2024(06)LCX0056

Chandigarh Tribunal

Kobe Suspension Co. Pvt. Ltd.

Versus

Commissioner of Central Excise Goods & Service Tax

Excise Appeal No. 60106 of 2022 decided on 04-06-2024

CUSTOMS

CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
CHANDIGARH

REGIONAL BENCH - COURT NO. I

Excise Appeal No. 60106 of 2022

[Arising out of Order-in-Appeal No. 106/CE/CGST/Appeal-Gurugram/SKS/2021-22 dated 02.02.2022 passed by the Commissioner (Appeals), CGST, Gurugram]

Kobe Suspension Co Pvt Ltd
Plot No. 15, Industrial Estate,
Sector 6, Faridabad,
Haryana 121002                 ……Appellant

VERSUS

Commissioner of Central Excise, Goods &
Service Tax, Faridabad
GST Bhawan, New CGO Complex,
NH IV, Faridabad,
Haryana 121001                        ……Respondent

APPEARANCE:
Present for the Appellant: Sh. D.K. Singh & Sh. R.K. Varma, Advocates
Present for the Respondent: Sh. Harish Kapoor, Authorized Representative

CORAM:
HON’BLE Sh. S. S. GARG, MEMBER (JUDICIAL)
HON’BLE Sh. P. ANJANI KUMAR, MEMBER (TECHNICAL)

FINAL ORDER NO. 60297/2024

DATE OF HEARING: 07.02.2024
DATE OF DECISION: 04.06.2024

PER : S. S. GARG

The present appeal is directed against the impugned order dated 02.02.2022 passed by the Commissioner (Appeals) of Central Goods & Service Tax, Gurugram, whereby the learned Commissioner (Appeals) has upheld the Order-in-Original dated 10.06.2021 and denied the benefit of Cenvat Credit in terms of Rule 3(1) of Cenvat Credit Rules, 2004 and subsequently cash refund in terms of transitional provision under Section 142(6)(a) of the CGST Act, 2017.

2. Briefly stated facts of the present case are that the appellant is engaged in manufacturing of different types of wheel rim, automotive parts and components falling under ITCHS 8708. The appellant imported the capital goods without payment of duty under EPCG scheme; however, the appellant could not fulfil its export obligations against the said import due to lack of export orders in order to regularize the said imports. The appellant paid the customs duties along with interest. These duties were paid during GST regime. Thereafter, the appellant approached the DGFT department and the DGFT department issued the discharged certificate to the appellant. Thereafter, the appellant filed the refund application under Section 142(6)(a) of the CGST Act, 2017 seeking cash refund of Cenvat Credit of CVD (Rs.23,72,607/-) and SAD (Rs.10,21,081/-) along with interest (Rs.54,23,577/-) total amounting to Rs.88,17,266/-. A show cause notice was issued to the appellant proposing to deny the refund on the ground of non-fulfillment of condition of export under advance licence, as the same was not covered under Section 142 ibid. The appellant filed detailed reply to the show cause notice. The adjudicating authority, after following the due process, rejected the refund on the fresh grounds other than the grounds stated in the show cause notice. Aggrieved by the said order, the appellant filed appeal before the Commissioner (Appeals) who vide the impugned order, upheld the Order-in-Original. Aggrieved by the said impugned order, the appellant has preferred the present appeal.

3. Heard both the parties and perused the records.

4.1 The learned Counsel for the appellant submits that the impugned order is not sustainable in law as the same has been passed without properly appreciating the facts and the law.

4.2 He further submits that both the authorities have failed to appreciate that the appellant imported the capital goods under scheme of EPCG authorization which provides conditional exemption to the appellant from the basic customs duty plus additional custom duty levied equivalent to excise duty plus sales tax duty. However, the scheme also provides an option to regularize these authorizations in case of non-fulfillment of the export obligation due to the situation beyond their control during the period of export obligation discharge. He refers to para 5.14 of handbook of procedure issued under Foreign Trade Policy 2009-14 and also Customs Notification No. 102/2009- Cus dated 11.09.2009 granting exemption of customs duty on import of capital goods under EPCG authorization.

4.3 He further submits that both the authorities have failed to appreciate that the appellant is claiming availment of Cenvat Credit of duty (CVD & SAD) paid on capital goods in terms of Rule 3(1) of the Cenvat Credit Rules, 2004 which provides that a manufacturer or producer of final product shall be allowed to take Cenvat Credit of the additional duty leviable under Section 3 of the Customs Tariff Act, equivalent to the duty of excise and the additional duty leviable under sub-section (5) of Section 3 of the Customs Tariff Act, which is paid on any input or capital goods received in the factory of manufacture of final product or premises of the provider of output service on or after the 10th day of September, 2004.

4.4 He further submits that both the authorities have failed to appreciate that the appellant is claiming availment of Cenvat Credit of duty (CVD & SAD) paid vide different customs challans on regularization of the EPCG authorization. These challans were very much specified documents to take Cenvat Credit as per Rule 9(1) of the Cenvat Credit Rules, 2004.

4.5 He further submits that the default in export obligation has taken place prior to 01.07.2017 and the customs duty liability is discharged beyond 01.07.2017. He also submits that due to coming into force of GST, this credit is no longer possible and therefore, under the transitional provision contained in Section 142(6)(a) of the CGST Act, 2017, this needs to be refunded in cash.

4.6 He further submits that this issue is no more res integra. This very issue, as to whether CVD & SAD paid subsequent to 2017, are eligible for cash refund under Sections 142 (3) and 142(6)(a) of the CGST Act, 2017, has been decided in favour of the assessee/importer in the following cases:

4.7 He further submits that the Commissioner (Appeals) while rejecting the refund, has relied upon the CBIC Circular No. 20- 10/11/2019-GST/1001 dated 22.06.2020. He further submits that this Circular is not binding on the appellant as well as the Court.

4.8 He further submits that the provisions of clause (a) of subsection (8) of Section 142 of CGST Act, 2017 is related to recovery of the arrear of tax under the existing law and credit of the same as input tax credit in CGST Act, 2017; however, the present case is different because in the present case, the appellant is asking for credit under existing law and its refund, if credit is found eligible under existing law, in terms of provision of Section 142(6)(a) of CGST Act, 2017.

4.9 He further submits that the Commissioner (Appeals) while rejecting the refund, has relied upon the decision of the Tribunal in the case of M/s Servo Packaging Ltd vs. Commissioner of CGST & CE – 2020 (373) ELT 550 (Tri. Chennai) whereby the Tribunal has rejected the refund filed under Section 142(3) of CGST Act, 2017. In this regard, the leaned Counsel submits that this decision of the Tribunal has been challenged by the appellant-assessee and the same is pending before the Hon’ble Madras High Court and hence, it is not the final judgment in the matter. The Tribunal in M/s Servo Packaging Ltd ‘s case (supra) has observed in para 11 as under :

“11. ………. At best, the appellant could have availed the Cenvat Credit but that would not ipso facto give them any right to claim refund of such credit in cash with the onset of GST because Cenvat is an option available to an assessee to be exercised and the same cannot be enforced by the CESTAT at this stage.”

The learned Counsel submits that this observation of the Tribunal clearly shows that the appellant is eligible for the Cenvat Credit.

4.10 He also submits that though the Commissioner (Appeals) has relied upon the decision of Hon’ble Bombay High Court in the case of M/s JCB India Ltd vs. UOI – Writ Petition No. 3142 of 2017 decided on 19.02.2018, but the learned Commissioner (Appeals) has not quoted any specific provision which the appellant has not followed or complied with, which is required for availing of Cenvat Credit; while the appellant has fully complied with the Cenvat Credit Rules, 2004, Customs Notification No. 102/2009-Cus dated 11.09.2009 and provisions of Foreign Trade Policy, which makes the appellant eligible for the Cenvat Credit towards the duty paid while regularization of EPCG authorizations.

5.1 On the other hand, the learned AR for the Revenue reiterates the findings of the impugned order and submits that the Commissioner (Appeals) has passed the impugned order by following the CBIC Circular dated 22.06.2020 and has also relied upon the decision of the CESTAT in the case of M/s Servo Packaging Ltd (supra).

5.2 The leaned AR further submits that the appellant is not entitled for Cenvat Credit of interest under the existing law. The claim of the appellant is only for the Cenvat Credit of duties paid by them for non fulfillment of export obligations. They have not disputed the payment of duties or its delayed payment. Interest has only been charged for delayed payment. Since, the payments are not under challenge, therefore, they are liable for payment of interest on delayed payment.

5.3 The learned AR further submits that refund under Section 142(6)(a) of CGST Act, 2017 is only in respect of amount of Cenvat Credit of duties, which is available to them under existing law; but no credit of interest paid for delayed payment of customs duties is available to them under the existing law. He also submits that in the decisions relied upon by the appellant, interest has not been granted.

6. After considering the submissions made by both the parties and perusal of the material on record, we find that it is pertinent to reproduce the provisions of Section 142(6)(a) of the CGST Act, 2017, Section 11B(2) of the Central Excise Act, 1944 and Rule 3(1) of the Cenvat Credit Rules, 2004, which are reproduced herein below:

“Section 142(6)(a) of CGST Act, 2017: Every proceeding of appeal, review or reference relating to a claim for CENVAT credit initiated whether before, on or after the appointed day under the existing law shall be disposed of in accordance with the provisions of existing law, and any amount of credit found to be admissible to the claimant shall be refunded to him in cash, notwithstanding anything to the contrary contained under the provisions of existing law other than the provisions of sub-section (2) of section 11B of the Central Excise Act, 1944 (1 of 1944) and the amount rejected, if any, shall not be admissible as input tax credit under this Act;

Provided that no refund shall be allowed of any amount of CENVAT credit where the balance of the said amount as on the appointed day has been carried forward under this Act."

“Rule 3. Cenvat Credit - (1) A manufacturer or producer of final products or a (provider of output service] shall be allowed to take credit (hereinafter referred to as the CENVAT credit) of -

(i) ……….
(ii) ………
(iii) ………
(iv) ………
(v) ……….
(vi) ……….
(via) ............

(vii) the additional duty leviable under section 3 of the Customs Tariff Act, equivalent to the duty of excise specified under clauses (i), (ii), (iii), (iv), (v) , (vi) and (via):

[* * * * * *]

(viia) the additional duty leviable under sub-section (5) of section 3 of the Customs Tariff Act [* **]:

Provided that a provider of [output] service shall not be eligible to take credit of such additional duty;]

(viii) ……………
(ix) ……………
(ixa)……………
(ixb)………….
(x)…………
(xa)..........
(xi)............
paid on -

(i) any input or capital goods received in the factory of manufacture of final product or [by] the provider of output service on or after the 10th day of September, 2004; and

(ii) ………. ”

“Section 11B(2) of the Central Excise Act, 1944:

Claim for refund of duty and interest, if any, paid on such duty -

2) If, on receipt of any such application, the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise is satisfied that the whole or any part of the duty of excise and interest, if any, paid on such duty paid by the applicant is refundable, he may make an order accordingly and the amount so determined shall be credited to the Fund:

Provided that the amount of duty of excise and interest, if any, paid on such duty as determined by the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise under the foregoing provisions of this subsection shall, instead of being credited to the Fund, be paid to the applicant, if such amount is relatable to -

(a) rebate of duty of excise on excisable goods exported out of India or on excisable materials used in the manufacture of goods which are exported out of India;

(b) unspent advance deposits lying in balance in the applicant's account current maintained with the Principal Commissioner of Central Excise or Commissioner of Central Excise;

(c) 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;

(d) the duty of excise and interest, if any, paid on such duty paid by the manufacturer, if he had not passed on the incidence of such duty and interest, if any, paid on such duty to any other person;

(e) the duty of excise and interest, if any, paid on such duty borne by the buyer, if he had not passed on the incidence of such duty and interest, if any, paid on such duty to any other person;

(f) the duty of excise and interest, if any, paid on such duty borne by any other such class of applicants as the Central Government may, by notification in the Official Gazette, specify:

Provided further that no notification under clause (f) of the first proviso shall be issued unless in the opinion of the Central Government the incidence of duty and interest, if any, paid on such duty has not been passed on by the persons concerned to any other person.”

7. Further, we find that after considering these provisions of Section 142(6)(a) of the CGST Act, 2017, Section 11B(2) of the Central Excise Act, 1944 and Rule 3(1) of the Cenvat Credit Rules, 2004, the Tribunal in various decisions (cited supra) has allowed the refund of Cenvat Credit of CVD & SAD paid through various challans produced on record.

8. Further, we find that the Tribunal in the case of Sri Chakra Poly Plast India Pvt Ltd (supra) has considered the earlier judgments in the cases of Mithila Drugs Pvt Ltd (supra), Clariant Chemicals India Ltd (supra), ITCO Industries Ltd (supra) and Flexi Caps & Polymers Pvt Ltd (supra), and by following these case-laws on this issue, has allowed the refund of CVD & SAD. The relevant findings of the Tribunal in the case of Sri Chakra Poly Plast India Pvt Ltd (supra) from para 10 to para 14 are reproduced herein below:

“10. In the case of Mithila Drugs Pvt Ltd vs CGST, Udaipur [2022 (3) TMI 58 – CESTAT New Delhi], the Delhi Bench has held as under:

“7. Having considered the rival contentions, I find that the payment of CVD and SAD subsequently during GST regime, for the imports made prior to 30.06.2017 is not disputed under the advance authorisation scheme. It is also not disputed that the appellant have paid the CVD and SAD in August, 2018 by way of regularisation on being so pointed out by the Revenue Authority. Further, I find that the Court below have erred in observing in the impugned order, that without producing proper records of duty paid invoices etc. in manufacture of dutiable final product, refund cannot be given. I further find that 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. Accordingly, I hold that the appellant is entitled to refund under the provisions of Section 142(3) and (6) of the CGST Act.

8. Accordingly, I direct the jurisdictional Assistant Commissioner to grant refunds to the appellant of the amount of SAD & CVD as reflected in the show causes notices and also in the orders-in-appeal. Such refund shall be granted within a period of 45 days from the date of receipt of order along with interest under Section11BB of the Central Excise Act. The impugned orders are set aside.” [Emphasis supplied]

11. In the case of Clariant Chemicals India Ltd vs CCE & ST, Raigad [2022 (10) TMI 796 – CESTAT Mumbai], the Mumbai Bench has held as under:

8. Upon hearing the Counsels from both sides and after perusal of the case record, it is apparent that Appellant’s eligibility to take credit of the duties paid as CENVAT Credit is undisputable and only because of procedural aberration occurred during transition to GST period, Appellant could not take the credits in its electronic ledger in the GST regime, for which it sought for refund such a contingency is perhaps foreseen by the legislature for which contingent provision is well enumerated in Clause 6(a) of Section142 of the CGST Act that deals with claim for CENVAT Credit after the appointed date under the existing law. It reads:-

“6(a) every proceeding of appeal, review or reference relating to a claim for CENVAT credit initiated weather before, on or after the appointed day under the existing law shall be disposed of in accordance with the provisions of existing law, and any amount of credit found to be admissible to the claimant shall be refunded to him in cash, notwithstanding anything to the contrary contained under the provisions of exiting law other than the provisions of sub-section (2) of section 11B of the Central Excise Act, 1944 and the amount rejected, if any, shall not be admissible as input tax credit under this Act: Provided that no refund shall be allowed of any amount of CENVAT credit where the balance of the said amount as on the appointed day has been carried forward under this Act;” (Underlined to emphasise)

9. It is an admitted fact of the parties that the said CENVAT Credit balance was not carried forward to the Appellant’s account on the appointed date since it was not due on the said day also. Therefore, in view of clear provision contain under Section 142(6)(a) of the CGST Act, Claimant/Appellant is eligible to get the refund of credit by cash except where unjust enrichment is alleged or established against the Appellant. The Appellant is also otherwise eligible to go for availment of transitional credit through filing required forms in Tran-I as per the order passed by the Hon'ble Supreme Court on 22nd July, 2022 but in view of the observation of this Tribunal read with Section 142(6)(a) of the CGST Act that such CENVAT Credit amount shall be paid to the Appellant in cash, it can’t avail dual benefits once order of this Tribunal is duly complied by the Respondent-Department by the closing date of the window.” [Emphasis supplied]

12. In the case of ITCO Industries Ltd vs CGST & CE, Salem [2022 (6) TMI 1040 – CESTAT Chennai], the Chennai Bench has held as under:

11. From the narration of facts, it can be seen that Department has rejected the claims invoking Rule 9(1)(b)of Cenvat Credit Rules, 2004. The said provision has already been reproduced above. The Department is ofthe view that credit is not eligible as appellant has paid the duties only after issuing a demand notice. Onperusal of the alleged demand notice, it is merely in the nature of an intimation letter and has not been issuedinvoking any provisions of Customs law or Excise law. Further, in such intimation also, there is no allegationof any fraud, collusion or suppression of facts with intent to evade payment of duty. There is no evidenceplaced before me to establish that the duties were paid after adjudication and rendering a finding of fraud,collusion or suppression of fact with intent to evade payment of duty. In such circumstances, the credit cannotbe denied. I hold that the appellant is eligible for credit of CVD and SAD paid by them. The Tribunal in thecase of Circor Flow Technologies (supra) and Mithila Drugs Pvt. Ltd. (supra) had analysed a similar issue. InM/s.Mithila Drugs Pvt. Ltd., the facts are identical to that of the instant case. The relevant paragraphs read asunder:

“5.1 Learned Counsel further relies on the precedent ruling of this Tribunal in Flexi Caps and Polymers Pvt. Ltd., vs. Commissioner, CGST & Central Excise, Indore -2021 (9) TMI 917-CESTAT, New Delhi, wherein also pursuant to demand of service tax under reverse charge mechanism after 30.06.2017, for transaction related prior to the said date (01.07.17), this Tribunal held that as the appellant was entitled to cenvat credit under Cenvat Credit Rules, which is not now available due to GST regime, is entitled to refund under Section 142 read with Rule 146 of the CGST Act.

6. Learned Authorised Representative Sh. Mahesh Bhardwaj appearing for the Revenue relies on the impugned order.

7. Having considered the rival contentions, I find that the payment of CVD and SAD subsequently during GST regime, for the imports made prior to 30.06.2017 is not disputed under the advance authorisation scheme. It is also not disputed that the appellant have paid the CVD and SAD in August, 2018 by way of regularisation on being so pointed out by the Revenue Authority. Further, I find that the Court below have erred in observing in the impugned order, that without producing proper records of duty paid invoices etc. in manufacture of dutiable final product, refund cannot be given. I further find that 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.Accordingly, I hold that the appellant is entitled to refund under the provisions of Section 142(3) and (6)of the CGST Act.

8. Accordingly, I direct the jurisdictional Assistant Commissioner to grant refunds to the appellant of the amount of SAD & CVD as reflected in the show causes notices and also in the orders-in-appeal. Such refund shall be granted within a period of 45 days from the date of receipt of order along with interest under Section 11BB of the Central Excise Act. The impugned orders are set aside.”

12. After appreciating the facts and evidence as well as applying the principles of law laid in the above decisions, I am of the view that the rejection of refund claims cannot be justified. The impugned orders are set aside. Appeals are allowed with consequential relief, if any, as per law.” [Emphasis supplied]

13. In the case of Flexi Caps & Polymers Pvt Ltd vs CGST & CE, Indore [2021 (9) TMI 917 – CESTAT New Delhi], the Delhi Bench has held as under:

7. Apparently, the said Cenvat Credit could not be availed any more due to the erstwhile law i.e. Central Excise Act, 1944 being taken over by New GST Act, 2017. Perusal thereof shows that the Act contains a provision to take care of such unutilized credits of the assessee to be refunded to them in cash. The relevant provision is Section 142 of GST Act, with sub-section (3) thereof reads as follows:-

“(3) Every claim for refund filed by any person before, on or after the appointed day, for refund of any amount of CENVAT credit, duty, tax, interest or any other amount paid under the existing law, shall be disposed of in accordance with the provisions of existing law and any amount eventually accruing to him shall be paid in cash, notwithstanding anything to the contrary contained under the provisions of existing law other than the provisions of sub-section (2) of section 11B of the Central Excise Act, 1944:”

and sub-section (8) (a) and (b) reads as follows:-

“(8) (a) where in pursuance of an assessment or adjudication proceedings instituted, whether before, on or after the appointed day, under the existing law, any amount of tax, interest, fine or penalty becomes recoverable from the person, the same shall, unless recovered under the existing law, be recovered as an arrear of tax under this Act and the amount so covered shall not be admissible as input tax credit under this Act;

(b)where in pursuance of an assessment or adjudication proceedings instituted, whether before, on or after the appointed day, under the existing law, any amount of tax, interest, fine or penalty becomes refundable to the taxable person, the same shall be refunded to him in cash under the said law, notwithstanding anything to the contrary contained in the said law other than the provisions of sub-section (2) of section 11B of the Central Excise Act, 1944 and the amount rejected, if any, shall not be admissible as input tax credit under this Act.”

In view of these provisions, denying the said entitlement, that too, on the ground that the letter of DGFT cannot be considered as the assessment order is not appropriate to my opinion because the fact still remains is that the requisite duty stands paid in full by the appellant which entitles the appellant to have credit thereof though in the form of cash in terms of the provisions of the new Act. Hence, I hold that the view formed by Commissioner (Appeals) while rejecting the refund is not appropriate. Rather it is beyond the intention of the Legislature.” [Emphasis supplied]

14. In all these case laws, the issue was identical i.e., as to whether CVD+SAD as part of Custom Duties paid subsequent to 01.07.2017 on account of non-fulfilment of Export Obligation, are eligible for cash refund when the Appellant cannot take these amounts as Cenvat Credit. The co-ordinate Benches of Tribunal have been consistently holding that the Appellant would be eligible for Cenvat Credit. The issue in the present appeal is squarely covered by these decisions.”

9. In view of our above discussion and by following the ratios of the above said decisions cited supra, we are of the considered view that the appellant is entitled to refund of Cenvat Credit of CVD amounting to Rs.23,72,607/- and SAD amounting to Rs.10,21,081/-; and not the interest paid on delayed payment of duties as claimed by the appellant. Consequently, the appeal is partially allowed in above terms.

(Order pronounced in the court on 04.06.2024)

(S. S. GARG)
MEMBER (JUDICIAL)

(P. ANJANI KUMAR)
MEMBER (TECHNICAL)