Refund Of CENVAT Credit By Cash As Per Transitional Provisions Of S.142(5) Of CGST Act, Is Subject To Time Limit U/s 11B Of Central Excise Act: CESTAT
Pranav B Prem
The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Chennai Bench, has held that refund claims filed under Section 142(5) of the Central Goods and Services Tax Act, 2017, for amounts relatable to earlier service tax payments, are squarely governed by the limitation prescribed under Section 11B of the Central Excise Act, 1944. Dismissing ten appeals filed by Mahindra Holidays and Resorts India Ltd. (MHRIL), the Tribunal affirmed that refund claims must be filed within one year from the relevant date and cannot be entertained merely because they arise under a transitional provision of the CGST Act.
The appeals pertained to refunds of service tax paid by MHRIL on Annual Subscription Fees and membership amounts collected from its timeshare customers. These amounts related to services that ultimately did not materialize due to cancellation of memberships. Between 2020 and 2023, MHRIL filed refund applications amounting to more than ₹6 crore for the period between July 2017 and March 2021, seeking the amounts in cash under Section 142(5) of the CGST Act.
The Department rejected the claims on the ground that they were filed beyond the one-year period prescribed in Section 11B, which continued to apply even to transitional refund claims filed under the CGST Act. Upon appeal, the Commissioner (Appeals) upheld these orders, prompting the assessee to approach the Tribunal.
MHRIL argued that the transitional provision in Section 142(5) began with a non-obstante clause overriding earlier laws, and therefore the limitation provisions of Section 11B should not apply. It was contended that tax paid on cancelled memberships was not “tax” but a deposit, and that unjust enrichment did not arise because credit notes had been issued to customers. MHRIL maintained that once services were cancelled, the corresponding tax was liable to be refunded without the procedural bar of limitation.
The Department, however, argued that Section 142(5) expressly required refund claims to be processed “in accordance with the provisions of the existing law,” which necessarily included the limitation under Section 11B. It emphasized that the transitional provisions did not create a new mechanism for refund but only provided that, where refund was otherwise admissible, the amount must be given in cash rather than by way of credit. It was further submitted that MHRIL was aware of cancellations at the time they occurred and could not justify approaching the Department years later.
The Tribunal held that Section 142(5) had to be read harmoniously and that the non-obstante clause did not override the limitation period prescribed under the existing law. It observed that the provision only directed the mode of refund—by cash instead of re-credit—but did not dilute the statutory requirement of timeliness. Since the claims were filed well beyond the one-year limitation period, they were barred by Section 11B.
The Tribunal also noted that MHRIL had failed to provide satisfactory justification for the delay in filing the claims despite being fully aware of cancellation events. Referring to the principle that “equity aids the vigilant,” the Tribunal refused to entertain refund claims that were belatedly filed. It further held that the argument that the tax was merely a deposit was untenable in view of the Supreme Court’s decision in Mafatlal Industries Ltd. v. Union of India, which mandated that refund claims of the kind at hand must be processed strictly under Section 11B.
Given these findings, the Tribunal upheld the orders of the Commissioner (Appeals) and dismissed all ten appeals filed by MHRIL. It concluded that the refund claims were clearly beyond the limitation period and that no further examination of unjust enrichment or merits was required once the claims were found to be time-barred.
Appearance
Counsel For Appellant: Harish Bindumadhavan, Advocate
Counsel For Respondent: AR Sanjay Kakkar
Cause Title: Mahindra Holidays and Resorts India Ltd. Versus Commissioner of GST & Central Excise
Case No: Service Tax Appeal Nos. 40011 to 40014 of 2021
Coram: Hon’ble Shri M. Ajit Kumar, Member (Technical), Hon’ble Shri Ajayan T.V., Member (Judicial)
