CESTAT: Refund Of Post-GST Payment Of CVD & SAD Maintainable Under Section 142(3) CGST Act
Pranav B Prem
The Ahmedabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that a refund claim pertaining to CVD (Countervailing Duty) and SAD (Special Additional Duty), paid after the introduction of GST due to non-fulfilment of export obligations, is maintainable under Section 142(3) of the CGST Act, 2017. The matter was heard by Dr. Ajaya Krishna Vishvesha (Judicial Member).
The appeal concerned the question of whether refund could be granted under Section 142(3) in lieu of CENVAT credit where the appellant discharged CVD and SAD after 01.07.2017, even though the imports were made under the Advance Authorisation scheme before the GST regime. The assessee, a manufacturer of Brass Strips, P.B. Strips and Brass Caps falling under Tariff Headings 74092100, 74093100 and 74199930, had imported inputs duty-free between January 2012 and January 2014. As the export obligations could not be fulfilled proportionately, the DGFT issued a deficiency letter in May 2019 asking the assessee to regularise the excess imports by paying applicable customs duties with interest.
Following this, the assessee paid Rs. 6,47,119 as CVD and Rs. 2,42,676 as SAD on 20.05.2019. While these duties were eligible for CENVAT credit under the erstwhile regime and Bills of Entry were available, the transition to GST left no mechanism for availing such credit. The assessee therefore filed a refund claim under Section 142(3) seeking cash refund of Rs. 8,89,795.
The Assistant Commissioner rejected the refund on the ground that the payment was made after the appointed day and that CVD and SAD were not covered under Section 11B of the Central Excise Act. The Commissioner (Appeals) upheld this view, also observing that the refund was barred under Rule 9(1)(b) of the CENVAT Credit Rules, 2004, alleging non-disclosure of duty liability and attributing the payment to detection by DGFT.
Before the Tribunal, the appellant relied on several precedents of the Gujarat High Court, Telangana High Court, and various CESTAT Benches to argue that refund under Section 142(3) is permissible when duties relatable to the pre-GST period are paid after the appointed day. It was also contended that the deficiency letter issued by DGFT did not amount to a demand notice, nor was there any finding of suppression, fraud, or wilful misstatement, making Rule 9(1)(b) inapplicable.
The Tribunal agreed with the appellant’s submissions. Referring to Epigral Limited v. Union of India, the Bench noted that any refund accruing after 01.07.2017 must be processed in accordance with the existing law and “paid in cash” under Section 142(3). It also observed that the payments made by the assessee were voluntary and not pursuant to any recovery or adjudication proceedings. The Bench highlighted that the deficiency letter issued by the DGFT merely offered an opportunity to regularise the bona fide default and did not indicate proceedings under the FTDR Act or the Customs Act.
On the question of suppression, the Tribunal recorded that the assessee had disclosed excess imports in the revised ANF 4F submitted to the DGFT, and there was “no demand notice” or adjudication alleging suppression. Relying on decisions such as Rubamin Private Limited and ITCO Industries Limited, it held that Rule 9(1)(b) could not be invoked in the absence of any allegation or finding of fraud or wilful misstatement.
In conclusion, the Tribunal held that both the Assistant Commissioner and the Commissioner (Appeals) erred in rejecting the refund. The impugned order was set aside, and the matter was remanded to the adjudicating authority to pass a fresh order on the refund application in light of the Tribunal’s findings. The Bench further directed that the refund “is required to be paid in cash” as per the ruling of the Gujarat High Court in Thermax Limited v. Union of India, and the process must be completed within twelve weeks of receipt of the order.
Appearance
Counsel for Appellant/ Assessee: Vineet Nagla
Counsel for Respondent/ Department: Anand Kumar
Cause Title: Rashtriya Metal Industries Limited v. Commissioner of CGST & Central Excise, Surat
Case No: Excise Appeal No. 10388 Of 2020-SM
Coram: Dr. Ajaya Krishna Vishvesha (Judicial Member)
