Refund allowed of Unutilized Education Cess, which couldn't be transitioned into GST

Last updated: 26 August 2021

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The CESTAT, Bangalore has ruled that companies can claim a refund for unutilised Education Cess (EC) and Secondary and Higher Education Cess (SHEC) if these credits could not be transitioned into the Goods and Services Tax (GST) regime. This decision follows previous rulings that allow for such refunds, particularly when the transition was restricted by law. The tribunal found that the appellant's reliance on precedent cases was valid, overriding the department's rejection of the refund claim.

Court :
CESTAT, Bangalore

Brief :
In Kirloskar Toyota Textile Machinery Pvt. Ltd. v. Commissioner of Central Tax, Bengaluru South GST Commissionerate [Central Excise Appeal No. 20320 of 2020 dated August 19, 2021] Kirloskar Toyota Textile Machinery Pvt. Ltd ('the Appellant') has filed the current Appeal against Order-In-Appeal No. 328/2020 dated June 23, 2020 ('OIA') which upheld the order of rejection of refund of unutilized education Cess ('EC') and Secondary and Higher Education Cess ('SHEC') under Section 140(1) of the Central Goods and Services Tax Act, 2017 ('CGST Act')

Citation :
Central Excise Appeal No. 20320 of 2020 dated August 19, 2021

In Kirloskar Toyota Textile Machinery Pvt. Ltd. v. Commissioner of Central Tax, Bengaluru South GST Commissionerate [Central Excise Appeal No. 20320 of 2020 dated August 19, 2021] Kirloskar Toyota Textile Machinery Pvt. Ltd ('the Appellant') has filed the current Appeal against Order-In-Appeal No. 328/2020 dated June 23, 2020 ('OIA') which upheld the order of rejection of refund of unutilized education Cess ('EC') and Secondary and Higher Education Cess ('SHEC') under Section 140(1) of the Central Goods and Services Tax Act, 2017 ('CGST Act')

The Appellant contended that accumulated credits of Cesses were not transitioned into Goods and Services Tax ('GST') regime due to specific restriction under Section 140(1) of the CGST Act. The Appellant therefore had to resort to the option of refund under existing law to avoid lapsing of credit.

Relied on judgments M/s. Bharat Heavy Electricals Ltd. Vs. Commissioner of CGST [2020-TIOL-1341-CESTAT-DEL] and The Union of India v. Slovak India Trading Company [2006 (201) ELT 559 Kar dated July 7, 2006] wherein the appeal was allowed to the assessee on the matter of refund of Cesses.

The Hon’ble CESTAT, Bangalore observed that the decisions relied on by the Appellant are provided by the Division Bench of CESTAT, New Delhi which would prevail over the decision rendered by Single Member of the CESTAT relied on by the Department.

Further noted that the case of Slovak India Trading Company (supra) is bound to be followed which was also relied on in the case of M/s. Bharat Heavy Electricals Ltd. (supra) by holding that the refund of the Cesses can be granted, which couldn’t be transitioned into GST.

FAQ :

Yes, the CESTAT has ruled that a refund is allowed for unutilised Education Cess and Secondary and Higher Education Cess if these credits could not be transitioned into the GST regime due to legal restrictions.

The ruling covers unutilised Education Cess (EC) and Secondary and Higher Education Cess (SHEC).

The appellant contended that accumulated credits of cesses could not be transitioned into the GST regime due to a specific restriction under Section 140(1) of the CGST Act.

The decision relied on previous judgments, including M/s. Bharat Heavy Electricals Ltd. Vs. Commissioner of CGST and The Union of India v. Slovak India Trading Company, which allowed for the refund of cesses that couldn't be transitioned into GST.

Yes, the tribunal observed that the decisions relied on by the appellant, provided by a Division Bench of CESTAT, New Delhi, prevailed over the decision relied on by the Department, and specifically noted that the case of Slovak India Trading Company was to be followed.

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Judgement posted by

Bimal Jain

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FCA, FCS LLB with21 Yrs of Experience inTaxation Indirect and Direct: Education Qualification: B.Com (Hons) Chartered Accountants Company Secretary LLB Qualified SAP FI/CO Consultants Professional Membership: Chairmanof Indirect Tax Committee of PHD Chamber of Commerce Member of Indirec ... Read more

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