Cash refund Of Edu Cess, SHE Cess KKC Not Permitted: CESTAT

The Delhi Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that cash refund of education cess, Secondary and Higher Education Cess (SHE), Krishi Kalyan Cess (KK) is not permitted. The larger bench of R. Muralidhar (Judicial Member), Binu Tamta, (Judicial Member) and P. Anjani Kumar (Technical Member) has observed that no refund can be granted for the blocked Education Cess, SHE Cess and KKC under the provisions of Section 142(3). The refund claims, if filed after 1.3.2016 / 1.6.2016 would be time-barred. The issue was escalated a significant tax dispute to a Larger Bench after noting contradictory decisions on whether unutilised balances of Education Cess (EC), Secondary & Higher Education Cess (SHE) and Krishi Kalyan Cess (KKC) — which could not be transitioned into the GST regime — are refundable in cash under Section 142(3) of the CGST Act, 2017. The reference arose during the hearing of an appeal filed by KEI Industries Ltd., Bhiwadi, challenging the rejection of its refund claim of ₹7,42,108 — the closing balance of EC/SHE/KKC as of June 30, 2017, reversed from TRAN-1 after GST audit objections. The appellant argued that CENVAT credit, once validly earned, becomes an indefeasible and vested right, incapable of lapsing without express statutory authority. Strong reliance was placed on Supreme Court rulings in Eicher Motors and Slovak India, asserting that withdrawal of levy does not automatically wipe out accumulated credit. It was submitted that credit of EC/SHE/KKC was legitimately availed prior to their abolition in 2015. Section 140 of the CGST Act barred transition of such cesses into GST, but Section 142(3) expressly allows cash refunds of pre-GST credits. Section 142(3) contains no limitation period, rendering the refund filed in 2021 legally maintainable. Support poured in from intervenors JK Lakshmi Cement and BHEL, who stressed that the CESTAT ruling in Nu-Vista Ltd., which allowed cash refund, correctly interpreted the law. The department strongly opposed the refund claim, contending that transitional provisions under Section 140 are distinct from refund provisions under Section 142; non-transition cannot generate a refund entitlement. Refund claims under Section 142(3) must satisfy all conditions of Section 11B of the Central Excise Act, including limitation and restrictions under Rule 5 of the CENVAT Credit Rules. Blocked cesses became a “dead claim” upon abolition in 2015, making cash refund legally impossible. Revenue relied heavily on High Court rulings from Kerala (Muthoot Finance), Madras (Sutherland Global), Delhi (Cellular Operators Association of India) and Rajasthan (Banswara Syntex) — all ruling against the encashment of unutilised cess credits. Given these divergent positions and the nationwide implications for taxpayers, the Bench held that the issue cannot be finalized without authoritative determination by a Larger Bench. The Tribunal has referred the following questions for adjudication: Whether unutilized balances of EC/SHE/KKC as on 30.06.2017 — which could not be transitioned under Section 140 — are refundable in cash under Section 142(3) of the CGST Act? Whether refund claims filed post-GST for such balances are barred by limitation or by Rule 5 of the CENVAT Credit Rules? The tribunal has held that there was no provision under CCR 2004 to either to merge the blocked cesses with Excise Duty/Service Tax or to claim the blocked amounts as refund under Section 11B, even prior to 1.7.2017. Under the earlier statutory provisions, the Rule 5 of CCR 2004 was specifically applicable to refund accruing on account of export of goods and services which has no applicability to result in any refund of the blocked cesses. The CESTAT stated that when the refund is not eligible ab initio the question of granting them under the provisions of CGST Act 2017 cannot arise. Case Details Case Title: M/S. Kei Industries Ltd. Versus Commissioner Of Central Goods & Service Tax & Central Excise-Alwar Case No.: Excise Appeal No. 50090 of 2024 Date: 20.11.2025 Counsel For Appellant: Priyanka Goel, Advocate Counsel For Respondent: Rakesh Agarwal, Shri S. K. Ray and Shri V. J. Saharan Click Here To Read Order Read More: Valid E-Way Bill Shows No Intent to Evade Tax: Allahabad HC Quashes GST Seizure for Undeclared Delivery Address

Cash refund Of Edu Cess, SHE Cess KKC Not Permitted: CESTAT

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