Cash refund of pre-GST duties and taxes in lieu of Cenvat credit
The recent judgment of CESTAT, Chennai in the case of Servo Packaging Limited v. CGST, 2020-VIL-72-CESTAT-CHE-CE.
In this case, the Appellant imported certain duty-free goods for export against Advance Authorization. Due to lack of export orders, the Appellant could not fulfil its export obligation and paid requisite duties with interest. The Appellant filed a refund application under Section 142(3) of the Central Goods and Services Tax Act, 2017 (‘CGST Act’) seeking refund of CVD and SAD paid.
The lower authorities rejected the refund claim on the ground that such refund is not envisaged under Section 142 of the CGST Act. Now, the CESTAT has also rejected the refund claim filed by the Appellant. The CESTAT held that though the Appellant could have availed Cenvat credit, that would not ipso facto give rise to claim of refund of such credit in cash post advent of GST. The Tribunal observed that availment of Cenvat credit was an ‘option’ available to a taxpayer which cannot be enforced post advent of GST through refund claim.
NITYA’s Comments: The above ruling is an adverse for taxpayers seeking cash refund of erstwhile duties and taxes paid post advent of GST in bona fide cases. There is a plethora of judgments upholding taxpayer’s right to claim credit as an inherent right. In our view, the Tribunal read Section 142(3) of the CGST Act in a narrow way which will make the provision redundant.
Notably, the Tribunal did not consider the earlier jurisprudence on this issue like decision of High Court in the case of Thermax Limited v. Union of India, 2019 (31) GSTL 60 (Guj.) [Refer NITYA’s Outlook | Issue 36 | Cash refund of pre-GST duties and taxes in lieu of Cenvat Credit post advent of GST dated December 16, 2019 (Link here) and NITYA’s Outlook | Issue 11 | Refund of erstwhile duties and taxes (excise duty, service tax / CVD / SAD) paid after advent of GST dated March 4, 2019 (Link here) for detailed discussion]. Despite this adverse ruling, in our view, the taxpayers are legally entitled to claim cash refund of such old duties and taxes paid post advent of GST.