2025 (7) TMI 1072 - AT - Central Excise

Denial of refund claim in cash of unutilized cenvat credit accumulated on account of Education Cess Secondary Higher Education Cess - period of limitation stipulated in the 11B of the Central Excise Act - Post GST Era - HELD THAT - At the outset it is to be placed on record as also been noted in the written submissions filed on behalf of appellant that education Cess Secondary Higher Education Cesses which were discontinued w.e.f. 2015 had a reference in Finance Bill 2015 by clause No. 114 wherein Hon ble Finance Minister had clearly mentioned that he had proposed to subsume Education Cess Secondary Higher Educating Cess in the Central Excise Act and through notification No. 12 of 2015 those Cesses on inputs or capital goods received after 01-03-2015 would be allowed to be utilized for payment of normal Central Excise duty and not alone Cess component of the said duty. This means that whatever balance was available upto 30.04.2015 got subsumed with Central Excise duty and credits accumulated on its accounts should be treated as Cenvat Credits on Central Excise duty. This being the position prevailing then appellant had the option to transit those to GST regime through Trans-I Register but as because there was an F.A.Q. issued by the Department that those Cesses can not be transitioned on 31.06.2017 it was lying balance as accumulated credit in the Appellant s account. Now the question comes as to if seeking refund of the amount would be governed by the period of limitation stipulated in the 11B of the Central Excise Act. The answer is obvious No for the reason that section 142(3) clearly states that notwithstanding anything containing in section 11B except 11B(2) refund shall be granted in cash. Therefore going by the definition as available in the CGST Act existing law as defined in Section 2(48) of CGST Act 27 means it is the Excise Duty and other laws Rules etc. existing before GST came into force which provisions except Section 11B sub-section 2 would be in-applicable to grant refund in cash and therefore the contention of the Ld. Commissioner (Appeals) that limitation period of one year as available in section 11B sub-section(1) or refund provision not being available in the existing law as held in Rungta Mines Ltd. 2022 (2) TMI 934 - JHARKHAND HIGH COURT would have no application in this case wherein refund is sought in cash u/s. 142(3) of the CGST Act. The impugned order is set aside - appeal allowed.

Summary

ISSUES:

Whether refund of unutilized Cenvat credit accumulated on account of Education Cess, Secondary & Higher Education Cess can be claimed in cash under section 142(3) of the CGST Act despite the limitation period under section 11B of the Central Excise Act.Whether the limitation period of one year under section 11B(1) of the Central Excise Act applies to refund claims filed under section 142(3) of the CGST Act.Whether the discontinuation of Education Cess and related cesses w.e.f. 2015 and their subsumption into Central Excise duty affects the eligibility for refund of accumulated cenvat credit post GST implementation.Whether Explanation 3 to section 140 of the CGST Act, excluding certain cesses from "eligible duties and taxes," applies to refund claims for Education Cess credit when Explanation 1 and 2 have not been brought into force.Whether the refund claim can be denied on the ground that the unutilized cesses have become "dead credit" as per judicial precedents.Whether the Commissioner (Appeals) exceeded jurisdiction by introducing new grounds not raised in the show cause notice regarding entitlement to cash refund.

RULINGS / HOLDINGS:

The refund claim for unutilized Cenvat credit on Education Cess and related cesses is maintainable in cash under section 142(3) of the CGST Act, which contains a "non-obstante clause" overriding the limitation period prescribed in section 11B of the Central Excise Act, except for section 11B(2).The limitation period of one year under section 11B(1) of the Central Excise Act does not apply to refund claims filed under section 142(3) of the CGST Act, as the latter has an overriding effect over the former.The Education Cess and related cesses discontinued w.e.f. 2015 were subsumed into Central Excise duty, and credits accumulated up to 30.04.2015 should be treated as Cenvat Credits on Central Excise duty; transition to GST regime was available but not permitted for these cesses, leaving accumulated credit as balance eligible for refund.Explanation 3 to section 140 of the CGST Act cannot be read in isolation to exclude Education Cess from refund eligibility because Explanations 1 and 2, which define "eligible duties and taxes," have not been brought into force by official Gazette notification.The contention that unutilized cesses have become "dead credit" and are not refundable is not applicable where refund is claimed under section 142(3) of the CGST Act, which mandates cash refund notwithstanding existing law limitations.The Commissioner (Appeals) exceeded jurisdiction by raising issues not contained in the show cause notice, and such order is liable to be set aside.

RATIONALE:

The Court applied the statutory framework of section 142(3) of the CGST Act, which contains a "notwithstanding anything contained in the existing law" clause, thereby overriding the limitation provisions of section 11B of the Central Excise Act except subsection (2) thereof.The definition of "existing law" under section 2(48) of the CGST Act includes Central Excise and related laws prior to GST, but section 142(3) mandates refund in cash irrespective of limitation under such existing laws.Judicial precedents of this Tribunal and High Courts were considered, including the interpretation that Explanation 3 to section 140 cannot exclude cesses from refund eligibility unless Explanations 1 and 2 are notified, which has not occurred.The Court distinguished decisions holding cesses as "dead credit" by emphasizing that refund claims under section 142(3) are not barred by limitation or discontinuance of cesses, given the overriding statutory provision.The Court noted that the Commissioner (Appeals) erred in raising new grounds not included in the show cause notice, violating principles of natural justice and jurisdictional limits.The ruling aligns with a doctrinal position that refund under section 142(3) of the CGST Act is a statutory right enforceable notwithstanding conflicting provisions in prior laws, except as expressly excluded.