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TMI Blog2025 (5) TMI 1527X X X X Extracts X X X X X X X X Extracts X X X X ..... conditions laid down in Rule 5 ibid, which was not the case of the appellant. The inability to utilize the Cenvat credit due to the closure of the factory was not the ground for claiming the refund in cash, as has been held in the case laws cited supra. The claim of the appellant has, therefore, rightly been rejected as communicated vides impugned letter. 6. In view of the above discussion and findings, the appeal bearing No. 27-CE/APPL-MRT/MRT/2020-21 dated 21.08.2020 filed by M/s Reema Steel Pvt. Limited, 4th K.M. Stone, Nazibabad Road, Bijnor is rejected." 2.1 Appellant was engaged in the manufacture of M.S. Ingots falling under chapter 72 of the First Schedule to Central Excise Tariff Act, 1985. Appellant vide his letter dated 26.04.2013 informed that his factory was closed. After six years i.e. vide letter dated 09.12.2019 appellant again requested from the department for the cash refund of the Cenvat credit of Rs.20,07,793/- lying in balance in his records and shown in ER-1 return as on June-2017. 2.2 After following due procedure of the law, Original Authority rejected the refund claim by observing as follows:- "1. The refund claim is hit by limitation as provided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... low:- 4.3 In the present case the claim made by the appellant has been rejected by the Original Authority but he may advice that they could have transit this credit which was appearing in their ER-1 return filed on 10.07.2017 to their GST-ITC credit account by filing requisite TRAN-I. 4.4 Appellant's letter dated 26.04.2013 is of no relevance as the same has been filed, intimating about suspension/closer of production activities. However, no registration has been surrendered. They were also filing ER-1 return regularly till the time of introduction of GST i.e. till the period 30th June, 2017. As appellant has neither surrendered the registration and continued to file the returns under Central Excise Act, return cannot be compare with the cash as accumulated credit as in case of surrender of registration. Thus the case laws/decisions relied upon by the appellant cannot be invoked for allowing this refund claim. The decision of Hon'ble Supreme Court upholding the decision in the case of M/s Slovak India Trading Co. Pvt. Ltd. 2008 (10) STR 101 (Kar.) was in situation where the registration was surrendered. The relevant paragraph of the Hon'ble Karnataka High Court's order is reprod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gal proposition on the point of refund :- "7. In a recent judgment of the Hon'ble Supreme Court, in the case of Union of India and Others v. VKC Footsteps India Private Ltd. reported in 2021 SCC online SC 706 = 2021 (52) G.S.T.L. 513 (S.C.), the Hon'ble Supreme Court dealt with the provision of refund of tax under Section 54 of the CGST Act and has extensively dealt with the principles of refund in the matter of taxation. In the said case, the Hon'ble Supreme Court was dealing with the conflicting view of Hon'ble Gujarat High Court and Hon'ble Madras High Court on the point of validity of Rule 89(5) which provided a formula for a refund of ITC and the case of refund on account of inverted duty structure under sub-section (3) and Section 54 inter alia dealing with credit accumulation on account of rate of tax on inputs being higher than the rate of tax on output supplies. The Hon'ble Supreme Court ultimately upheld the view of the Hon'ble Madras High Court which held that refund is statutory right and the extension of the benefit of refund only to the unutilised credit that accumulates on account of rate of tax on input goods being higher than the rate of tax on output supplies, b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld amount to rewriting the legislation; (vi) Accepting the submission of the assessees that goods and services must be treated at par can lead to drastic consequences in terms of : (a) rates of taxes; (b) concessions, benefits and exemptions; (c) intervention in the areas of political, economic and legislative policies; (vii) Refund of taxes is one form of granting exemption; (viii) Once a refund is construed as a form of exemption from taxes, the provision has to attract strict interpretation; (ix) Exemptions, concessions and exceptions have to be treated at par and must be strictly construed; (x) ITC is not a matter of right and the burden of proof is on the assessee to establish a claim for a concession or benefit; (xi) The manner in which a proviso can be construed has been elucidated in the precedents of this Court. A proviso may not be only an exception but may constitute a restriction on the operation of the main statutory provision; and (xii) A legislative amendment which reflects a policy choice is not subject to judicial review." 8. The Hon'ble Supreme Court crystalised and laid down the law in connection with refund under taxation and som ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und. Parliament has in clause (i) of the first proviso allowed a refund of the unutilized ITC in the case of zero-rated supplies made without payment of tax. Under clause (ii) of the first proviso, Parliament has envisaged a refund of unutilized ITC, where the credit has accumulated on account of the rate of tax on inputs being higher than the rate of tax on output supplies. When there is neither a constitutional guarantee nor a statutory entitlement to refund, the submission that goods and services must necessarily be treated at par on a matter of a refund of unutilized ITC cannot be accepted. Such an interpretation, if carried to its logical conclusion would involve unforeseen consequences, circumscribing the legislative discretion of Parliament to fashion the rate of tax, concessions and exemptions. If the judiciary were to do so, it would run the risk of encroaching upon legislative choices, and on policy decisions which are the prerogative of the executive. Many of the considerations which underlie these choices are based on complex balances drawn between political, economic and social needs and aspirations and are a result of careful analysis of the data and information regar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d." (Francis Bennion : Statutory Interpretation, 2nd Edn., p. 213) The Learned Author has further pointed out : "Transitional provisions in an Act or other instrument are provisions which spell out precisely when and how the operative parts of the instrument are to take effect. It is important for the interpreter to realise, and bear constantly in mind, that what appears to be the plain meaning of a substantive enactment is often modified by transitional provisions located elsewhere in the Act." (p. 213) Similarly Thornton in his treatise on Legislative Drafting has stated : "The function of a transitional provision is to make special provision for the application of legislation to the circumstances which exist at the time when that legislation comes into force." For the purpose of ascertaining whether and, if so, to what extent the provisions of sub-section (1A) introduced in Section 23 by the amending Act are applicable to proceedings that were pending on the date of the commencement of the amending Act it is necessary to read Section 23(1A) along with the transitional provisions contained in sub-section (1) of Section 30 of the amending Act." 12. There is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efund as per law and prescribed procedure. 15. It has been submitted that in the case of Gammon India Ltd. v. Chief Secretary (supra), it has been held that the rights which are saved by saving provisions continues even after repeal. Further in the judgment passed by the Hon'ble Supreme Court in the case of Baraka Overseas Trader (supra), it has been held that the accrued rights under old law is to be continued under the new law. However, the moot question in the instant case is as to whether there was any existing right of availing Cenvat credit or refund on the date of coming into force of the CGST Act in favour of the petitioner which can be said to have accrued or vested and consequently saved by the repealing provision of CGST Act. The finding in later part of this judgment holds that the petitioner did not have any existing right of availing Cenvat credit or refund on the date of coming into force of the CGST Act which can be said to have accrued or vested and consequently saved by Section 174 (repeal and saving) read with Section 6 of General Clause Act. 16. The Learned Counsel has themselves relied upon a judgment passed by the Hon'ble Supreme Court in the case of Sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der Heading Nos. 87.02 and 87.04 or chassis of such tractors or such motor vehicles under Heading No. 87.06. However, credit taken on inputs which were lying in the factory on 16-3-1995 either as parts or contained in finished products lying in stock on 16-3-1995 was allowed. Prior to the 1995-96 Budget, the Central excise/additional duty of customs paid on inputs was allowed as credit for payment of excise duty on the final products, in the manufacture of which such inputs were used. The condition required for the same was that the credit of duty paid on inputs could have been used for discharge of duty/liability only in respect of those final products in the manufacture of which such inputs were used. xx xx xx As pointed out by us that when on the strength of the Rules available, certain acts have been done by the parties concerned, incidents following thereto must take place in accordance with the Scheme under which the duty had been paid on the manufactured products and if such a situation is sought to be altered, necessarily it follows that the right, which had accrued to a party such as the availability of a scheme, is affected and, in particular, it loses sight of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioner had no existing right on the date of coming into force of CGST Act to avail credit of the service tax paid on "port services" as Cenvat credit and accordingly, the provision of Section 140(3) of the CGST Act cannot be construed to have conferred such a right which never existed on the date of coming into force of CGST Act. 21. So far as the judgment passed in the case of Kunal Kumar Tiwari v. State of Bihar (supra) is concerned, the same has been relied upon by the petitioner to submit that an interpretation which advances the purpose of object underlying the Act should be preferred. But the Learned Counsel for the petitioner has failed to show as to how the entitlements to Cenvat credit on service tax paid on "port services" which the petitioner did not claim as per procedure prescribed by law can be construed to confer such a right to claim such credit under transitional provisions followed by cash refund and how such a position in law would advance the purpose and object of CGST Act. Rather, the aforesaid interpretation sought to be given by the petitioner is contrary to the very object and purpose of Section 142(3) of CGST Act which has been discussed at a later p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvat credit was not taken as the original bill/invoice was not received though generated on 23-5-2017. Admittedly, the petitioner did not claim the service tax paid on "port services" involved in this case as Cenvat credit in their relevant ER-1 return. 27. On account of non-inclusion of the service tax paid on port services in ER-1 Return, the petitioner could not have claimed the transition of the said Cenvat credit as permissible transitional credit referrable to Section 140 of CGST Act through TRAN-1 and could not utilise the same under CGST Regime. Admittedly, the time for filing TRAN-1 was extended till 31-10-2017 but still the impugned service tax on "port services" could not be included (although by this time the original bill/invoice was received on 20-9-2017) as this Service Tax as Cenvat credit was not included in ER-1 return and the time for filing ER-1 return for the period in question had expired. Further the petitioner had claimed this amount in Service Tax return ST-3 filed on 22-9-2017. 28. Thus, the petitioner missed to exercise their rights to avail of transitional credit of the service tax paid on "port services" through the mechanism prescribed under the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ications for refund under Section 11B(1) are to be dealt with as it uses the words "such application" which is clearly referrable to Section 11B(1) of Central Excise Act, 1944. Further, the proviso to Section 11B(2) deals with situations of rebate of duty; unspent advance deposits; principles of unjust enrichment in cases where duty of excise is paid by manufacturer or borne by buyer and who have not passed on the incidence of such duty to any other person; and also where duty of excise is borne by any other class of applicant as the central government may notify in official gazette with a further proviso regarding unjust enrichment. 43. The entire Section 11B of Central Excise Act, 1944, as it stood immediately before the appointed date, does not sanction any refund where the assessee has failed to claim Cenvat credit as per Cenvat Credit Rules, 2004 and has lost its right to claim such credit by not claiming it within the time prescribed. Further Section 11B also has its own strict time lines for claiming refund. Rule 5 of the Cenvat Credit Rules provides for refund only when the inputs are used in relation to export, which is not the case here. These aspects of the matter hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (3) of CGST Act that it indicates that Section 142(3) would apply to the situations where the assessee has failed to take transitional credit under Section 140(1), is also devoid of any merits. The second proviso only indicates that if the assessee has taken transitional credit he will not be entitled to refund. Certainly, an assessee cannot simultaneously claim transitional credit as well as refund of the same amount. The second proviso to Section 143(2) cannot be said to be an eligibility condition to claim refund but is only a condition which governs refund as an assessee cannot be permitted to have transitional credit as well as refund of the same tax amount. 48. Section 140(5) applies under the circumstances where input services are received after the appointed day but the tax has been paid by the supplier under the existing law within the time and in the manner prescribed with a further condition that the invoice etc. are recorded in the books of account of the such person within a period of 30 days from the appointed day. Section 140(5) also does not help the petitioner. Section 140(5) has no applicability to the facts and circumstances of this case. In the instant case, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t output service provider and the same cannot be used for providing output services. Therefore, it cannot be their input services under Rule 2(l) of Cenvat Credit Rules, 2004. I am also of the considered view that the petitioner could not have claimed the impugned service tax on port services in ST-3 return as they were registered for discharging their liability under the service tax only on reverse charge mechanism. Rather it is the case of the petitioner that they had included the impugned service tax in ST-3 Return under compelling circumstances of non-receipt of original invoice dated 23-5-2017 and this was done only attempting to save their credit which they had failed to claim through ER-1 return and then as transitional credit through TRAN-1 under Section 140(1) of the CGST Act. Thus, the authority has rightly held that petitioner had wrongly claimed Credit of the impugned service tax under ST-3 return and omitted to claim the impugned service tax as Cenvat credit in ER-1 Return. 52. Further case of the respondent is that the petitioner as a manufacturer was eligible to claim Cenvat credit on impugned service i.e. "port services" and should have claimed the credit in their ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e petitioner and the port authorities and the tax collecting authorities had nothing to do in the matter. Certainly, the delay in receipt of original invoice is not attributable to the respondent authorities under the existing law or under the new law. 54. The authorities have held in the impugned orders that in the instance case, the timeline for claiming Cenvat credit qua the service tax paid on port services was not followed by the petitioner, although the services were availed, the entire payment was made and the bill was also generated in the month of April/May, 2017. Further, it has also been held in the impugned orders that the petitioner not only failed to claim the Cenvat credit as per law, but illegally claimed the credit of the same while filing service tax return although the petitioner was not entitled to do so as the petitioner was not registered as a service provider. The authorities have also held that the service tax paid on port service was not eligible for refund under the existing law as the said services were not utilised for export. Thus, the petitioner on the one hand did not claim Cenvat credit as per the procedure established by law under the existing law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s case. 4.10 In case of C A D Vision Engineers s Pvt. Ltd. [FINAL ORDER No. A/30289/2024 dated 30.04.2024 in Service Tax Appeal No. 30202 of 2020] Hyderabad bench held as follows: "9. At the very outset, it is to be understood that after the introduction of GST Laws with effect from 01.07.2017 certain transitional provisions were made so as to ensure that certain provisions of the existing law are further carried forward and claims, liability etc., under the existing laws were to be disposed off in terms of provisions made in the Act. In so far as it relates to refund of cenvat credit, there are apparently three options available post introduction of GST Laws. Firstly, under Section 140 where specific and eligible cenvat credits under existing law were entitled for being carried forward under the new regime and to be taken as credit in their electronic ledger under the Act, subject to provisions under the relevant rules and procedures. The second provision was in terms of Section 142(3) and third under Section 142(9)(b). A plain reading of the provisions would indicate that, interalia, refund of any amount of tax or cenvat credit has to be disposed off in accordance with the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said Order of the Hon'ble Tribunal has been stayed by Hon'ble High Court of Madhya Pradesh. The other citations relied upon are in relation to substantive right to claim input credit. However, I find that these judgments are in relation to the cenvat credit and it's admissibility under the erstwhile CCR and not in relation to the entitlement of refund under Section 142 of the Act. Moreover, as pointed out by the Learned DR, Division Bench of CESTAT, Hyderabad, in the case of CCE, Tirupati Vs Rani Plastic Pipe Industries [2020 (6) TMI 356-CESTAT,Hyd] has held that there is no provision in the CCR for refund of cenvat credit if the assessee is not able to utilize it for any other purpose, such as factory being closed and that it was also held that the Larger Bench of Hon'ble High Court of Bombay had held that no refund can be sanctioned under Section 11B if the assessee is unable to utilize cenvat credit on account of closure of manufacturing activities. Similar view was also held by the Division Bench of CESTAT in the case of Finex Industries Pvt Ltd., Vs CCE, which also examined, interalia, the judgments in the case of Union of India Vs Slovak India Trading Co. Pvt Ltd., [2006 (201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or other evidence as the applicant may furnish to establish that the amount of duty of excise, in relation to which such refund is claimed, was collected from or paid by him and incidence of such duty had not been passed by him to any other person. The later provision enabling the claiming of refund is now worded differently. We have reproduced it and now it is only when the proviso is attracted that the amount of refund can be paid over to the applicant or else it has to be credited to the fund. Even earlier, the amount used to be credited to the fund, but the proviso says that instead of being credited to the fund, it can be paid to the applicant if such amount in this case is relatable to refund of credit of duty paid on excisable goods used as inputs in accordance with the rules made. The crucial words are that "the refund of credit of duty paid on excisable goods used as inputs in accordance with the rules made or any notification issued under this Act". If the excisable goods are not used as inputs in accordance with the rules made, to our mind, there is no question of any refund. Our view gets support and reinforcement from the language of the rules themselves. Mr. Patil re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e which is exported, then, the Cenvat credit in respect of the input or input service so used shall be allowed to be utilised by the manufacturer or provider of output service towards payment of duty of excise on any final product cleared for home consumption or for export on payment of duty or service tax on output service. Whether for any reason, such adjustment is not possible, the manufacturer shall be allowed refund of such amount subject to such safeguards, conditions and limitation as may be specified by the Central Government by a notification. 24. The word input is defined in Rule 2(k) of the Cenvat Credit Rules, 2004 to mean all goods used in the factory by the manufacturer of the final product or all goods including accessories, cleared along with the final product, the value of which is included in the value of the final product and goods used for providing free warranty for final products or all goods used for generation of electricity or steam for captive use or all goods used for providing any output service. We are not concerned with the excluded portion, but the consistent thread is that input means all goods used in the factory by the manufacturer of the final p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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