2024 (9) TMI 1773 - AT - Central Excise

Cash refund against the accumulated and unutilized Cenvat credit of Education Cess and Secondary Higher Education Cess in the light of Section 142 (3) of CGST Act 2017 read with Section 11 B of Central Excise Act 1944 - Denial of refund claim on the ground that since the levy of Education Cess and Secondary Higher Education Cess had been abolished the appellant was not supposed to retain the credit and carry forward the same - time limitation - Principles of unjust enrichment. Cash refund against the accumulated and unutilized Cenvat credit of Education Cess and Secondary Higher Education Cess - HELD THAT - The abolition of Education Cess does not affect the accumulated Cenvat credit which was availed during the time when the Cenvat credit on Education Cess and Secondary Higher Education Cess was legally available to the appellant. The both the lower authorities have misunderstood the abolishing of education cess the levy of duty and the availment of Cenvat credit are on different yardstick. Therefore merely because the levy of education cess was abolished it can not disentitle an assessee from availment of Cenvat credit on Education Cess and Secondary Higher Education Cess. Therefore the accumulation of the Cenvat credit in respect of Education Cess and Secondary Higher Education Cess was absolutely legal and correct. Consequently they are eligible for refund of the same as provided under Section 142 (3) of the CGST Act 2017 read with Section 11B of Central Excise Act 1944. Time Limitation - HELD THAT - As per special provision under section 142 (3) the provision of time bar is not applicable in the case of cash refund of accumulated Cenvat credit. Therefore the ground of time bar itself is irrelevant and on that basis refund is not time bar. Principles of unjust enrichment - HELD THAT - The provision of unjust enrichment is very much applicable to which the sanctioning authority can test the aspect of unjust enrichment at the time of processing the refund claim. The issue of refund of accumulated Education Cess and Secondary Higher Education Cess has been considered in the case of USV Private LTD 2023 (2) TMI 230 - CESTAT AHMEDABAD wherein this Tribunal has held that the appellant is entitled for cash refund of accumulated and unutilized Cenvat credit of Education Cess and Secondary and Higher Education Cess. Thus the appellant is entitled for the cash refund of accumulated Education Cess and Secondary Higher Education Cess lying in their Cenvat account subject to verification of the claim in accordance with law. The Impugned orders are set aside - Appeals are allowed.

Summary

ISSUES:

Whether the appellant is entitled to cash refund against the accumulated and unutilized Cenvat credit of Education Cess and Secondary & Higher Education Cess under Section 142(3) of the CGST Act, 2017 read with Section 11B of the Central Excise Act, 1944.Whether the abolition of Education Cess and Secondary & Higher Education Cess disentitles an assessee from retaining or claiming refund of accumulated Cenvat credit on such cesses.Whether the refund claim for accumulated Cenvat credit of Education Cess and Secondary & Higher Education Cess is barred by limitation/time bar.Whether the principles of unjust enrichment apply to refund claims of accumulated Cenvat credit of Education Cess and Secondary & Higher Education Cess.Whether Rule 5 of the Cenvat Credit Rules, 2004 permits or prohibits cash refund of unutilized Cenvat credit on closure of manufacturing or exit from the Modvat/Cenvat scheme.Whether the accumulated Cenvat credit of Education Cess and Secondary & Higher Education Cess constitutes a vested right and survives the transition to GST regime.Whether conflicting High Court and Tribunal decisions on refund of accumulated Cenvat credit of Education Cess and Secondary & Higher Education Cess should be resolved in favor of the Karnataka High Court and Punjab and Haryana High Court decisions upheld by the Supreme Court.

RULINGS / HOLDINGS:

The appellant is entitled to cash refund of accumulated and unutilized Cenvat credit of Education Cess and Secondary & Higher Education Cess under Section 142(3) of the CGST Act, 2017 read with Section 11B of the Central Excise Act, 1944, as the abolition of the levy does not affect the vested right in the accumulated credit.The abolition of Education Cess and Secondary & Higher Education Cess does not disentitle the appellant from retaining or claiming refund of legally availed Cenvat credit on such cesses; "the levy of duty and the availment of Cenvat credit are on different yardstick."The refund claim of accumulated Cenvat credit of Education Cess and Secondary & Higher Education Cess is not barred by limitation under the special provision of Section 142(3) of the CGST Act, 2017, which excludes time bar for cash refund of accumulated Cenvat credit.The principle of unjust enrichment remains applicable and may be tested by the sanctioning authority at the time of refund processing.Rule 5 of the Cenvat Credit Rules, 2004 does not prohibit cash refund of unutilized Cenvat credit; it allows refund "subject to such safeguards, conditions and limitations as may be specified by the Central Government," and specifically contemplates refund when adjustment is not possible, such as on closure of manufacturing or exit from the Modvat scheme.Accumulated Cenvat credit of Education Cess and Secondary & Higher Education Cess constitutes a vested right that does not extinguish by change of law or introduction of GST, unless specifically barred; such credit is "indefeasible" and "as good as paid" as held in Eicher Motors and subsequent decisions.In cases of conflicting decisions, the view of the Karnataka High Court in Slovak India Trading Co. Pvt. Ltd., affirmed by the Supreme Court, and the Punjab and Haryana High Court, should be followed over contrary views such as the Rajasthan High Court and the Larger Bench of Bombay High Court.

RATIONALE:

The legal framework applied includes Section 142(3) of the CGST Act, 2017, Section 11B of the Central Excise Act, 1944, and Rule 3 and Rule 5 of the Cenvat Credit Rules, 2004.Precedent decisions from various High Courts and Tribunals, including the Karnataka High Court in Slovak India Trading Co. Pvt. Ltd., upheld by the Supreme Court, establish that accumulated Cenvat credit is a vested right and refund is permissible upon closure of manufacturing or exit from the Modvat/Cenvat scheme.The Court distinguished between abolition of levy and the right to credit, emphasizing that abolition of Education Cess does not extinguish the right to refund accumulated credit legally availed during the levy period.The special provision in Section 142(3) of the CGST Act excludes time bar for refund claims of accumulated Cenvat credit, reflecting legislative intent to protect such vested rights despite the transition to GST.Judicial discipline requires following binding jurisdictional High Court decisions over conflicting judgments, especially when affirmed by the Supreme Court, to maintain consistency and predictability in tax law.The Court rejected reliance on policy decisions or notifications that contradict binding judicial precedents, reaffirming that vested rights in tax credits cannot be negated by administrative policy.