GST UPDATE ON SECTION 142(3) OF CGST ACT, 2017 GRANTING REFUNDS IN CASH

GST UPDATE ON SECTION 142(3) OF CGST ACT, 2017 GRANTING REFUNDS IN CASH:- The provisions contained in section 142(3) of the CGST Act, 2017 as regards grant of refund claims in cash in GST era are beneficial in nature but at times the benefit of this provision is not being extended to the assessees by the revenue authorities. The present update seeks to discuss the practical problems faced by the assessee with respect to refund claims filed by them in pre-GST era but decided in post GST regime.

Before proceeding further, it is pertinent to observe the provisions contained in section 142(3) of the CGST Act, 2017 which reads as follows:-
(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:
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.
The above provision clearly states that the every claim of refund filed by any person shall be paid in cash. However, there are instances where the refund claim is allowed by way of credit even if the order is passed post implementation of GST. In this context, decision given by the Hon’ble Gujarat High Court in the case of M/S THERMAX LTD. VERSUS UNION OF INDIA [2019 (31) G.S.T.L. 60 (GUJ)] is worth noting wherein the Hon’ble Gujarat High Court by placing reliance on the provisions contained in section 142(3) of the CGST Act, 2017 upheld that the refund claim is to be granted in cash and not by way of re-credit. In this case, the contention of the revenue authorities was that since the assessee was not required to pay duty on export, the amount paid was not excise duty and so it cannot be considered as case of rebate of excise duty. However, the Hon’ble High Court concluded that as the government cannot retain any amount without authority of law, the same ought to be refunded back to the assessee and after implementation of GST, in light of the express provision, the refund should be paid in cash. The above decision will definitely serve as an aid to the assessee to enforce the provisions contained in section 142(3) of the CGST Act, 2017.
We wish to point one common difficulty being faced by many assessees who have filed refund claim of accumulated cenvat credit under the erstwhile Rule 5 of the Cenvat Credit Rules, 2004 wherein there was provision that the assessee was required to debit the amount of cenvat credit before filing refund claim. Many cases are being reported wherein it has been observed that the assessee has been placed at disadvantageous position in cases where the decision was passed in GST regime. This is for the reason that according to the first proviso to section 142(3) of the CGST Act, 2017, if any claim for refund of cenvat credit is rejected, the amount so rejected shall lapse. However, if the same assessees would have withdrawn their refund claim before implementation of GST regime and would have taken re-credit of the amount debited, the said amount would have been transitioned into the GST era. It is worth noting that second proviso also makes it clear that the amount of cenvat credit for which refund is being claimed should not have been carried forward in GST regime. Hence, if the claims of accumulated cenvat credit are decided adversely after implementation of GST, the assessees are placed at disadvantageous position. This is evident from the adverse decision by the Hon’ble Hyderabad Tribunal given in the case of UNITED SEAMLESS TUBULAR PVT. LTD. VERSUS COMMR. OF CENTRAL TAX, RANGAREDDY[2019 (28) G.S.T.L. 244 (TRI. – HYD.)].
Similarly, another practical problem faced by the assessee is regarding the refund of transportation/insurance charges included in the assessable value of goods for the purpose of central excise duty in case of rebate claims filed under Rule 18 of the Central Excise Rules, 2002. During the time when Central Excise Laws were prevalent, the rebate claim of certain expenses called as post removal expenses was granted to the assessee by way of re-credit in cenvat credit account. However, with the advent of GST, the assessee lost even the re-credits of post removal expenses for the rebate orders passed post implementation of GST on the grounds that the revenue authorities are not permissible to grant refund claim by way of re-credit in GST era.
Now, the question that arises is whether the decision given by the Hon’ble Gujarat High Court in the case of M/S THERMAX LTD. VERSUS UNION OF INDIA [2019 (31) G.S.T.L. 60 (GUJ)]will come to the rescue of the assessees in above cited cases wherein there is express adverse decision given by Hyderabad Tribunal. It is hoped that the court recognises the hardship faced by the assessees on account of change in law and suggests a convincing solution to the above cited problems faced by the assessees.

This is solely for educational purpose.

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GST UPDATE ON SECTION 142(3) OF CGST ACT, 2017 GRANTING REFUNDS IN CASH

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