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Judgment
The appellant has filed these three appeals directed against the impugned order dt. 13/05/2019 passed by the Commissioner of Central Tax (Appeals), Bangalore whereby the Commissioner (Appeals) has partly disallowed the refund for the period after 01/03/2015. Since the issue involved in all these three appeals is common, all the three appeals are disposed of by this common order.
Briefly the facts of the present case are that the appellant is a 100% EOU and are engaged in the manufacture and export of sheet metal enclosures and parts and had availed cenvat credit of duty and service tax paid by the suppliers of goods and services. As the appellant had exported to overseas and cleared predominant part of the manufactured goods to other EOUs, the appellants filed refund claims with the Deputy Commissioner of Central Excise, Jigani Division, Bangalore seeking cash refund in respect of unutilized Cenvat credit availed on inputs/input services availed by them under Rule 5 of Cenvat Credit Rules, 2004 ('CCR' for short) read with Notification No 27/2012 CE (NT) dated 18-06-2012. All the 7 refund claims were disposed of by the Deputy Commissioner of Central Excise, Jigani Division, Bangalore vide different OIOs wherein the cash refunds were restricted to the extent of goods physically exported by the appellants out of India and refund claims in respect of goods cleared to EOUs under Inter Unit Transfer (IUT) were rejected. The details of the claims filed and refund sanctioned and rejected are as follows:-
Sl.No
Period
Refund applied for (Rs)
Refund sanctioned by DC
Amount in dispute and subject matter of the present appeals (Rs)
1
Jan 2015 to March 2015
9,00,000/-
1,98,436/- (vide OIO No 78/2016-(R) dated 31-05- 2016
2,94,261/- (as per impugned OIA No 141 to 147/2019 dated 13-05-2019
2
Apr 2015 to June 2015
17,59,106/-
4,61,051/-vide OIO No 133/2016-(R) dared 30- 09-2016
12,98,055/-
3
July 2015 to September 2015
13,72,971/-
1,94,402/-
11,78,569/-
Aggrieved by the orders of the Deputy Commissioner, the appellants preferred separate before the Commissioner (Appeals) and the Commissioner (Appeals) vide the impugned OIA No 141-147/2019 dated 13-05-2019 wherein the orders of the Deputy Commissioner were upheld except to the extent of holding that the appellants were entitled to cash refund for the months of January 2015 to February 2015 and not for the month of March 2015 onwards. Hence the present appeals.
Heard both sides and perused the records.
5.1. Learned counsel for the appellant submitted that the impugned order is not sustainable in law as the same has been passed without properly appreciating the facts and the law. He further submitted that there is no dispute about the fact that the appellants are 100% EOU and holders of a valid letter of permission issued by the Development Commissioner. He further submitted that the conclusion arrived by the original authority that appellant had not physically exported their goods but cleared the same to another EOU which is not equivalent to physical export. He further submitted that the main ground taken by the lower authorities for rejection of the cash refund is that insertion of clause (1A) in Explanation to Rule 5 of CENVAT Credit Rules effective from 01/03/2015 that "export goods" means any goods which are to be taken out of India to a place outside India and that in the present case, the appellant had not exported the goods but had cleared the goods to another EOU and hence they are not entitled to cash refund. He further submitted that the issue as to whether the cash refund of unutilized cenvat credit in respect of clearances made to EOU on IUT basis is admissible or not is no more res integra and is covered by the decision of the Bangalore CESTAT in the case of Wave Mechanics Pvt. Ltd. Vs. CCT, Bangalore [2019(370) ELT 291 (Tri. Bang.)] wherein it was inter alia held that cash refund is not admissible under Rule 5 of CCR read with Notification No.27/2012-C.E dated 18-06-2012 in respect of clearances made by one EOU to another on IUT basis. It was also held in the said case that the amounts in respect of which cash refund had been claimed by the said appellant were debited in the Cenvat credit at the time of filing the refund claim as required by the then Notification No 27/2012-C.E dated 18-06-2012 and hence the appellant was entitled to take recredit of the Cenvat credit for which the claims were filed. He further submitted that in the in the present case while claiming cash refund, the present appellants had already debited the entire Cenvat credit in respect of which the claims had been filed as required under the then Notification No 27/2012-C.E dated 18-06-2012 and the said fact is clearly recorded in each of the OIO passed by the Deputy Commissioner. He further submitted that the following amounts were lying in balance at the time the Goods and Service Tax regime came to be implemented w.e.f. 01/07/2017.
Sl.No
Period
Amount in dispute and subject matter of the present appeals
1
Jan 2015 to March 2015
Rs 2,94,261/-
2
Apr 2015 to June 2015
Rs 12,98,055/-
3
July 2015 to September 2015
Rs 11,78,569/-
5.2. It is his further submission that OIOs had been passed by the Deputy Commissioner during the year 2016 i.e. before the Central Excise law was replaced by the GST regime as the appellants had agitated the matter before the Commissioner (Appeals) as on the date GST levy came into existence from 1st July 2017. Learned consultant referred to the provision of Section 142 of Central Goods and Services Tax Act, 2017, mainly sub-section (3) and sub-section (6)(a) of Section 142. He also submitted that as per sub-section (3) of Section 142, 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. He also submitted that sub-section (6)(a) of Section 142 provides that 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. It is his further submission that in the present case request for cash refund of the amounts mentioned above has been rejected on the ground that with effect from 1st March 2015 only value on account of physical exports is liable to be considered for the purpose of sanctioning cash refund. The fact of the matter is that as the time of filing the refund claim the appellants had debited the entire amounts in their Cenvat account as mandated under Notification No 27/2012-C.E. (N.T) dated 18-06-2012 and the said amount was debited under the bona fide belief that cash refund would be sanctioned to them. He further submitted that the credit itself was never disallowed and the cenvat credit amount in dispute lying in the balance as on31/06/2017 are liable to be refunded to the appellant in cash as per the provisions of sub-section 3 or sub-section 6(a) of Section 142 of CGST Act. He further submitted that this Tribunal has consistently held that cenvat credit existing in the cenvat account as on the date of coming into force of CGST shall be granted in cash. For this, he relied upon the following decisions:-
i. SMG International Versus Commissioner of Central Excise [2019 (21) G.S.T.L 446 (Tri-Chan)]
ii. Oswal Castings Pvt. Ltd Versus Commissioner of C.Ex [2019 (24) G.S.T.L 649 (Tri-Chan]]
iii. Rawalwasia Ispat Udyog Pvt. Ltd Versus Commr. Of C.Ex [2019 (26) G.S.T.L 196 (Tri-Chan)]
iv. Toshiba Machine (Chennai) P. Ltd Versus Commr. Of Central Tax, [2019 (27) G.S.T.L 218 (Tri-Chennai)]
v. Great India Steel Fabricators Versus Commissioner of C.Ex & S.T [2019 (28) G.S.T.L 279 (Tri-Chan)]
On the other hand the learned AR defended the impugned order and submitted that the Commissioner(Appeals) after considering the amendments which came into effect by Notification No.6/2015- CE(NT) dt. 01/03/2015 amending the 'export of goods' and after considering the decisions, has rightly held that the appellant is not entitled for cash refunds because they have not physically exported the goods to the extent of rejection of refund.
After considering the submissions of both sides and perusal of the material on record, I find that in the present case, the appellant is a 100% EOU, which has admittedly supplied the goods to another EOU and filed refund claims under Rule 5 read with Notification No.27/2012 dt. 18/06/2012. Further I find that the goods were supplied by the appellant to another EOU after coming into force of the amendment in Rule 5. Further I find that with the insertion of clause (1A) in Explanation 1 to Rule 5 came into force vide Notification No.6/2015-CE(NT) dt. 01/03/2015 whereby export goods means any goods which are to be taken out of India to a place outside India, which means that there has to be a physical export and therefore deemed exports are not entitled for cash refunds. Here it is pertinent to make a reference to relevant provision of Section 142 of the CGST Act, 2017 which is reproduced herein below:-
(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 (1 of 1944) :
Provided that where any claim for refund of CENVAT credit is fully or partially rejected, the amount so rejected shall lapse :
Provided further 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.
...
...
(6)(a) 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;
(b) every proceeding of appeal, review or reference relating to recovery of 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 if any amount of credit becomes recoverable as a result of such appeal, review or reference, the same shall, unless recovered under the existing law, be recovered as an arrear of tax under this Act and the amount so recovered shall not be admissible as input tax credit under this Act.
Further I find that this Tribunal in the case of Wave Mechanics Pvt. Ltd. cited supra has held that cash refund is not admissible under rule 5 of CENVAT Credit Rules read with Notification No.27/2012-CE dt. 18/06/2012 in respect of clearances made by one EOU to another EOU on IUT basis. It was also held that the amounts in respect of cash refund has been claimed were debited in the cenvat credit account at the time of filing the refund claim as required under the said Notification and the appellant was entitled to take recredit of the cenvat credit. Further after going through the sub-section 3 of Section 142 of CGST Act, I find that as per the said sub-section, 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. Further it is very clear that as per subsection (6)(a) of Section 142, 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. Further I find that the appellant had already debited the entire amount in their cenvat account and the said amount was debited under a bona fide belief that the cash refund would be sanctioned to them and the very fact that cenvat credit was never disallowed, hence the cenvat credit lying in the balance of cenvat account are liable to be refunded in cash to the appellant as per the provisions of sub-section 3 or sub-section (6)(a) of the Section 142 of CGST Act. This issue is no more res integra and has been held in favour of the appellant by various decisions cited supra. Hence, by following the ratio of the said decisions, I am of the considered view that the impugned order denying the cash refund is not sustainable in law and the appellant is entitled to cash refund as per sub-section 3 and sub-section 6(a) of Section 142 of CGST Act. All the three appeals are accordingly allowed.
(Order was pronounced in Open Court on 31/03/2021)