CESTAT | Whether refund claim under R. 5 of CCR can be rejected on the ground that appellant did not debit amount of refund claimed at the time of filing refund claim, but have debited such amount subsequent to the filing of refund claim but before adjudication?

Customs, Excise and Services Tax Appellate Tribunal (CESTAT): Anil Choudhary (Judicial Member) allowed an appeal which was filed bearing the issue as to whether the refund claim under Rule 5 of Cenvat Credit Rules read with Notification No.27/2012-CE (NT) can be rejected on the ground that the appellant did not debit the amount of refund claimed at the time of fling the refund claim, but have debited such amount subsequent to the filing of the refund claim but before adjudication.

Appellant is the exporter of taxable services. They also received various input services, on which they paid tax and taken credit being entitled to the same. The appellant could not utilise the cenvat credit as the exports were not taxable. They had filed for refund claim under Rule 5 of CCR read with Notification No.27/2012-CE. Show cause notice was issued pursuant to scrutiny as it appeared that the appellant has not debited the refund claim amount at the time of making the claim, as required under Condition No.2 (h) of Notification No.27/2012. Original refund claim was rejected observing that the appellant has not debited the amount of refund claimed in cenvat credit account, as required under Condition 2 (h) of the Notification.

Commissioner (Appeals) ignored the order of the Hon’ble Supreme Court in the case of Hari Chand Shri Gopal – 2010 (260) ELT Page 3 (SC), wherein the doctrine of substantial compliance was explained stating that it is a judicial invention, equitable in nature, designed to avoid hardship in cases where a party does all that can reasonably be expected of it, but failed or faulted in some minor or inconsequent aspects, which cannot be described as the “essence” or the “substance” of the requirements. Substantial compliance means “actual compliance in respect to the substance essential to every reasonable objective of the statute”.

Counsel for the appellant, Shri Abhinav Kalra, Chartered Accountant urges that the admitted fact is that the appellant have exported 100% of their services. Further, admittedly, the appellant have not carried forward the unutilised cenvat credit to the GST Regime. Under such circumstances, the appellant can no longer use the balance of cenvat credit as on 30.06.2017 for the purpose of the payment of GST, if any.

The Tribunal held that the debit of the amount of refund claim in the cenvat credit account suo moto before the adjudication, is sufficient compliance Condition No.2(h) of the Notification No.27/2012-CE it further held that the Commissioner (Appeals) have mis-conceived and mis-directed himself by ignoring the ruling of the Hon’ble Supreme Court, which is both judicial indiscipline and also in violation of Article 141 of the Constitution of India.[Porteck India v. Commr. Of CGST and CE, 2021 SCC OnLine CESTAT 2609, decided on 14-10-2021]

Suchita Shukla, Editorial Assistant has reported this brief.

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