Assessee Entitled To Cash Refund Of Cenvat Credit On Amount Of CVD And SAD Paid After 01.07.2017: CESTAT

The Delhi Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that the assessee is entitled to a cash refund of CENVAT credit on the amount of cash of countervailing duty (CVD) and special additional duty (SAD) paid even after July 1, 2017.

The bench of Justice Dilip Gupta (President) and Hemambika R. Priya (Technical Member) has observed that the appellant/assessee has paid the CVD and SAD for the period prior to July 1, 2017, even though the payment was made subsequent to July 1, 2017. Therefore, since the duty was paid by the appellant for the period when the Cenvat credit rules existed, the appellant was entitled to Cenvat credit during the period prior to July 1, 2017.

The respondent-assessee is in the business of manufacturing submersible pumps, power-driven pumps, centrifugal pumps, and solar pumping systems. It is registered with the Goods and Services Tax Department, but before the introduction of the CGST Act, it was registered with the Central Excise Department.

The assessee was availing of CENVAT credit for duty paid on the input goods as well as the service tax paid on input services that were used in the manufacture of the final products, and it also filed the statutory monthly ER-1 returns.

The assessee claimed that Shakti Pumps claims that under the erstwhile regime, i.e., prior to July 1, 2017, it was entitled to avail CENVAT credit for CVD and SAD paid for regularization of the unutilized duty-free inputs imported under the AA Scheme in terms of rule 3 read with rule 9 of the 2004 Credit Rules.

The assessee filed two refund claims on 9.5.2019 before the Joint Commissioner of State Tax, GST Indore, claiming refund of CENVAT credit in cash in respect of CVD amounting to Rs. 1,35,10,358/- and SAD amounting to Rs. 1,10,44,821/- paid by it post-implementation of the CGST Act in terms of Section 142(3) read with Section 142(6)(a) of the CGST Act. However, the Joint Commissioner, in letters dated September 26, 2019, communicated that it was not the appropriate authority. The refund applications were, therefore, re-submitted by Shakti Pumps before the Assistant Commissioner seeking refund of CENVAT credit in cash of CVD amounting to Rs. 1,35,10,358/- by the first application dated 21.06.2019 and refund of CENVAT credit in cash of SAD of Rs. 1,10,44,821/- by the second application dated 25.06.2019 in terms of sections 142(3) and 142(6)(a) of the CGST Act, which applications were received on 08.07.2019.

The Assistant Commissioner had rejected the refund claims filed by the assessee.

The assessee appealed before the Commissioner (Appeals). The Commissioner (Appeals) has held that there could be no doubts that Shakti Pumps was eligible for CENVAT credit and, therefore, the Assistant Commissioner committed an illegality in rejecting the claim. The Commissioner (Appeals), therefore, held that Shakti Pumps would be entitled to a refund in cash of CVD and SAD in terms of Section 142(3) of the CGST Act, subject to verification of unjust enrichment by the sanctioning officer.

The department challenged the order passed by the Commissioner (Appeals) Customs, CGST, and Central Excise, Indore.

The department contended that CVD and SAD are not duties paid under the “existing law as defined under Section 2(48) of the CGST Act, and there is no machinery or mechanism for refunding CVD and SAD under the Central Excise Act of 1944. Mere specifying any duty as eligible for CENVAT credit does not make it so unless eligibility is proved under the Rules. The notification does not allow CENVAT credit of duties paid due to default, and therefore, allowing CENVAT credit of default duties would be against the mandate of the notification. A party that has availed itself of the itself of the benefit on the assurance and undertaking that it shall perform certain acts necessary for the enjoyment of the benefit cannot be permitted to enjoy the benefit even after violating the conditions subject to which the benefit was extended.

The department argued that Section 142(6)(a) of the CGST Act relates to the claim of CENVAT credit in proceedings relating to appeal, review, or reference, and as the said provision is not satisfied, the question of the grant or refund of the same is illegal and unjustified.

The issue raised was whether the assessee was entitled to claim a refund of CENVAT credit in cash for the amount of CVD and SAD paid under the existing law under the provisions of Section 142(3) of the CGST Act.

The tribunal, while allowing the appeal, held that the assessee is entitled to a cash refund of CENVAT credit in the amount of CVD and SAD paid even after July 1, 2017. The Commissioner (Appeals), therefore, committed no illegality in granting this relief to the assessee.

Counsel For Appellant: Rakesh Agarwal

Counsel For Respondent: Sukriti Das

Case Title: Assistant Commissioner Versus Shakti Pumps

Case No.: Excise Appeal No. 51131 Of 2020

Click Here To Read The Order