Custom, Excise & Service Tax Tribunal
Ms Reema Steel Pvt Ltd vs Ce & Cgst Meerut-I on 19 May, 2025
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
ALLAHABAD
REGIONAL BENCH - COURT NO.I
Excise Appeal No.70037 of 2021
(Arising out of Order-in-Appeal No.MRT/EXCUS/000/APPL-MRT/153/2020-21
dated 28/10/2020 passed by Commissioner (Appeals) Central Goods &
Service Tax, Meerut)
M/s Reema Steel Pvt. Ltd., .....Appellant
(4th K.M. Stone Naziababad Road,
Kiratpur, Bijnor)
VERSUS
Commissioner of Central Excise &
Service Tax, Meerut ....Respondent
(Mangal Pandey Nagar, Meerut) APPEARANCE:
Shri Aalok Arora, Advocate for the Appellant Shri Manish Raj, Authorised Representative for the Respondent CORAM: HON'BLE MR. SANJIV SRIVASTAVA, MEMBER (TECHNICAL) FINAL ORDER NO.70286/2025 DATE OF HEARING : 08 April, 2025 DATE OF DECISION : 19 May, 2025 SANJIV SRIVASTAVA:
This appeal is directed against Order-in-Appeal No.MRT/EXCUS/000/APPL-MRT/153/2020-21 dated 28/10/2020 passed by Commissioner (Appeals) Central Goods & Service Tax, Meerut. By the impugned order following has been held:-
"I find that the appellant had simply asked for the cash refund of the Cenvat credit Aying in balance without satisfying as to how the said credit was refundable to him, in cash. His contention that the Cenvat credit lying in balance was as good as cash and the same was therefore refundable in cash was not supported by any provisions of the law and was in fact in contradiction to the judgements/ Excise Appeal No.70037 of 2021 2 decisions cited above in which it was concluded that the cash refund of the unutilized Cenvat credit was not permissible except under the 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 under Section 118 of the Central Excise Act, 1944 in as much as it has been filed on 09.12.2019 i.e. after one year.
2. There was no such provision in Central Excise Act or Rules made there under, for refund of unutilized Cenvat credit balance.
3. As per the provisions of CGST Act, 2017 unutilized CENVAT credit may be shifted to ITC through TRAN-1."
2.3 Aggrieved appellant have filed appeal before Commissioner (Appeals) which has been dismissed as per the impugned order referred in para-1 above.
2.8 Aggrieved appellant have filed this appeal.
Excise Appeal No.70037 of 2021 3 3.1 I have heard Shri Aalok Arora learned Counsel appearing for the appellants and Shri Manish Raj learned Authorised Representative appearing for the revenue. 3.2 Arguing for the appellant learned Counsel submits that refund should have been allowed in cash in view of the following decisions on the issue-
M/s ATV Projects India Ltd. 2023 (10) Centax 191 (Tri.-
Bom);
M/s Slovak India Trading Co. Pvt. Ltd. 2006 (201) ELT 559 (Kar.);
Union of India Vs Slovak India Trading Co. Pvt. Ltd.-2008 (223) ELT A170 (SC);
M/s Bangalore Cables Pvt. Ltd. 2017 (347) ELT 100 (Tri.-
Bang.);
M/s USV Pvt. Ltd. 2023 (5) Centax 7 (Tri.-Ahmd). 3.3 Arguing for the revenue learned Authorized Representative submits that the cases relied upon by the appellant are distinguishable in the present case the refund has not been claimed due to closer of the factory but for the reason of discontinuation of certain production activities as intimated by letter dated 26.04.2013. Though the appellant had intimated about discontinuation of production activities, they were regularly filing their ER-1 returns till the time of transition into GST regime and return was filed on 10.07.2017, the return was filed which would be the last return under Central Excise Act. Thereafter things were transitioned into GST and appellant would have taken forward the balance credit shown into GST era by filing Trans-I. Hence, there is no merit into this appeal. Appeal be dismissed.
4.1 I have considered the impugned orders along with the submissions made in appeal and during the course of argument.
4.2 Undisputedly, appellant had written two letters to the jurisdictional officers, the first letter dated 26.04.2013 is reproduced below:-
Excise Appeal No.70037 of 2021 4 Subsequently, they wrote another letter dated 09.12.2019 received on 11.12.2019 which is also reproduced below:-
Excise Appeal No.70037 of 2021 5 4.3 In the present case the claim made by the appellant has been rejected by the Original Authority but he may advice that Excise Appeal No.70037 of 2021 6 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 reproduced below:-
"2. Respondent-company is engaged in manufacture of shoes for M/s. Bata India Ltd. They are registered under the Central Excise Registration. The respondent surrendered their registration. A refund application was made on 14-5-2003 claiming a refund of Rs. 4,15,057/- During the Internal Audit, it was noticed that the assessee has availed Cenvat Credit of the materials received by them during the past on the strength of the photocopies of the duplicate copy of invoices and the original copies of the invoices were never produced. The assessee had availed the credit to the tune of Rs. 3,09,390/-. On scrutiny, it was noticed that there was neither production nor clearance of finished goods. Cenvat Credit availed by the respondent is irregular. A show cause notice was issued in the matter with regard to irregular availment and also with regard to rejection of refund claim. Reply was submitted. Thereafter, an order was passed ordering allowance of Cenvat Credit Excise Appeal No.70037 of 2021 7 of Rs. 3,72,405/- availed on the invoices mentioned in the show cause notice except invoice No. 62 dated 19-2-2002. Refund claim was also rejected in terms of Sec. 11B of the Act. It was stated that there is no provision in Rule 5 of Cenvat Credit Rules, 2002 with regard to refund. An unsuccessful appeal was filed by the assessee. Thereafter, he moved the Tribunal and the Tribunal has chosen to allow the appeal in terms of the impugned order. It is in these circumstances, the Revenue is before us raising the above referred questions of law."
4.5 As the present case is not a case where the registration was infact surrendered, the above decision in the case of M/s Slovak India Trading Co. Pvt. Ltd. or subsequent decisions would not have been applicable on the facts of the present case. 4.6 Central excise registration of the appellant would have been migrated into the GST regime and the appellant as per the returns filed was a continuing entity, it could have been claim the benefit of taking this credit into their GST account. There is no law which provides that if appellant fail to exercise the exercise its right to carry forward this credit to the GST, they could have claim the refund in cash. This is exactly as has been advised by the concern authorities to the appellant. 4.7 In case of Rugta Mines Ltd [2022 (67) G.S.T.L. 180 (Jhar.)] Hon'ble Jharkhand High Court has held as follows:
Legal 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 Excise Appeal No.70037 of 2021 8 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, by excluding unutilised input tax credit that accumulated on account of input services, is a valid classification and a valid exercise of legislative power. The Hon'ble Supreme Court accepted the submission of Mr. N. Venkataraman, Learned ASG on the legal proposition on the point of refund. The submissions of Mr. N. Venkataraman, Learned ASG on the point of legal proposition have been recorded in para-D.1.3 Part (III), as under :-
"(i) Article 265 of the Constitution provides that no tax shall be levied or collected except by authority of law. There being no challenge either to the levy or collection of taxes in these cases, taxes paid into the coffers of the Union Government or the States become the property of the Union/States;
(ii) The refund of taxes is neither a fundamental right nor a constitutional right. The Constitution only guarantees that the levy should be legal and that the collection should be in accordance with law. There is no constitutional right to refund. Refund is always a matter of a statutory prescription and can be regulated by the statute subject to conditions and limitations;
(iii) Even in the case of an illegal levy or a levy which is unconstitutional, the decision of the nine judges Bench in Mafatlal Industries Limited v. Union of India held that the right of refund is not automatic. The burden of proof lies on Excise Appeal No.70037 of 2021 9 the claimant to establish that it would not cause unjust enrichment;
(iv) Though tax enactments are subject to Articles 14 and 19(1)(g) of the Constitution, this is subject to two well- settled principles :
(a) Discriminatory treatment under tax laws is not per se invalid. It is invalid only when equals are treated unequally or unequals are treated equally. Both under the Constitution and the CGST Act, goods, services, input (goods) and input services are not one and the same. These are distinct species, though covered by a common code; and
(b) The Legislature is entitled to the widest latitude when it identifies categories of classification and unless things constituting the same class are treated differently without a rationale, the provision cannot be declared as unconstitutional;
(v) The doctrine of reading down is employed to narrow down the scope of a proviso under challenge, when it may otherwise be unconstitutional. The doctrine cannot result in expansion of a statutory provision for refund which would 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;
Excise Appeal No.70037 of 2021 10
(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 some of the paragraphs of the judgment are quoted as under :
"87. We must be cognizant of the fact that no constitutional right is being asserted to claim a refund, as there cannot be. Refund is a matter of a statutory prescription. Parliament was within its legislative authority in determining whether refunds should be allowed of unutilised ITC tracing its origin both to input goods and input services or, as it has legislated, input goods alone. By its clear stipulation that a refund would be admissible only where the unutilised ITC has accumulated on account of the rate of tax on inputs being higher than the rate of tax on output supplies, Parliament has confined the refund in the manner which we have described above. While recognising an entitlement to refund, it is open to the Legislature to define the circumstances in which a refund can be claimed. The proviso to Section 54(3) is not a condition of eligibility (as the assessees' Counsel submitted) but a restriction which must govern the grant of refund under Section 54(3). We therefore, accept the submission which has been urged by Mr. N. Venkataraman, Learned ASG.
93. Parliament engrafted a provision for refund Section 54(3). In enacting such a provision, Parliament is entitled to make policy choices and adopt appropriate classifications, given the latitude which our constitutional jurisprudence allows it in matters involving tax legislation and to provide for exemptions, concessions and benefits on terms, as it considers appropriate. The consistent line of precedent of Excise Appeal No.70037 of 2021 11 this Court emphasises certain basic precepts which govern both judicial review and judicial interpretation of tax legislation. These precepts are... ....
94. The principles governing a benefit, by way of a refund of tax paid, may well be construed on an analogous frame with an exemption from the payment of tax or a reduction in liability [Assistant Commissioner of Commercial Tax (Asst.) v. Dharmendra Trading Company reported in (1988) 3 SCC 570].
98. Parliament while enacting the provisions of Section 54(3), legislated within the fold of the GST regime to prescribe a refund. While doing so, it has confined the grant of refund in terms of the first proviso to Section 54(3) to the two categories which are governed by clauses (i) and (ii). A claim to refund is governed by statute. There is no constitutional entitlement to seek a refund. 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 Excise Appeal No.70037 of 2021 12 and information regarding the levy of taxes and their collection. That is precisely the reason why courts are averse to entering the area of policy matters on fiscal issues. We are therefore unable to accept the challenge to the constitutional validity of Section 54(3)."
9. Though in the instant case we are not dealing with Section 54 of CGST Act but are concerned with transitional provisions dealing with "refund" under Section 142(3) of the CGST Act "in cash" under certain circumstances in connection with taxes suffered under the previous regime. However, the fundamental concepts and the interpretation of law relating to refund would still be the same and what is to be seen is whether the petitioner qualifies for entitlement of refund under Section 142(3) of CGST Act in the light of the facts and circumstances of this case.
Legal proposition on the point of interpretation of transitional provisions, vested rights etc. with reference to the judgments relied upon by the Learned Counsel of the petitioner.
10. The Learned Counsel for the petitioner has also referred to the judgment passed in the case of Union of India v. Filip Tiago De Gama of Vedam De Gama (supra) on the point that the transitional provisions are to be purposefully construed and the paramount object in statutory interpretation is to discover what the Legislature intended and this intention is primarily to be ascertained from the text of the enactment in question. This principle of statutory interpretation is well settled.
11. So far as the case of K.S. Paripoornan (supra) is concerned, the Hon'ble Supreme Court has considered the role of "Transitional Provision" and the Learned Counsel for the petitioner has referred to Para-71 of the said judgment, which is quoted as under :-
"71. Section 30 of the amending Act bears the heading "Transitional provisions". Explaining the role of transitional provisions in a statute, Bennion has stated :
Excise Appeal No.70037 of 2021 13 "Where an Act contains substantive, amending or repealing enactments, it commonly also includes transitional provisions which regulate the coming into operation of those enactments and modify their effect during the period of transition. Where an Act fails to include such provisions expressly, the court is required to draw inferences as to the intended transitional arrangements as, in the light of the interpretative criteria, it considers Parliament to have intended."
(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 doubt about the aforesaid proposition that the transitional provisions are made to make special provision for the application of legislation to the Excise Appeal No.70037 of 2021 14 circumstances which exist at the time when the legislation comes into force and are applicable to proceedings that were pending on the date of the commencement of the amending Act.
13. So far as the judgment in the case of J.K. Cotton Spinning and Weaving Mills Co. Ltd. (supra) is concerned, the petitioner has referred to Paragraphs 10 of the said judgment, which is quoted as under :-
"10. Applying this rule of construction that in cases of conflict between a specific provision and a general provision the specific provision prevails over the general provision and the general provision applies only to such cases which are not covered by the specific provision, we must hold that Cl. 5(a) has no application in a case where the special provisions of Cl. 23 are applicable."
The aforesaid judgment does not help the petitioner in any manner in view of the fact that there is no conflict amongst the various provisions of CGST Act referred to by the Learned Counsel for the petitioner during the course of argument, particularly with reference to Sections 140, 142 and 174 of the CGST Act. The provisions have been interpreted in later portion of this judgment.
14. The Learned Counsel has further referred to the judgment in the case of CIT v. J.H. Gotla reported in (1985) 4 SCC 343 to submit that even in taxation, if strict literal construction leads to absurdity, construction which results in equity rather than injustice, should be preferred. However, during the course of argument, the Learned Counsel has failed to demonstrate as to how any of the provisions of CGST Act which have been referred to by the petitioner has led to any absurdity. The interpretation of the provisions of CGST Act particularly with reference to refund as contemplated in the Act itself is required to be seen in the light of the principles as has been laid down by the Hon'ble Supreme Court in the case of Union of India v. VKC Footsteps (supra), whose relevant portions have already Excise Appeal No.70037 of 2021 15 been quoted above. There can be no doubt that the right to refund in the matter of taxation is a statutory right which is neither a fundamental right nor a constitutional right and there is no equity in taxation. The right crystalizes only when the statute permits refund 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 State of Punjab and Ors. v. Bhajan Kaur and Ors. (supra), wherein Section 6 of General Clauses Act has been interpretated by holding that the said provision inter alia saves a right accrued, but it does not create a right. Paragraph 14 of the aforesaid judgment is quoted hereinbelow for ready reference :-
"14. ... ... ... ... ... ... ... ... ... ... ... .... Section 6 of the General Clauses Act, therefore, inter alia, saves a right accrued and/or a liability incurred. It does not create a right. When Excise Appeal No.70037 of 2021 16 Section 6 applies, only an existing right is saved thereby. The existing right of a party has to be determined on the basis of the statute which was applicable and not under the new one. If a new Act confers a right, it does so with prospective effect when it comes into force, unless expressly stated otherwise."
17. In the case of Glaxo Smith Kline PLC and Others (supra), the Hon'ble Supreme Court has upheld the view of the learned single judge of the High Court and held at Para 17 as under :-
"17. The Learned Single Judge's view that the provisions of Section 78 of the Amendment Act have no application to the proceedings which stood concluded before the appointed day appears to be the correct view governing the issue. Since Chapter IV-A in question was merely repealed, the situation has to be dealt with in line with Section 6 of the General Clauses Act. The provisions of Section 78 are conditional provisions and are not intended to cover cases where the application for EMR had been rejected with reference to Section 21 of the amending enactment. As noted above, Chapter IV-A was repealed. The effect of the repeal has to be ascertained in the background of Section 6 of the General Clauses Act. That being so, the order of the Division Bench cannot be sustained and that of the Learned Single Judge has to operate. The appeal is allowed but in the circumstances without any order as to costs."
18. In the case of Eicher Motors Ltd. v. Union of India (supra), it has been held that the rights of credit facilities accrued under existing law are not to be altered. Paragraphs 5 and 6 of the aforesaid judgment are quoted as under :-
"5. Rule 57F(4A) was introduced into the Rules pursuant to the Budget for 1995-96 providing for lapsing of credit lying unutilised on 16-3-1995 with a manufacturer of tractors falling under Heading No. 87.01 or motor vehicles falling under Heading Nos. 87.02 and 87.04 or chassis of such tractors or such motor vehicles under Heading No. 87.06.
Excise Appeal No.70037 of 2021 17 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 fact that the provision for facility of credit is as good as tax paid till tax is adjusted on future goods on the basis of the several commitments which would have been made by the assessees concerned. Therefore, the Scheme sought to be introduced cannot be made applicable to the goods which had already come into existence in respect of which the earlier Scheme was applied under which the assessees had availed of the credit facility for payment of taxes. It is on the basis of the earlier Scheme necessarily that the taxes have to be adjusted and payment made complete. Any manner or mode of application of the said Rule would result in affecting the rights of the assessees.
6. We may look at the matter from another angle. If on the inputs, the assessee had already paid the taxes on the basis that when the goods are utilised in the manufacture of further products as inputs thereto then the tax on these Excise Appeal No.70037 of 2021 18 goods gets adjusted which are finished subsequently. Thus, a right accrued to the assessee on the date when they paid the tax on the raw materials or the inputs and that right would continue until the facility available thereto gets worked out or until those goods existed. Therefore, it becomes clear that Section 37 of the Act does not enable the authorities concerned to make a rule which is impugned herein and, therefore, we may have no hesitation to hold that the Rule cannot be applied to the goods manufactured prior to 16-3-1995 on which duty had been paid and credit facility thereto has been availed of for the purpose of manufacture of further goods."
19. The Learned Counsel has also referred to the judgment passed in the case of CCE v. Grasim Industries Ltd. (supra) to submit that excise duty/Cenvat is value added tax. There is no doubt about the aforesaid proposition, as it is not in dispute in the instant case that the petitioner was entitled to take credit of the service tax paid to the port authorities for the "port services" by way of Cenvat credit as per the provisions of the rules.
20. However, in the instant case the petitioner has failed to follow the prescribed procedure to avail such a credit and consequently having lost such a right, he cannot claim revival of such a right and claim refund of the same by virtue of transitional provisions under Section 140(3) of the CGST Act. The facts involved in the present case would demonstrate that the 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 Excise Appeal No.70037 of 2021 19 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 part of the Judgment.
22. So far as the judgment passed in the case of M/s. DMR Constructions (supra) by Hon'ble Madras High Court is concerned, the same related to transition of accumulated tax deducted at source which existed on the date of coming into force of CGST Act and relief was granted to the petitioner in terms of transitional credit under Section 140(1) of CGST Act.
23. However, in the instant case, the petitioner failed to claim transitional credit in terms of Section 140(1) of the CGST Act and wrongly took credit of the impugned service tax in ST-3 return and thereafter claimed refund of the same by referring to Section 142(3) of CGST Act. Accordingly, the said judgment does not apply to the facts and circumstances of this case.
The sequence of facts; case of the parties and the contents of the impugned orders
24. The petitioner was having Central Excise Registration for manufacture of sponge iron, billet and TMT Bar. The petitioner was also registered under Service tax only as a person liable to pay service tax under Reverse Charge Mechanism. Admittedly, the "port services" involved in this case is not covered under Reverse Charge Mechanism and therefore the same was not includable in the service tax return filed by the petitioner under ST-3. Accordingly, the Excise Appeal No.70037 of 2021 20 petitioner was not entitled to avail credit of the impugned service tax paid on the "port services" in its service tax ST-3 return.
25. It is not in dispute that the petitioner was entitled to claim Cenvat credit on the service tax paid on "port services" if used in the manufacturing activity for which the petitioner was registered under the Central Excise Act, 1944.
26. The petitioner had imported coal through Bill of entry dated 27-4-2017 for using the same in or in relation to manufacture of dutiable final products. In course of the import, they received a bundle of services from M/s. Kolkata Port Trust during 26-4-2017 to 29-4-2017 in the nature of "port services" who issued Bill dated 23-5-2017 for Rs. 89,36,836/- which included service tax of Rs. 10,88,328/-. The petitioner claims to have paid the entire bill including service tax on port services in the month of April itself. The petitioner was entitled to claim the service tax paid on "port services" as Cenvat credit in their ER-1 return as per the provisions of existing law. The petitioner has submitted that the Cenvat 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 Excise Appeal No.70037 of 2021 21 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 CGST Act (Section 140) read with the existing provisions of Cenvat Credit Rules, 2002. It is also important to note that the existing provision did not permit Cenvat credit of service tax paid on "port services" without its inclusion in ER-1 Return and in absence of such inclusion within the prescribed time line the claim of credit stood completely lost and could not be claimed in TRAN-1 as transitional credit under CGST Act. Admittedly, the petitioner was not entitled to claim the service tax paid on "port services" in their service tax return ST-3 as the petitioner was not an output service provider and was liable to file service tax return and pay service tax only under reverse charge mechanism. Admittedly, "port services" were not under reverse charge mechanism.
29. Further, Rule 5 of Cenvat Credit Rules, 2004 permits refund only when the services are used to export goods or services, which is not the case in the present case. It is not the case of the petitioner that the impugned services were used for export of goods or services. Thus, under the existing law the claim of refund of service tax paid by the petitioner on port services was not admissible.
30. The case of the petitioner is that since they received the original copy of the Bill dated 23-5-2017 as late as on 20-9-2017, they could not take Cenvat credit in their last ER-1 return for June, 2017 filed on 30-7-2017. However, the petitioner took the credit of Rs. 10,88,328/- in their ST- 3 return for April-June, 2017 filed on 22-9-2017 with a view to keep the said transaction above board so that their claim was not lost. It is also not in dispute that the last date for filing TRAN-1 was extended up to 31-10-2017.
Excise Appeal No.70037 of 2021 22
42. It is not in dispute that the refunds under the existing law of Service Tax as well as Central Excise Act, 1944 are governed by Section 11B of the Central Excise Act, 1944 and sub-section (2) of Section 11B also refers to application for refund made under Section 11B(1) of Central Excise Act, 1944. Further Section 11B(3) of Central Excise Act, 1944 clearly provides that all kinds of refunds including those arising out of judgment, decree or orders of court or tribunal are to be dealt with in accordance with the provisions of Section 11B(2) of Central Excise Act, 1944. It is also important to note that Section 11B(2) of Central Excise Act, 1944 deals with the manner in which applications 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 have been rightly considered and decided against the petitioner while passing the impugned orders whose details have already been stated above.
Excise Appeal No.70037 of 2021 23
44. Under the provisions of Section 11B the right to claim refund was conferred not only to the assessee but also to such classes of applicants as notified by the Central Government and also covers situations arising out of judgments of Courts and Tribunals. On the appointed date there could be claims of refund of any amount of Cenvat credit, duty, tax, interest or any other amount paid under the existing law in connection with which the applications for refunds were pending or time limit for claiming refund was yet to expire or may crystalize on account of any judgment of Courts or Tribunals in relation to pending litigations. These are some of the situations which would be covered by the miscellaneous transitional provisions as contained in Section 142(3) of CGST Act which would continue to be governed by Section 11B(2) of Central Excise Act, 1944.
45. The provision of Section 142(3) does not entitle a person to seek refund who has no such right under the existing law or where the right under the existing law has extinguished or where right under the new CGST regime with respect to such claim has not been exercised in terms of the provision of CGST Act and the rules framed and notifications issued. Meaning thereby, Section 142(3) does not confer a new right which never existed under the old regime except to the manner of giving relief by refund in cash if the person is found entitled under the existing law in terms of the existing law. Section 142(3) does not create any new right on any person but it saves the existing right which existed on the appointed day and provides the modalities for refund in cash if found entitled under the existing law as the entire claim is mandated to be dealt with as per the existing law. It neither revive any right which stood extinguished in terms of the existing law nor does it create a new right by virtue of coming into force of CGST Act.
Excise Appeal No.70037 of 2021 24
46. Section 174 of the CGST Act read with Section 6 of the General Clauses Act saves the right acquired, accrued or vested under the existing law and does not create any new right which never existed on the appointed day i.e. on 1-7- 2017 under the existing law.
47. The argument of the petitioner by referring to second proviso to Section 142(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, admittedly the services in the nature of "port services" were received by the petitioner in the month of April, 2017 and invoice was also generated in the month of May, 2017.
49. In the peculiar facts of this case, the petitioner did not claim transitional credit but claimed the impugned amount of service tax on "port services" as credit in their ST-3 return which they were admittedly not entitled as they were assessee under service tax only on reverse charge mechanism and admittedly the "port services" availed by Excise Appeal No.70037 of 2021 25 the petitioner was not covered under reverse charge mechanism. Thus, the petitioner on the one hand illegally took credit of service tax on "port services" as credit in their ST-3 return and on the other hand filed application for refund of the same amount under Section 142(3) of the CGST Act which is certainly not permissible in law. The authorities have rightly considered these aspects of the matter also while rejecting the application for refund filed by the petitioner.
50. It is not in dispute that the petitioner has claimed the credit of service tax involved in the present case paid on "port services" as "input service" in ST-3 return filed on 22- 9-2017, though they were not entitled to claim such a credit. It is further not in dispute that the petitioner did not include the impugned service tax paid on "port services" in its ER-1 return and accordingly was neither entitled to include nor included the same as transitional credit in TRAN- 1 under CGST Act. As per the notification (Annexure-5) extending the date of filing TRAN-1 to 31-10-2017, the same was in relation to certain service tax issues which were paid after 30-6-2017 under reverse charge basis to cover instances of bills raised on 30-6-2017 since credit is available only if the payment is made and the payment in such cases could be made only after 30-6-2017. However, in the instant case the bill was admittedly generated on 23- 5-2017, services availed and bill amount including service tax was paid in April, 2017 but the original bill did not reach the petitioner for unknown/undisclosed reasons.
51. It is apparent from the impugned orders that the specific case of the respondent is that the petitioner had claimed Cenvat credit under ST-3 return thereby treating the services involved in the present case as their input services used for providing output service, whereas they are not 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.
Excise Appeal No.70037 of 2021 26 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 ER-1 Return within the prescribed time and accordingly could have claimed transitional credit through TRAN-1 under Section 140 of CGST Act. Thus, late receipt of the original invoice which has been cited as the reason for failure to claim Cenvat credit under the existing law and transitional credit under Section 140(1) of the CGST Act was wholly attributable to acts and omissions of the petitioner and its service provider of the "port services" and the respondent authorities had no role to play. The petitioner had failed to avail the opportunity to claim Cenvat credit of service tax on port services in terms of the existing law read with Section 140 of CGST Act and had no existing right of refund on the date of coming into force of CGST Act. The petitioner having not used the port services for export was not entitled to claim refund under the existing law. The petitioner was also not entitled to refund on account of the fact that the petitioner had already taken credit of the service tax paid on port services in ST-3 Return of service Excise Appeal No.70037 of 2021 27 tax although admittedly the petitioner was not entitled to take such credit in ST-3 Return. On account of aforesaid three distinct reasons the petitioner was rightly held to be not entitled to refund under Section 142(3) of CGST Act by the impugned orders.
53. All the aforesaid provisions referred to and relied upon by the Learned Counsel of the petitioner do not entitle a person like the petitioner to any relief in the circumstances of acts and omissions of the service provider (port authority) or the service recipient (the petitioner) who have failed to comply the provision of law, both under the existing law and also under the CGST Act. The relied upon provisions of CGST Act do not cover any such situation relating to any consequences due to inter parte acts and omissions. In the instant case, as per the case of the petitioner, the entire problem has cropped up due to non- receipt of the invoice in original from the port authorities although the port services were availed and payments for the same to the port authorities were made by the petitioner in the month of April, 2017, the invoice was generated by the port authorities in the month of May, 2017 but the original invoice was received by the petitioner only on 20-9-2017 i.e. after coming into force of CGST Act. The late receipt of the invoice is essentially between the 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 Excise Appeal No.70037 of 2021 28 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 and on the other hand violated the provisions of law while filing his service tax returns and claimed the amount as input service and thereafter filed his petition for refund on 28-6-2018 referring to Section 142(3) of the CGST Act. The petitioner never had a right to claim refund under the existing law and had failed to exercise their right to claim Cenvat credit as per law and wrongly claimed the impugned amount as credit in Service Tax Return (S.T. 3 return)."
4.8 Rule 5 of the CENVAT Credit Rules,2004 was amended in the year 2012 and as per the amended rule there is no provision for the refund of the accumulated credit. The said rule after amendment provided for the refund of the Cenvat Credit taken during a particular quarter which is attributable to the export of the good or services during that quarter. Refund under Rule 5 has been made subject to the limitation as provided by the Section 11B of the Central Excise Act, 1944. In the present case appellant could not show how there refund claim can be considered in terms of amended rule 5 and was filed within the period of limitation prescribed.
4.9 I further note Rule 5 was amended with the objective, taking note of the mischief on the account of phrase "accumulated credit" used in the said rule earlier. The rule was made more specific to provide refund only in specified circumstances of the CENVAT Credit attributable to the export of goods and services during specified period. It is settled position in law that while interpreting any such provision the courts or tribunal should take note of mischief sought to be corrected by Excise Appeal No.70037 of 2021 29 the amendments made in law. The Mischief Rule, also known as Heydon's Rule, is a principle of statutory interpretation that guides courts to interpret legislation by identifying the "mischief" or "evil" the law aimed to address. It essentially prioritizes the purpose of the law over its literal wording. The rule also aims to prevent clever evasions or circumventions of the law that would allow the mischief to continue. Even if the Slovak India has decided the issue of refund of accumulated credit, it has decided the issue prior to the amendments made in the Rule 5 of the CENVAT Credit Rules, 2004 and not for the subsequent period. Hence I do not find any applicability of the said decision or any decision rendered following the said decision in facts and circumstances of this 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 provisions of the existing law and any amount eventually accruing to him shall be refunded to be paid in cash only, notwithstanding anything to the contrary contained under the provisions of existing law other than Excise Appeal No.70037 of 2021 30 the provisions of Sub-section 2 of Section 11B. Therefore, it is obvious that refund has to be examined first in terms of the relevant provisions, as it existed under the existing law, in this case Cenvat Credit Rules, 2004 or the Finance Act 1994.
10. The perusal of CCR under the existing law clearly brings out that the refund of unutilized cenvat credit can be made only for specific purpose under Rule 5, 5A and 5B, subject to certain prescribed/notified procedure, conditions and limitations etc., as may be specified or notified by notification. Also, it is obvious that there is no provision for refund of CENVAT credit either under CCR 2004 or Finance Act 1994 for service tax paid correctly, which in any case has not been disputed by the appellant. They have also admittedly not filed any revised ST-3 within the specified tax limit as would have been otherwise required under Section 142(9)(b).
11. Therefore, it is obvious that the nature of refund being sought in this case would not get covered in any one of these situations when there is no provision for refund of such cenvat credit or tax under existing law and I find much force in the argument of the Learned DR that Section 142(3) in itself is not a statutory provision for grant of refund, per se, as this is nothing but only an enabling Section for grant of refund, albeit in cash, notwithstanding certain provisions to the contrary in the Section 11B except relating to undue enrichment. Therefore, in this case, since the refund would not have been available under the provisions of the existing law, the same cannot be processed and allowed under Section 142(3) also and therefore refund of the tax or credit in respect of service tax paid under reverse charge mechanism for import of service after the appointed date would not be admissible to the appellant under the provisions of Section 142(3).
12. I have also perused the citations relied upon by the appellant in the case of BHEL. The Hon'ble Tribunal was Excise Appeal No.70037 of 2021 31 dealing with the matter of grant of refund in cash in respect of certain "cesses", which is not the case here and therefore it is distinguishable. Moreover, as pointed out by Learned DR the 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) ELT 559 (Kar)] and Union of India Vs Slovak India Trading Co. Pvt Ltd., [2008 (223) ELT A 170 (SC)].
13. Therefore, essentially when there is no provision in the law either under the Cenvat Credit Rules 2004 or in the Finance Act 1994 to allow cash refund, for such accumulated credit, Section 142(3), per se, cannot make it an eligible refund merely because the appellant have not been able to utilize on the ground of not having filed the revised return or were not able to take the TRAN-1 route etc., within specified time. I also observe that in the case of Banswara Syntex Vs CCE [2018 (91) TMI 1064], the Hon'ble Division Bench of Rajastan High Court held that refund of Excise Appeal No.70037 of 2021 32 accumulated unutilized credit on account of education cess and secondary and higher secondary education cess was not entitled for cash refund in view of their having no provision under the Act of 1944.
14. Further, I also find that the issue of the scope of Section 142(3) of the Act came up before Hon'ble Jharkhand High Court in the case of M/s Rungta Mines Vs CCE, Jamshedpur [2022-TIOL-252-HC-Jharkhand-GST]. In this case Hon'ble High Court, interalia, held that the provision of Section 142(3) does not entitle a person to seek refund where no such rights occur under the existing law or new CGST regime in terms of provision of CGST Act and the rules framed and notification issued thereunder. Meaning thereby, Section 142(3) does not confer a new right which never existed under the old regime to the manner of giving relief if the person is not entitled under the existing law. The relevant paras of the judgment are reproduced below for ease of reference:
45. .....
46. .....
47. ......
48. ......"
4.11 Further I find that the issue is also covered against the appellant by the decision of larger bench of Bombay High Court in case of Gauri Plasticulture (P) Ltd. [2019 (30) GSTL 224 (Bom)] and other decisions relied in the impugned order. In case of Gauri Plasticulture, Hon'ble Bombay High Court has considered the Rule 5 prior to its amendment in 2012 and has held as follows:
22. In the case at hand, we are considering a claim of refund of duty. Section 11B(1) clearly says that a person claiming refund has to make an application for refund of such duty before the expiry of the period prescribed and in such form and manner. The application has to be accompanied by such documentary or other evidence as the applicant may furnish to establish that the amount of duty Excise Appeal No.70037 of 2021 33 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 relies upon Rule 5 of the Cenvat Credit Rules, 2004. That Rule reads as under :-
"RULE 5. Refund of Cenvat credit. - Where any input or input service is used in the final products which is cleared for export under bond or letter of undertaking, as the case may be, or used in the intermediate products cleared for export, or used in providing output service which is exported, the CENVAT credit in respect of the input or input service so used shall be allowed to be utilized by the manufacturer or provider of output service towards payment of,
(i) duty of excise on any final products cleared for home consumption or for export on payment of duty; or
(ii) service tax on output service, and where for any reason such adjustment is not possible, the manufacturer shall be allowed refund of such amount subject to such safeguards, conditions and Excise Appeal No.70037 of 2021 34 limitations, as may be specified, by the Central Government, by notification :
Provided that no refund of credit shall be allowed if the manufacturer or provider of output service avails of drawback allowed under the Customs and Central Excise Duties Drawback Rules, 1995, or claims a rebate of duty under the Central Excise Rules, 2002, in respect of such duty :
Provided further that no credit of the additional duty leviable under sub-section (5) of section 3 of the Customs Tariff Act, as amended by clause 72 of the Finance Bill, 2005, the clause which has, by virtue of the declaration made in the said Finance Bill, under the Provisional Collection of Taxes Act, 1931, the force of law, shall be utilised for payment of service tax on any output service. Explanation : For the purposes of this rule, the words 'output service which are exported' means any output service in respect of which payment is received in India in convertible foreign exchange and the same is not repatriated from, or sent outside, India. Provided that the CENVAT credit or inputs shall not be denied to job worker referred to in rule 12AA of the Central Excise Rules, 2002, on the ground that the said inputs are used in the manufacture of goods cleared without payment of duty under the provisions of that rule."
23. Thus, a perusal of this rule indicates that where any input or input service is used in the final product, which is cleared for export etc. or used in the intermediate product cleared for export or used for providing output service 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 Excise Appeal No.70037 of 2021 35 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 product. In the situation that is presented before us and particularly in the central excise appeals at hand, it is evident that the order-in-original has been passed by accepting the plea that the assessee was availing Cenvat credit of duties paid on the inputs purchased and was utilising the same for payment of additional duties of excise on final products at the time of clearance of the same. According to the case of the assessee, by a notification dated 9th July, 2004, the Government of India had exempted all goods appearing within the Schedule of the said Act of 1978. The assessee utilised credit balance of additional duty of excise in their RG-23A Part II Register as on 6th September, 2004, which could not be utilised in future and had remained unutilised. The condition was that since none of the products are charged to additional duties of excise, it would not be possible to utilise the said unutilised credit and the assessee was liable for cash refund. This plea was not accepted in the order-in-original, but came to be accepted by the appellate authority. The Revenue approached the CESTAT against the appellate authority's view, but the CESTAT dismissed the Revenue's appeal. Now, if the cash refund was not Excise Appeal No.70037 of 2021 36 permissible, then, it is evident that by reading into the provision something which is expressly not there, such a refund was sought.
4.12 Thus in view of the discussions as above, I do not find any merits in this appeal.
5.1 Appeal is dismissed.
(Order pronounced in open court on-19 May, 2025) (SANJIV SRIVASTAVA) MEMBER (TECHNICAL) akp