Hyderabad CESTAT Holds Unutilised Education Cess Credit Cannot Be Refunded, Rejects ₹22.11 Lakh Claim

The Hyderabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) on 8 July held that unutilised Education Cess, Secondary and Higher Education (SHE) Cess and Krishi Kalyan Cess (KKC) lying in the CENVAT credit account as on 30 June 2017 cannot be refunded under Section 142 of the Central Goods and Services Tax (CGST) Act, 2017.

Judicial Member Angad Prasad and Technical Member P. Anjani Kumar dismissed the appeal filed by Hexagon Capability Centre India Private Limited against the rejection of its refund claim of Rs. 22.11 lakh towards accumulated Education Cess, SHE Cess and KKC. The Bench observed:

"When the refund is not eligible ab initio in view of the above discussions, the question of granting them under the provisions of CGST Act 2017 cannot arise... we... come to a conclusion that ab initio there was no provision for transitioning of the cesses in question."

The dispute arose from Hexagon Capability Centre India Private Limited's claim that the accumulated credit of these cesses, which could not be transitioned into the Goods and Services Tax (GST) regime, should be refunded under Section 142(3) and Section 142(6) of the CGST Act. The appellant relied on various decisions of the Tribunal and High Courts to support its claim.

The Revenue opposed the claim, arguing that the issue had already been settled by the Larger Bench of the Tribunal in Kei Industries Ltd., which held that no refund of such accumulated cess credit was permissible.

Agreeing with the Revenue, the Tribunal held that the Larger Bench had conclusively ruled that the CENVAT Credit Rules did not permit the merger of these cesses with excise duty or service tax, nor did they allow a refund of such credit. It held that since the credit itself could not be transitioned into GST, Section 142 of the CGST Act could not create a refund entitlement that did not exist under the earlier regime.

It also relied on its earlier decision in Laurus Labs Ltd., where it had taken the same view. Following this ruling, it held that Hexagon Capability Centre India Private Limited had failed to establish any legal entitlement to the refund.

Accordingly, the CESTAT dismissed the appeal.

Appearance for the Appellant: Shri K. Lakshman Kumar, Chartered Accountant.

Appearance for the Respondent: Shri V.R. Pavan Kumar, Authorised Representative.