GST: Tax Tribunal Allows Refund Of Education Cess
Legacy indirect tax cases on transition credit against education cess paid may find some reprieve in a recent tax tribunal ruling.
The relief comes from the Customs, Excise & Service Tax Appellate Tribunal, New Delhi, which set aside the tax department's circular on unutilised credit prior to the Goods and Services Tax regime.
Nu Vista Ltd., a manufacturing company, had moved the appellate body after the Commissioner (Appeals) dismissed credit availment by it against education cess.
The case pertains to the transition of cess levied before the introduction of GST. There are contrary high court rulings on the point of refund of cess, where the same cannot be utilised due to discontinuation of the levy itself, and this order, to an extent, brings more clarity, Rajat Bose, partner at Shardul Amarchand Mangaldas & Co., told BloombergQuint.
At the CESTAT, the company argued that the credit refund cannot be denied merely on the ground that such credit was not utilised prior to the GST regime. And that central value added tax or CENVAT credit is a vested right in favour of a taxpayer the moment input goods/services are received and therefore, it cannot be taken away.
Countering the company's claim, the department argued that the refund is inadmissible as these cesses have been phased out. It stated that transition of unutilised credit can only be allowed for levies that have been subsumed under GST. Education cess and secondary and higher education cess don't fall in this category. Since no new liability to pay such cesses arises, no vested right exists in relation to the accumulated credit of the past, the department said.
The appellate tribunal dismissed the department's view. Relying on certain Supreme Court rulings, it set aside the order of the Commissioner (Appeals) and held that the company is entitled to a refund of the balance amount of credit of cess. It reasserted that CENVAT credit is a vested right.
Bose said that if the government wants to deny a vested right, there has to be a specific provision under the law. From a practical standpoint, the advice we give clients is that a cash refund of cess can be claimed, he said.
That's because the education cess and secondary and higher education cess were discontinued under the erstwhile regime, i.e. central excise and service tax and so, such credit can't be utilised under the GST regime, Saloni Roy, partner at Deloitte India, explained. "Where credit of cess was not transitioned to the GST regime, you file an application for cash refund."
Apart from conflicting court decisions, currently, there's no specific provision for refund of cesses not transitioned under GST. This being the case, a view detrimental to the assessee cannot be taken, a principle upheld by the Supreme Court.Saloni Roy, Partner, Deloitte India
The state cannot unjustly enrich itself at the cost of the assessee, she said.