07.2017. The appellant, therefore, could not claim the transition of the input credit under section 140 of the CGST Act. The appellant could not also avail CENVAT credit under the CENVAT Rules as they were no longer in force after the introduction of the CGST Act. 17. It is for this reason that the appellant filed an application under section 142(3) of the CGST Act claiming refund of the amount of CENVAT credit paid by the appellant. This claim of the appellant was rejected by the Deputy Commissioner by the order dated 24.04.2019 and the appeal filed by the appellant before the Commissioner (Appeals) was also rejected by the order dated 21.09.2019. xxxxxxxxxxxx 49. In the present case, the service tax was paid under the provisions of Chapter V of the Finance Act and refund was claimed under sub-section (3) of section 142 of the CGST Act, under which the claim was required to be disposed of in accordance with the provisions of the existing law. Therefore, even if the service tax had been deposited by the appellant after 01.01.2017, nonetheless the refund of any amount of ....
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....ant that since the inputs imported by it were used in the manufacture of final products on which Central Excise Duty/GST, as the case may be, was paid/to be paid, they were eligible for refund of CVD and SAD paid. Further, post the introduction of GST, the appellant having left with no option to claim the above credit under the CENVAT Credit Rules with also no scope to report the same under Transitional Credit while migrating to GST, the refund in cash was claimed under Section 142(3) ibid. xxxxxxxxxxxxx 10. Thus, the availability of CENVAT paid on inputs despite failure to meet with the export obligation may not hold good here since, firstly, it was a conditional import and secondly, such import was to be exclusively used as per FTP. Moreover, such imported inputs cannot be used anywhere else but for export and hence, claiming input credit upon failure would defeat the very purpose/mandate of the Advance Licence. Hence, claim as to the benefit of CENVAT just as a normal import which is suffering duty is also unavailable for the very same reasons, also since the rules/procedures/ conditions governing normal import compared to the one under Advance Authorization may vary becau....
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....t of Cenvat credit/duty/tax/interest or any other amount paid under the existing law, shall be disposed of in accordance with the provisions of the existing law and any amount eventually accruing to him, shall be paid in cash, notwithstanding anything to the contrary contained under the provisions of existing law other than the provision of sub-section (2) of section 11B of the Central Excise Act (unjust enrichment). 13. Further from a conjoint reading of subsection (3) (5) and (8A) of Section 142 of the CGST Act it is evident than that an assessee is entitled to claim refund of CVD and SAD paid after the appointed day, under the existing law, and such claim has to be disposed of according to the provisions of the existing law. As the Appellant was admittedly entitled to Cenvat credit of the said amount of Rs. 3,28,75,733/-, which is now no longer available due to implementation of GST regime, it is held that they are entitled to refund of the said amount." (emphasis supplied) 64. In Commissioner of Central Excise & Service Tax, Ahmedabad-I vs. Aculife Healthcare Private Limited [2024-VIL-474-CESTAT-AHM-CE], the Division Bench observed: "5. We find that the department sou....