Thermax Limited vs. Union Of INDIA

Held

The Court held that the petitioner's contention regarding the mode of refund was valid. It was established that the duty paid by the petitioner was not legally payable on the exported goods, and therefore, the rebate claim was not admissible under Rule 18 of the Central Excise Rules, 2002. However, the revisionary authority correctly treated the duty paid as a voluntary deposit that the government could not retain. The Court found that Section 142(3) of the GST Act clearly mandates that any amount eventually accruing to a person, including refunds of duty paid under the existing law, should be paid in cash, especially after the appointed day of GST. The Court reasoned that CENVAT credit balances as on 30.06.2017 were carried forward, but a refund of an amount that was not legally due and was treated as a voluntary deposit should be paid in cash, aligning with the spirit of the transition provisions and the principle that the government cannot retain money not due to it. The Court relied on the reasoning in the M/s. Lanxess India Pvt. Ltd. case. The impugned order was modified to direct the refund in cash instead of CENVAT credit.

Facts

The petitioner, Thermax Limited, engaged in manufacturing capital goods, exported boilers to Jeddah, Saudi Arabia. They paid applicable excise duty and subsequently filed a rebate claim under Rule 18 of the Central Excise Rules, 2002. A show cause notice was issued proposing to deny the rebate, which was rejected by the respondent No. 3. The petitioner's appeal to the Commissioner (Appeals) and subsequent revision application before the respondent No. 2 were also rejected. The revisionary authority held that while the rebate was not admissible as duty was paid unnecessarily, the amount paid should be re-credited to the petitioner's CENVAT credit account, as the government could not retain funds not legally due. The petitioner challenged this order before the High Court, specifically seeking the refund in cash due to the advent of the GST regime.

Key Issues

1. Whether, in light of Section 142(3) of the Central Goods and Services Tax Act, 2017, the amount of duty paid by the petitioner, which was held to be not legally payable on exported goods, should be refunded in cash instead of being credited to the CENVAT account? Petitioner's contention: The petitioner argued that under Section 142(3) of the GST Act, any claim for refund of amounts paid under the existing law, filed before or after the appointed day (01.07.2017), must be disposed of in accordance with the existing law, and any amount accruing to the claimant should be paid in cash. They relied on a decision in M/s. Lanxess India Pvt. Ltd. where a refund was directed to be paid in cash, asserting that CENVAT credit accounts have become redundant post-GST. Revenue's contention: The learned advocate for the respondent submitted that an appropriate order may be passed in view of the provisions of Sub-Section (3) of Section 142 of the Central Goods and Services Tax Act, 2017.