In Schlumberger Asia Services Ltd. v.Commissioner of CE & ST, Gurgaon-I (Service Tax Appeal No. 60095 of 2021), the Tribunal decided that Cess is available as Refund where it has not been transitioned as Input Tax Credit under GST regime.
Facts
The Appellant in the present case has filed the said Appeal against the Order-in-Appeal dated 28.09.2020 (“Order”) passed with respect to the Education Cess, Secondary and Higher Education Cess and Krishi Kalyan Cess that the Appellant claimed refund for, as it was lying unutilised in their Central value Added Tax (“CENVAT”) Credit Account. This refund was claimed by the Appellant, after the Goods and Services Tax (“GST”) regime came into force and the same was denied.
The Appellant in the present case had unutilised Education Cess, Secondary and Higher Education Cess and Krishi Kalyan Cess in the Appellant’s CENVAT Credit Account. After the implementation of the GST regime, the Appellant was allowed to transfer the Cess amount from the CENVAT Credit Account to the GST Account.
On 30.08.2018, an amendment was put into force in Section 140 of the Central Goods and Services Tax Act, 2017 (“CGST Act”) stating that any person cannot carry forward any credit amount from their CENVAT Credit Account.
The Appellant then filed for refund of the Education Cess, Secondary and Higher Education Cess and Krishi Kalyan Cess. A show cause notice was issued as to the terms that, as the Appellant is not entitled to carry forward the CENVAT credit and therefore, the Appellant cannot be entitled to any refund either.
The matter was adjudicated and the refund was denied to the Appellant. Hence, this appeal was filed by the Appellant before the Customs, Excise and Service Tax Appellate Tribunal, Chandigarh (“CESTAT”).
Issue before the CESTAT
- Whether the Appellant can claim refund for the unutilised Education Cess, Secondary and Higher Education Cess and Krishi Kalyan Cess in the CENVAT Credit Account?
Contentions of the Parties
The Appellant contended that the present set of facts is similar to the facts in the case of M/S Bharat Heavy Electricals Ltd vs. Commr. Of CGST & Customs,, wherein the CESTAT had allowed the refund.
The Appellant therefore contended that the Order shall be set aside.
The Respondent contended that as the Education Cess, Secondary and Higher Education Cess and Krishi Kalyan Cess have been carried forward into the GST Account, it has become GST Credit and not CENVAT Credit and the refund has to be filed under the CGST Act in accordance to the amendment in Section 140.
The Respondent also contended that the refund was barred by the limitation of time and the refund that has to be claimed should be filed within one year.
The Respondent further contended that the facts of the case of M/S Bharat Heavy Electricals Ltd vs. Commr. Of CGST & Customs, were not relevant to the present set of facts. .
Decision and Findings
The CESTAT held that the Education Cess, Secondary and Higher Education Cess and Krishi Kalyan Cess are not a GST Credit as contended by the Respondent.
The CESTAT further held that under Section 140 of the CGST Act, the Appellant cannot transfer the Education Cess, Secondary and Higher Education Cess and Krishi Kalyan Cess to the GST Account and hence, the amount shall be lying unutilised in the CENVAT Credit Account.
The CESTAT observed that the amendment to Section 140 of the CGST Act was introduced on 30.08.2018 i.e. one year after the implementation of the GST regime. It is impossible for the Appellant to file for a refund within one year of transfer of the CENVAT Credit amount into the GST Account as the amendment was not in force within that time period. Hence, the refund was not barred by the limitation.
The CESTAT held that in the case of M/S Bharat Heavy Electricals Ltd vs. Commr. Of CGST & Customs, the assesse was entitled to claim refund for the Education Cess, Secondary and Higher Education Cess and Krishi Kalyan Cess and as it could not be transferred to the GST Account and was lying unutilised in the CENVAT Credit Account.
Subsequent to the above observations, the CESTAT held that the Appellant was entitled to file for the refund claim.
AMLEGALS Remarks
Under this recent judgment, the CESTAT has allowed organisations to file for any refund claims that they are entitled to, for the Education Cess, Secondary and Higher Education Cess and Krishi Kalyan Cess which is lying unutilised in their CENVAT Credit Account.
The CESTAT has also stated that if the Education Cess, Secondary and Higher Education Cess and Krishi Kalyan Cess could not be transferred to the GST Account then the amount does not become GST Credit but is a CENVAT Credit of Education Cess, Secondary and Higher Education Cess and Krishi Kalyan Cess which is lying unutilised as on 01.07.2017.
For any query or feedback feel free to connect with aditi.tiwari@amlegals.com
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