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2025 (7) TMI 554 - AT - Central ExciseRejection of appeal filed by the appellant for cash refund of Cenvat credit of Countervailing duty (CVD) Special Additional Duty (SAD) u/s. 142(3) of Central Goods Service Tax Act 2017 - rejection on the ground that the instant case falls under the category of differential duty and would be eligible for Cenvat credit - principles of unjust enrichment - HELD THAT - Section 142 ibid is a transitional provision. A reading makes it explicit that it has an overriding effect subject only to the principle enshrined in Section 11B(2) ibid which primarily deals with unjust enrichment . It mandates for cash refund of any amount of Cenvat credit paid under the existing law. The amount of CVD and SAD totaling Rs. 13, 41, 195/-paid by the appellant on 18.01.2019 to regularize obligation under Advance Authorisation granted them prior to GST regime was admissible to them as a Cenvat credit under erstwhile Cenvat Credit Rules 2004 however w.e.f. 01.07.2017 GST came into force and the Cenvat Credit Rules 2004 were no longer in existence having been superseded by Notification No. 20/2017-CE(NT) dated 30.06.2017. Hence the appellant was not in a position to avail the Cenvat credit of such duties paid by them in absence of enabling provision and therefore they filed a claim for cash refund. There is no dispute regarding the fact that the Appellant had borne the incidence of CVD and SAD. Therefore the bar of unjust enrichment is not attracted and the refund is legally tenable u/s 11 B(2) ibid. Although the payment of CVD SAD had been made in the year 2019 i.e. during GST regime but it pertains to the period pre-GST i.e. prior to 1.7.2017 as the deficiency letter issued by DGFT was itself of 17.3.2017 and admittedly its credit is no longer available under the GST regime. So far as applicability of Cenvat Credit Rules 2017 which superseded the CCR 2004 vide notification No.20/2017-CE (NT) dated 30.6.2017 is concerned although the CVD SAD were paid on 18.1.2019 but it pertains to the imports of period prior to coming into force of GST i.e. prior to 30.6.2017 and the department s view is not correct that in view of Notification dated 30.6.2017 which brought the CCR 2017 into operation there was no provision of availing Cenvat credit on CVD SAD payments and the appellant cannot claim the same. It is admitted position that ER-1 was required to be filed by 30.06.2017 for carrying forward the Cenvat Credit balance as per Section 140 ibid and TRAN-1 up to 27.12.2017 whereas the CVD SAD were paid by the appellant only on 18.1.2019. In the instant matter the cash refund is claimed because CENVAT credit could not be availed during pre-GST period as stated earlier. The issue involved herein is no more res integra in view of number of decisions of this Tribunal. A co-ordinate Bench of the Tribunal in the matter of Mithila Drugs Pvt Ltd. v. Commissioner Central Goods and Service Tax 2022 (3) TMI 58 - CESTAT NEW DELHI decided the identical issue in favour of the assessee. CVD and SAD paid post-GST on imports made pre-GST i.e. prior to 01.07.2017 where CENVAT Credit could not be availed are eligible for cash refund in terms of section 142(3) ibid. The impugned order is set aside - appeal allowed.
The core legal question considered by the Tribunal was whether the appellant is entitled to a cash refund of Countervailing Duty (CVD) and Special Additional Duty (SAD) paid after the implementation of the Goods and Services Tax (GST) regime, specifically under Section 142(3) of the Central Goods & Service Tax Act, 2017, for goods imported prior to the GST effective date of 1 July 2017.
In addressing this issue, the Tribunal examined the transitional provisions under Section 142(3) of the CGST Act, 2017, and the corresponding provisions of Section 11B(2) of the Central Excise Act, 1944, which govern refund claims of excise duty and interest. The Tribunal also considered the applicability of the erstwhile Cenvat Credit Rules, 2004, and the subsequent Cenvat Credit Rules, 2017, which came into effect from 30 June 2017, coinciding with the GST rollout. The appellant, a manufacturer of excisable goods, had imported inputs under an Advance Authorisation Licence issued under the Foreign Trade Policy, 2015-20. Due to excess imports, the Director General of Foreign Trade (DGFT) issued a deficiency letter dated 17 March 2017, directing the appellant to regularize the excess imports by paying the applicable customs duties, including CVD and SAD, with interest. The appellant complied by paying these duties on 18 January 2019, after the GST regime commenced, but was unable to avail Cenvat credit for these duties under the GST framework, as the Cenvat Credit Rules, 2004 had been superseded. The appellant filed a refund claim under Section 142(3) of the CGST Act, 2017, seeking cash refund of the Cenvat credit of CVD and SAD paid. The Adjudicating Authority rejected the refund claim on the ground that CVD and SAD paid post-GST are not admissible as Cenvat credit under the Cenvat Credit Rules, 2004. The Commissioner (Appeals) agreed that the duties were admissible as Cenvat credit but denied cash refund, holding that under the old law, credit was available but cash refund was not permissible. The Tribunal's detailed analysis began with a close reading of Section 142(3) of the CGST Act, 2017, which is a transitional provision mandating that refund claims for amounts paid under the existing law prior to the appointed day (1 July 2017) shall be disposed of in accordance with the existing law, but any amount accruing shall be paid in cash. The only exception is where unjust enrichment is found under Section 11B(2) of the Central Excise Act, 1944. The Tribunal emphasized that the provision has an overriding effect and mandates cash refund of Cenvat credit amounts paid under the existing law. The Tribunal found that the appellant had borne the incidence of CVD and SAD on imports made prior to GST implementation, and thus, the bar of unjust enrichment was not attracted. The payment made on 18 January 2019 was to regularize pre-GST imports, and since the Cenvat Credit Rules, 2004 were no longer in force post-GST, the appellant could not avail credit and was entitled to a cash refund. The Tribunal rejected the Commissioner's conclusion that the duties paid for contravention of the Advance Authorization scheme were non-refundable, clarifying that the deficiency letter from DGFT was not a demand or recovery notice under Customs law but a direction to regularize excess imports, and there was no allegation of fraud or wrongdoing. Regarding the applicability of the Cenvat Credit Rules, 2017, the Tribunal held that these rules superseded the 2004 Rules from 30 June 2017, but the duties paid pertained to pre-GST imports, and the appellant's failure to claim credit before GST commencement was not fatal to their refund claim. The Tribunal distinguished the facts from a cited High Court decision where the petitioner had failed to claim credit due to internal omissions and had wrongly claimed credit under service tax returns, which was not the case here. The Tribunal also reviewed several precedents of co-ordinate Benches of the Tribunal, which had consistently held that CVD and SAD paid post-GST on pre-GST imports, where credit could not be availed, are eligible for cash refund under Section 142(3). The Tribunal cited a recent decision where a similar refund claim was allowed, emphasizing that the limitation period was waived under the transitional provisions and the only consideration was the absence of unjust enrichment. The Tribunal rejected reliance on earlier decisions which had denied refund claims, noting that subsequent larger Bench decisions and consistent judicial pronouncements had clarified the entitlement to cash refund in such cases. The Tribunal referred to a Larger Bench decision holding that refund claims under Section 142(3) must be disposed of in accordance with existing law and that refund of Cenvat credit amounts is permissible notwithstanding the payment date falling post-GST commencement. In conclusion, the Tribunal held that the appellant is entitled to a cash refund of the CVD and SAD paid post-GST on goods imported prior to 1 July 2017 under Section 142(3) of the CGST Act, 2017. The impugned order denying the refund was set aside, and the Adjudicating Authority was directed to grant the refund along with interest from the date of filing the refund claim. Significant holdings include the following verbatim excerpt of the Tribunal's legal reasoning: "It is abundantly clear that Section 142 ibid is a transitional provision. A reading makes it explicit that it has an overriding effect subject only to the principle enshrined in Section 11B(2) ibid which primarily deals with 'unjust enrichment'. It mandates for cash refund of any amount of Cenvat credit paid under the existing law." "The amount of CVD and SAD totaling Rs. 13,41,195/- paid by the appellant, on 18.01.2019 to regularize obligation under Advance Authorisation granted them prior to GST regime, was admissible to them as a Cenvat credit under erstwhile Cenvat Credit Rules, 2004 however w.e.f. 01.07.2017, GST came into force and the Cenvat Credit Rules, 2004 were no longer in existence... Hence the appellant was not in a position to avail the Cenvat credit of such duties paid by them in absence of enabling provision and therefore they filed a claim for cash refund." "There is no dispute regarding the fact that the Appellant had borne the incidence of CVD and SAD. Therefore, the bar of unjust enrichment is not attracted and the refund is legally tenable u/s 11 B(2) ibid." "The issue involved herein is no more res integra in view of number of decisions of this Tribunal... refund of CVD and SAD in question is allowable, as credit is no longer available under the GST regime, which was however available under the erstwhile regime of Central Excise prior to 30.06.2017." "Section 142(3) of the CGST Act mandates that refund claims for amounts paid under the existing law shall be disposed of in accordance with the provisions of the existing law and any amount eventually accruing to the claimant shall be paid in cash." Core principles established are:
Final determinations:
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