GOODS CLEARED IN EXCISE LAW REGIME RETURNED BACK IN GST REGIME – REFUND ALLOWED?

[Mr. M. GOVINDARAJAN]

In M/S RAJASTHAN TRANSFORMERS & SWITCHGEARS VERSUS COMMISSIONER, CENTRAL GOODS AND SERVICE TAX, CENTRAL EXCISE JAIPUR. - 2022 (5) TMI 563 - CESTAT NEW DELHI, the appellants cleared the goods  to Technofab Engineers Limited, New Delhi, under central excise invoices during June 2017.  The appellants also paid the central excise duty to the tune of Rs.15,90,624/-.  The purchaser denied accepting the goods and cancelled the purchase orders.  Therefore the negotiations made in this regard failed.  The purchaser returned the materials during January 2018.  The purchaser also denied refunding the excise duty paid by the appellant. 

The provisions of GST came into effect from 01.07.2017.  The goods were delivered during pre GST regime and the goods returned are after the beginning of GST regime.  Then the question arose whether the appellant is eligible to get refund in the GST regime for the transactions held in pre GST regime. 

Section 142(1)(3) of GST Act provides that every claim for refund filed by any person before, on or after the appointed day, (01.07.2017) for refund of any amount 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 existing law and any amount eventually  accruing to him shall be paid in cash, notwithstanding anything to the contrary contained under the provisions of the existing law other than the provisions of Section 11B(2) of Central Excise Act, 1944.  The proviso to the said section provides that where any claim for refund of CENVAT credit is fully or partially rejected, the amount so rejected shall lapse.

The appellant filed refund to the tune of Rs.15,90,624/- in Form R on 30.10.2018 towards refund of central excise duty paid by the appellant on the goods cleared by them under central excise invoices issued under Rule 11 of the Central Excise Rules, 2002 but returned back from the unregistered buyer. 

A show cause notice was issued to the appellant by the Revenue.  The Adjudicating Authority rejected the refund claim.  The appellant filed appeal before the Commissioner (Appeals) against the order of the Adjudicating Authority.  The appellants submitted the following before Commissioner (Appeals)-

• Since the GST law was new and the provisions/procedures mentioned therein were not clear and in fact are ambiguous.    The Officers were confused in respect of procedural compliances.  Therefore the appellant could not file any intimation to the department.
• The Adjudicating Authority has manifestly erred in not appreciating the contention of entertaining a bona fide belief on the part of the appellant.
• The appellant accounted for all the receipt of materials and used in the manufacture of finished goods and cleared the same on payment of excise duty.
• The receipt of the returned goods was duly recorded in RG-1 register by the appellant.
• The material involved was rejected by the buyer in the month of December 2017 and the same were lifted immediately after refusal and failed negotiations.
• There is no procedure required under Section 142 of the CGST Act to intimate the jurisdictional officer in respect of the returned goods.  The returned goods are identifiable.
• As there is no dispute regarding the dispatch of excisable goods to the buyer, duty payment thereon, the other requirements which are procedural in nature, cannot be a reason to deny the appellant their legitimate refund claim. 

The Commissioner (Appeals) rejected the appeal.  The Commissioner (Appeals) held that the contention of the appellant that the applicant accounted for all receipts of returned goods is of no relevance.  In this case the basic condition of return of goods from a person, other than a registered person, and return of goods within the period of six months from the appointed date, is not satisfied.  Therefore the Commissioner (Appeals) held that the appellant is not eligible for refund of duty under the provisions of Section 142 of the GST Act.

Against the order of Commissioner (Appeals), the appellant filed the present appeal before the Tribunal.  During the hearing the appellant was not present.  The Tribunal observed that there is a letter dated 22.09.2021 filed by the appellant wherein it has been intimated that the supporting documents mainly RG-1 register for the relevant period are lying with the Department, which were resumed in audit proceeding.  The Tribunal perused the statement of facts and grounds of appeal.  The goods are cleared in the month of June 2017 during which the provisions of Central Excise law was applicable.

The Tribunal analyzed the provisions of Rule 16 of Central Excise Rules and Section 142 of GST Act.  The CGST Act provides the following conditions for refund-

1. Goods  must have been cleared within a period of six months prior to appointed day.
2. The goods are returned to any place of business on or after the appointed day.
3. The goods are returned by a person other than a registered person.
4. The goods are returned within a period of six months from the appointed day.
5. The goods are returned to the registered premises.
6. The goods shall be identifiable.
7. In case of goods being returned by registered person will be consider as deemed supply.

The Tribunal, in relation to the above points observed that-

1. The goods are cleared in June, 2017 within a period of six months prior to appointed day i.e., 01.07.2017.
2. There is no dispute in return of the goods after the appointed day.
3. The buyer of the goods was not registered under the excise law regime whereas the buyer registered with GST laws.  This situation is ambiguous.
4. The dispute arose soon after the supply on 10.07.2017.  The buyer has rejected the goods not being as per quality and also damaged in transit.  After series of correspondence the appellant accepted to take the goods back and thereafter lifted the goods from the premises of the buyer.  The appellant requested the buyer to issue invoice for return of goods consignment wise but the buyer did not accept this request.  Therefore there is a delay of few days, as the six months period ended on 31.10.2017l.
5. There is no dispute on the return of goods to the registered premises.
6. There is no dispute in the identity of the goods.  There is no allegation in the show cause notice that the goods were not received back or any misgiving on the part of the appellant.
7. The buyer was treated as unregistered dealer since he did not register under Central Excise Act, 1944.

The Tribunal held that the Authorities below have erried in holding that the goods have been returned by a registered dealer and hence there should have been proper invoice for return and in such circumstances there is no time limit applicable.  Therefore the buyer is entitled to take CENVAT credit under the provisions of GST laws on the strength of the returned goods.    The Tribunal held that for such deemed lapse procedure, the substantial benefit of refund of duty paid at the time of clearance cannot be denied to the appellant as the appellant have fulfilled all the conditions precedent for being entitled to refund.

The Tribunal allowed the appeal filed by the appellant and set aside the impugned order of the Adjudicating Authority and confirmed by Commissioner (Appeals).  The Tribunal directed the Revenue to grant refund within a period of 45 days from the date of receipt of order along with interest under Section 11BB of the Central Excise Act.