Muthoot Finance Limited vs Union Of India
2024 Latest Caselaw 26076 Ker

Kerala High Court

Muthoot Finance Limited vs Union Of India on 3 September, 2024

Author: P Gopinath

Bench: P Gopinath

                                           2024:KER:66766

                                                    'C.R'
        IN THE HIGH COURT OF KERALA AT ERNAKULAM

                         PRESENT

         THE HONOURABLE MR. JUSTICE GOPINATH P.

TUESDAY, THE 3RD DAY OF SEPTEMBER 2024 / 12TH BHADRA, 1946

                 WP(C) NO. 28282 OF 2022

PETITIONER:

         M/S.MUTHOOT FINANCE LIMITED,
         2ND FLOOR, MUTHOOT CHAMBERS,
         OPP. SARITHA THEATRE COMPLEX, BANERJI ROAD,
         KOCHI - 682 018,
         REPRESENTED BY MANOJ JACOB
         CHIEF GENERAL MANAGER - ACCOUNTS & TAXATION.


         BY ADVS.
         JAZIL DEV FERDINANTO
         JOSE JACOB

RESPONDENTS:

   1     UNION OF INDIA,
         REPRESENTED BY SECRETARY, MINISTRY OF FINANCE,
         DEPARTMENT OF REVENUE, NORTH BLOCK,
         NEW DELHI - 110 001.

   2     ASSISTANT COMMISSIONER,
         OFFICE OF THE ASSISTANT COMMISSIONER,
         4TH FLOOR, CENTRAL EXCISE BHAVAN
         CENTRAL TAX AND CENTRAL EXCISE,
          ERNAKULAM DIVISION,
         KATHRIKADAV, KERALA - 682 017.


         BY ADVS.
         SREELAL N. WARRIER, SC, CENTRAL BOARD OF EXCISE
         SHRI.P.R.SREEJITH, SC, GSTN
         SRI.T.C.KRISHNA FOR UNION OF INDIA

     THIS WRIT PETITION (CIVIL) HAVING COME UP          FOR
ADMISSION ON 03.09.2024, THE COURT ON THE SAME          DAY
DELIVERED THE FOLLOWING:
 WP(C) NO. 28282 OF 2022                     2

                                                          2024:KER:66766


                                                               'C.R'
                          JUDGMENT

The petitioner is a Public Limited Company

incorporated under the provisions of the Companies Act,

1956. It is engaged in financing, providing personal and

business loans upon the security of gold. For the period

from April 2017 to June 2017, the petitioner had filed

returns under the provisions of the Finance Act, 1994

disclosing payment of Service Tax of Rs.10,36,39,987/-

Education Cess (EC) amounting to Rs.67,69,195/-,

Secondary and Higher Education Cess (SHEC) amounting

to Rs.35,18,566/- and Krishi Kalyan Cess (KKC)

amounting to Rs.54,65,526/-.

2. Following the 101st amendment to the

Constitution and the introduction of GST, the petitioner

was under the impression that unutilized credit on

account of payment of Service Tax including amounts

paid towards EC, SHEC and KKC could be transitioned to

the GST regime. According to the petitioner, the

provisions of Section 140(8) of the CGST Act permitted

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such transition. However, vide the CGST (Amendment)

Act 2018 introduced with retrospective effect from

01.07.2017, Section 140(1) of the CGST Act was amended

to replace the term 'CENVAT credit' with the term

'CENVAT credit of eligible duties' . This was to prevent

the transition of accumulated credit on account of

payment of various amounts as Cess to the GST. It is the

case of the petitioner that the said amendment was

notified vide notification No.2/2019-Central Tax dated

29.01.2019. It is the case of the petitioner that in the case

of Assistant Commissioner of CGST and Central

Excise and Others v. Sutherland Global Services

Private Limited and Others; 2020 SCC OnLine Mad

27359, the Madras High Court took the view that Cess

such as EC, SHEC and KKC could not be transitioned with

reference to the provisions of Section 140 of the CGST

Act. According to the petitioner, it accordingly reversed

the transitional credit claimed on account of payment of

EC, SHEC and KKC and on such reversal, the petitioner

became entitled to seek a refund in terms of the

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provisions contained in Section 142(3) of the CGST/SGST

Acts under the existing law (Finance Act, 1994) and

therefore, the petitioner filed a claim for refund of an

amount of Rs.1,57,53,287/-. The said application which, is

on record as Ext.P4 was rejected finding that the claim

was time-barred in terms of the provisions contained in

Section 11B of the Central Excise Act, 1944 as made

applicable to Service Tax by virtue of the provisions

contained in the Finance Act, 1994. The order of the

competent authority (respondent No.2) rejecting the

refund claimed as time-barred is on record as Ext.P8. In

the meanwhile, the petitioner had also filed an application

for refund under Section 54 of the CGST Act clearly

stating that the same needs to be processed only if Ext.P4

application is rejected by the competent authority.

3. Sri. Jose Jacob, the learned counsel appearing

for the petitioner vehemently contends that the rejection

of the application for refund filed by the petitioner in

terms of the provisions contained in Section 142 (3) of the

CGST Act as time-barred is clearly unsustainable in law.

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It is submitted that going by the provisions as they stood

at the time of the introduction of GST, the petitioner was

entitled to transitional credit available on account of

payment of EC, SHEC and KKC and it is only with the

retrospective amendment of Section 140 of the

CGST/SGST Acts that such transition became impossible.

It is submitted that the application for refund in terms of

the provisions contained in sub-section(3) of Section 142

of the CGST Act should therefore be considered with

reference to the date on which the amendment came into

force. Further, it is submitted that it is only on reversal of

the transitional credit claimed that the petitioner could

maintain an application for refund in terms of the

provisions contained in Section 11B of the Central Excise

Act, 1944 as made applicable to Service Tax. It is

submitted that in such circumstances, the dismissal of the

application for refund as time-barred is clearly illegal and

unsustainable in law. The learned counsel appearing for

the petitioner would submit that there are several

judgments of the Tribunal holding in similar

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circumstances that the assessee is entitled to a refund of

EC, SHEC and KKC on account of the fact that they could

not be transitioned in terms of the provisions contained in

Section 140 of the CGST Act. It is submitted that if the

amount could not be sanctioned as a refund under the

provisions of the Finance Act, 1994 read with the

applicable provisions of the Central Excise Act, 1944, the

petitioner was entitled to maintain an application for

refund in terms of the provisions contained in Section 54

of the CGST Act. It is submitted that Ext.P5 application

filed by the petitioner has also not been considered by the

competent authority. It is therefore submitted that Ext.P8

order may be set aside and the matter may be remanded

for consideration on merits by the competent authority or

it may be held that the petitioner can process its

application for refund (Ext.P5) in accordance with the

provisions contained in Section 54 of the CGST Act.

4. Sri. P.R. Sreejith, learned counsel appearing for

the respondent Department would submit that the

petitioner is clearly not entitled to the benefit of refund of

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transitioning the amounts paid as EC, SHEC and KKC in

terms of the provisions contained in the CENVAT Credit

Rules, 2004 (hereinafter referred to as 'the CENVAT

Rules'). It is submitted that the EC, SHEC and KKC could

be set off in terms of the provisions contained in the

CENVAT Rules only against payment of similar Cess. It is

pointed out that the EC and SHEC were abolished on

01.03.2015 and 01.06.2015 respectively. It is submitted

that the provisions for collecting KKC continued till the

introduction of GST and were abolished with effect from

the coming into force of the Taxation Law (Amendment)

Act 2017. It is submitted that when amounts paid as EC,

SHEC and KKC could be utilized only for setting off

payments to be made against such Cess, the petitioner

had no right to maintain any application for refund of the

unutilized portion of credit available on account of

payment of EC, SHEC and KKC. It is submitted that the

issue raised by the petitioner is squarely covered against

the petitioner in view of the judgment of the Division

Bench of the Madras High Court in Sutherland Global

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Services Private Limited (supra). It is pointed out that

Section 54(3) of the CGST Act clearly indicates that a

refund (in cash) under GST is available only in two

circumstances, i.e, (i) when the applicant makes a zero-

rated supply and (ii) where the refund arises on account

of an inverted duty structure (inverted duty structure is a

situation where the duty paid on inputs is higher than the

duty to be paid on outputs). It is submitted that the claim

of the petitioner for refund was clearly not maintainable

and it is also a time-barred one. It is submitted that the

Court does not issue futile writs and unless this Court

were to find any right on the petitioner to claim a refund

under the provisions of the Service Tax Act, 1994 read

with the relevant provisions of the Central Excise Act

1944, there is no question of this Court directing the

application of the petitioner to be considered on merits

even if this Court were to find that the rejection of the

application on the ground of it being time-barred is not

sustainable in law.

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5. Having heard the learned counsel appearing for

the petitioner and the learned Standing Counsel

appearing for the respondents, I am of the view that the

petitioner has not made out any case for the grant of any

of the reliefs sought in the writ petition. A reading of the

provisions of the CENVAT Rules indicates that the EC,

SHEC and KKC can be utilized only for payment of such

Cess and not for any other purposes (See the First and

Second provisos to Rule 3(7)(b) & Rule 3(7)(d) of the

CENVAT Credit Rules, 2004). It is clear that there is no

cross-utilization of EC, SHEC and KKC against tax

payable on account of Service Tax under the provisions of

the Finance Act, of 1994. It is evident from the judgment

of the Division Bench of the Madras High Court in

Sutherland Global Services Private Limited (supra)

that there cannot be any transitioning of Cess paid as EC,

SHEC and KKC under the provisions of Section 140 of the

CGST Act. The following observations of the Madras

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High Court are relevant in this regard:-

"37. But, as noted above, the imposition or levy of Education Cess and Secondary and Higher Education Cess and Krishi Kalyan Cess did not operate after 01.07.2017. Explanation 3, in our opinion, specifying that any kind of Cess will be excluded for the purpose of Section 140, makes the intention of the Legislature very clear and Sub-section (8) of Section 140, which was emphasized by the learned counsel for the Assessee before us, is not excluded from the effect and operation of Explanation 3, because the exclusion is of any Cess which has not been specified in Explanations 1 and 2, Education Cess and Secondary and Higher Education Cess and Krishi Kalyan Cess are not included in Explanations 1 and 2 at all. Therefore, the exclusion of Education Cess and Secondary and Higher Education Cess for the purpose of carry forward and set off under Section 140 is specifically provided in Explanation 3, which is clearly applicable to gather the legislative intent, irrespective of piecemeal enforcement of Explanations 1 and 2 by the Legislature. Explanation 3 has its own force and application

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and does not have a limited application only via the route of Explanation 1 and Explanation 2. The Departmental Circular dated 02.01.2019, quoted above, in our opinion, rightly clarified this position with reference to Explanation 3 to Section 140 of the Act

39...........The "taking" of the input credit in respect of Education Cess and Secondary and Higher Education Cess in the Electronic Ledger after 2015, after the levy of Cess itself ceased and stopped, does not even permit it to be called an input CENVAT Credit and therefore, mere such accounting entry will not give any vested right to the Assessee to claim such transition and set off against such Output GST Liability."

I am in respectful agreement with the view taken by the

Division Bench of the Madras High Court in Sutherland

Global Services Private Limited (supra). Therefore,

the question of transitioning the EC, SHEC and KKC

Credit does not arise for consideration. To be fair to the

petitioner, the petitioner has no case that such

transitioning is permissible. Coming to the claim of the

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petitioner for refund, it is to be noted that the EC and

SHEC were abolished with effect from 01.03.2015 and

01.06.2015 respectively. With the abolition of such Cess

and the provisions of the CENVAT Rules providing that

credit of such Cess can be utilised only for payment of the

same Cess, the question of permitting the petitioner to

utilize the credit does not arise for consideration. It is

clear from the judgment of the Supreme Court in Union

of India and Others v. VKC Footsteps India Private

Limited; (2022) 2 SCC 603 that, a right to refund can

be circumscribed by statutory provisions and in the

absence of any provision enabling the petitioner to claim

the refund of amounts paid as EC, SHEC and KKC (to the

extent unutilised) the question of entertaining a claim for

refund in the nature of Ext.P4 does not arise for

consideration.

6. Coming to the claim of the petitioner that it is

entitled to entertain a claim for refund under the

provisions of Section 54 of the CGST Act, I am of the view

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that the said contention cannot be accepted in the light of

clear provisions contained in Sub-Section (3) of Section

54 of the CGST Act. It is clear from a reading of Sub-

Section (3) of Section 54 of the CGST Act that a claim for

refund of the CGST/SGST/IGST (in cash) can be

entertained only in two circumstances. The first is where

there is a zero-rated supply of goods or services and the

second one is, where the refund application arises on

account of an inverted duty structure, i.e where the duty

to be paid or paid on output services or goods is less than

the duty paid on input services or input goods. That

apart, the question of entertaining any application for a

refund under the provisions of Section 54 of the CGST Act

does not arise in the case of the petitioner. As held in

Sutherland Global Services Private Limited (supra)

there was no provision enabling the petitioner to claim

the transition of EC, SHEC and KKC to the GST regime

and the question of entertaining any application for a

refund under the provisions of Section 54 of the CGST Act

does not arise.

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7. The contention of the learned counsel

appearing for the petitioner that various Tribunals had

taken a view contrary to the view taken by this Court and

has held that EC, SHEC and KKC paid at the relevant

time under the provisions of the Finance Act 1994 can be

refunded cannot be accepted. In view of the statutory

provisions discussed above, the view taken by various

Tribunals does not appear to be in accordance with the

statutory provisions.

8. At this stage, the learned counsel appearing for

the petitioner vehemently contends that the application

filed for refund under Section 54 of the CGST Act should

have been considered and a speaking order should have

been passed by the competent authority. It is pointed out

that Ext.P5 remains unattended and no order has been

passed by the competent authority till today. In light of

the view that I have taken of the statutory provisions and

since the petitioner is not entitled to transition of

amounts paid as EC, SHEC and KKC to the GST regime,

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the question of directing the authority to consider and

pass orders on Ext.P5 also does not arise for

consideration. It is settled law that the Court will not

issue futile writs.

In that view of the matter, I find no merit in any of

the contentions of the learned counsel appearing for the

petitioner. The writ petition fails and it is accordingly

dismissed.

Sd/-

GOPINATH P. JUDGE ajt/DK

2024:KER:66766

APPENDIX OF WP(C) 28282/2022

PETITIONER EXHIBITS

Exhibit -P1 TRUE COPY OF THE SERVICE TAX RETURN FILED FOR THE PERIOD FROM APRIL 2017 TO JUNE 2017

Exhibit -P2 TRUE COPY OF THE TRAN-1 FILED BY THE PETITIONER

Exhibit -P3 TRUE COPY OF THE DRC 03 CHALLAN DATED 13.11.2020

Exhibit -P4 TRUE COPY OF THE REFUND APPLICATION DATED 30.08.2021

Exhibit -P5 TRUE COPY OF ARN DATED 27.10.2021 RECEIVED IN RESPECT OF REFUND APPLICATION UNDER SECTION 55 OF THE CGST ACT

Exhibit -P6 TRUE COPY OF THE SHOW CAUSE NOTICE NO. 05/2021 DATED 13.10.2021 ISSUED BY RESPONDENT NO.2

Exhibit -P7 TRUE COPY OF THE REPLY DATED 18.11.2021

Exhibit -P8 TRUE COPY OF THE OIO NO. 35/2021(OIO) CENTRAL TAX & CENTRAL EXCISE (REFUND) DATED 10.12.2021 ISSUED BY RESPONDENT NO.2

Exhibit -P9 TRUE COPY OF THE LETTER DATED 22.03.2022 ISSUED BY RESPONDENT NO.2

Exhibit -P10 TRUE COPY OF THE CIRCULAR NO.

157/13/2021-GST DATED 20.07.2021