2025 (7) TMI 1412 - AT - Service Tax

Bar for refund of the unutilized Education Cess (EC) Secondary and Higher Education Cess (SHEC) and Krishi Kalyan Cess (KKC) in terms of section 140 (1) CGST Act, 2017 after the retrospective insertion of Explanation 3 to Section 140 ibid - HELD THAT - In the instant case Explanation 3 is intended to clarify the exclusion of cesses however since the amended Explanations 1 and 2 are not notified Explanation 3 is not suffice to reject the claim and to contend that cess is not included in eligible duties and taxes as the said Explanation 3 refers to amended Explanations 1 and 2 which in turn refer to Section 140(1) ibid. Explanation 3 as such does not have any application to Section 140 (1) ibid but without looking into this aspect the claim of the appellant was rejected. Thus the rejection of the appellant s refund claim on the basis of Explanation 3 is not legally sustainable. Recently this Tribunal in Tata Telecommunications Transformation Services Ltd. vs. Commissioner of CGST C.Ex. Mumbai Central 2023 (10) TMI 1250 - CESTAT MUMBAI on somewhat similar issue after taking into consideration decisions of the various High Courts and Tribunal viz. Brand Equity Treaties Ltd. vs.Union of India 2020 (5) TMI 171 - DELHI HIGH COURT Gauri Plasticulture (P) Ltd. vs. Commissioner of Central Excise Indore 2019 (6) TMI 820 - BOMBAY HIGH COURT International Seaport Dredging Pvt.Ltd. vs. Commissioner of GST Central Excise (Appeals-I) Chennai 2022 (6) TMI 822 - CESTAT CHENNAI set aside the orders of lower authorities rejecting claim for monetization of cess and remanded the matter back to the original authority for re-determination. The impugned order is set aside and the matter is remanded back to the Adjudicating Authority to decide the refund claim afresh in accordance with law after verifying the supporting documents and also after giving proper opportunity of hearing to the appellant - Appeal allowed by way of remand.

Summary

ISSUES:

Whether there is any bar for refund of the unutilized Education Cess, Secondary and Higher Education Cess, and Krishi Kalyan Cess under Section 140(1) of the CGST Act, 2017 after the retrospective insertion of Explanation 3 to Section 140'Whether Explanation 3 to Section 140, inserted retrospectively, can be invoked in the absence of notification of the amendments to Explanations 1 and 2 to Section 140(1)?Whether the rejection of refund claims for unutilized cesses on the basis of Explanation 3 is legally sustainable?

RULINGS / HOLDINGS:

The Court held that there is no bar for refund of unutilized Education Cess, Secondary and Higher Education Cess, and Krishi Kalyan Cess under Section 140(1) CGST Act, 2017, as Explanation 3 cannot be invoked without notification of the amended Explanations 1 and 2.The Court ruled that Explanation 3, which excludes any cess not specified in Explanations 1 or 2, "cannot be invoked" because the amendments to Explanations 1 and 2 have not been notified, and thus the statutory scheme prior to amendment applies.The rejection of the refund claim solely on the basis of Explanation 3 is "not legally sustainable" and the matter must be remanded for fresh adjudication in accordance with law.

RATIONALE:

The Court applied the statutory framework of Section 140 of the CGST Act, 2017, including the retrospective amendment by Section 28 of the CGST (Amendment) Act, 2018, which inserted Explanation 3 clarifying the exclusion of certain cesses from "eligible duties and taxes."The Court emphasized the settled legal principle that amendments are effective only upon proper notification and promulgation; since the amendments to Explanations 1 and 2 were not notified, Explanation 3 cannot be applied.The Court relied on recent Tribunal precedents which held that refund claims for cesses not specified in Explanations 1 and 2 should not be rejected solely based on Explanation 3, and directed remand for re-determination after due opportunity of hearing.