M/s. Newtech Filter India Pvt. Ltd. Village Bairsen, Manjholi, Nalagarh, Distt. Solan, Himachal Pradesh (for brevity ‘the Appellants’) has filed the present appeal against the Sanction Order under Budgetary Support No. 34/AC/R/BS/Baddi/2017-18, dated 2-7-2018 (for brevity ‘the impugned orders’) passed by the Assistant Commissioner, Goods & Service Tax Division, Baddi (for brevity ‘the adjudicating authority’). Accordingly, I take up the appeal for decision.

2. Briefly stated, that the appellants were registered with the Department vide GSTIN No. 02AAECM5320Q1ZG. On 6-2-2018, the appellant had filed an application for Budgetary Support with the jurisdictional CGST office for an amount of ₹ 20,77,779/- for the quarter July, 2017 to September, 2017. The claim had been filed under the “Scheme of Budgetary Support under Goods and Services Tax regime to the units located in States of Jammu & Kashmir, Uttara-khand, Himachal Pradesh and North East including Sikkim” notified vide Notification dated 5-10-2017 (Published in the Gazette on 11-10-2017) issued by Ministry of Commerce and Industry (Department of Industrial Policy and Promotion) under F. No. 10(l)/2017-DBA-II/NER. The appellant had filed the claim as per proforma provided in the Central Board of Excise and Customs Circular No. 1060/9/2017-CX, dated 27-11-2017.

3. As per the provisions of Circular No. 1060/9/2017-CX, dated 27-11-2017, the appellants filed request for registration under Budgetary Support with the Assistant Commissioner, GST Division Baddi. It was, inter alia, stated that they had filed declaration with the then Deputy/Assistant Commissioner, Central Excise Division, Shimla on 27-3-2009, opting for exemption in terms of Notification No. 50/2003-C.E., dated 10-6-2003, mentioning wherein it had been mentioned that the date of commencement of commercial production of the unit w.e.f. 30-7-2009 had been taken on record. Accordingly, in terms of Board’s Circular dated 27-11-2017, Registration No. 04/GST Baddi/GST Shimla/02AAECM5320Q1ZG was issued to the appellants.

4. The jurisdictional Range Officer vide his report dated 22-6-2018 had reported that the appellants were eligible for budgetry support for specific goods and verified the refund claim. The range officer further reported that the budgetary support in respect of tax paid on RCM was not available. Therefore, net IGST payable in cash comes out to be ₹ 24,17,441/- on which budgetary support available @ 29% was ₹ 7,01,058/- and no tax in respect of CGST required to be paid in cash and hence no budgetary support admissible in respect of CGST. Accordingly, an amount of ₹ 7,01,058/- Was recommended for sanction and an amount of ₹ 9,87,558/- was recommended for rejection in respect of IGST. Further, an amount of ₹ 3,80,183/- claimed by the appellant in respect of CGST, was also recommended for rejection.

5. Accordingly, the adjudicating authority vide the impugned order sanctioned provisionally budgetary support amounting to ₹ 7,01,058/- to the appellant and ordered the same to be paid through PFMS in the bank account. The adjudicating authority further rejected the refund claim of an amount of  ₹ 9,87,558/- towards IGST and ₹ 3,80,183/- claimed in respect of CGST.

6. Being aggrieved, the appellants have filed the instant appeal against the impugned order on the grounds which inter alia are summarized as under :

• That regarding disallowance of tax paid on RCM basis – clause No. 5.1 of the notification issued by Ministry of Commerce and Industry dated 5 October, 2017 deals with determination of the amount of Budgetary Support which states that the amount which had been paid by the appellant in cash through cash ledger after utilization of input tax credit of Central Tax and Integrated Tax should be considered as eligible for refund and there was no restriction on the eligibility of refund in respect to amount paid under RCM.
• That under GST laws, the amount pertaining to RCM had to be mandatorily paid in cash, the appellant had accordingly paid same in cash and thus the same should be considered as eligible for refund.
• That the amount of the total tax payable on eligible goods sold remains same due to Reverse Charge Mechanism and it’s only the nomenclature of the tax which changes i.e. from normal tax to RCM.
• That as per GST laws, the taxpayers has to first pay the amount of tax payable on RCM basis in cash and can take the input tax credit of eligible amount of RCM in the same month. Thus, there was no difference in the actual amount of tax payable in respect of the eligible goods in cash on the taxpayer.
• That regarding disallowance of refund due to input credit amounting to ₹ 9,29,954/- appearing in the electronic credit ledger at the end of the quarter July-September, 2017, The ground was not correct as the balance lying after filing of return for the month of September was because of TRAN credit as per the provisions of the GST laws in respect of transitional credit.
• That the appellants had utilized the entire credit available while filing return for the month of July, 2017 and August, 2017 and paid the balance amount in cash. Accordingly, the appellant should be allowed the refund of the amounts paid in cash as per the scheme of budgetary support.
• That input credit available at the end of the quarter was mainly due to TRAN credit taken by the appellant on 26 September, 2017 which was not available for utilization in the month of July & August, 2017 to settle the Liability.
• That the amount of refund claim filed by the appellants primarily pertains to tax paid by the appellant for the month of July, 2017 and August, 2017, Accordingly, the same was a hardship on the appellants that despite paying tax on time and complying to all the provisions of the law, the amount of refund had been disallowed by the tax authorities merely due to procedural defects in the manner of scheme of refunds i.e. filing of application on quarterly basis instead of month basis.
• Further, the amount of credit which was appearing at the end of the quarter primarily due to Transitional credit which had been subsequently utilized by the appellants in the future tax payments and accordingly, reduced the refund for the quarter ended 31 December, 2017.

7. Personal hearing in the case was held on 7-1-2019 and Sh. Pankaj Gupta CA appeared on behalf of the Appellants and put his party’s claim positively. In month of July & August they paid duty of GST through cash & they filed TRAN-1 on 26th Sep., 2017. After taking credit of TRAN-1 into consideration they paid duty for the month of Sep., 2017 through TRAN-1 credit available into account Shri Gupta has view that for the month of July & August, 2017 they had paid from their pocket this is not allowed in refund. This should be allowed because if technically it would have condition for month wise filing of refund claim then they were eligible for refund for the month of July & August w.r.t. to Reverse Charge Mechanism liability this was not under DIPP’s refund benefit. He has nothing to add.

8. I have carefully gone through the facts of case, Sanction Order, Grounds of Appeals as well as the submissions put forth by the appellants at the time of personal hearing, The issue before me to be decided in the case is whether under the provisions of Scheme of Budgetary Support the appellants are entitled to the refund of tax paid in cash under Reverse Charge Mechanism and secondly whether the appellants are entitled to refund based on unutilized tax credit at the end of the quarter July, 2017 to September, 2017.

9. I find that the appellants are registered with the jurisdictional authorities of the department of CGST under the “Scheme of Budgetary Support under Goods and Service Tax regime to the units located in States of Jammu & Kashmir, Uttarakhand, Himachal Pradesh and North East including Sikkim” notified vide Notification dated 5-10-2017 (Published in the Gazette on 11-10-2017) issued by Ministry of Commerce and Industry (Department of Industrial Policy and Promotion) under F. No. 10(1)/2017-DBA-II/NER. Under the said scheme the appellant had filed the claim with the jurisdictional CGST authorities and out of the total claim of the appellants, the adjudicating authority had provisionally sanctioned the refund of ₹ 7,01,058/- and rejected the claims of  ₹ 13,76,741/- for the quarter July, 2017 to September, 2017 on the two issues. The adjudicating authority has sanctioned the provisional budgetary support to the appellant in terms of the para (vi) of para 9 of the Circular No. 1060/9/2017-CX, dated 27-11-2017 since no inspection report was received from the DIPP in this regard.

10. Regarding first issue where refund of the appellants was rejected by the adjudicating authority I find that the Government of India vide Notification No. 10/2017-Integrated Tax (Rate), dated 28th June, 2017 notified the payment of IGST on reverse charge basis i.e. for certain category of supply of services tax liability has been shifted on the recipient of services to be paid in cash and under the said scheme the tax paid can be claimed as credit in their book of accounts for utilising the same for discharging their outward tax liabilities. Hence, I observe that the tax paid under Reverse Charge Mechanism cannot be treated as duty paid under the forward charge i.e. outward tax for claiming the refund of the same under the scheme of Budgetary Support. As such the plea of the appellant does not hold good inasmuch as every payment made in cash has to be treated as tax paid in cash, whereas in this scenario the tax paid on behalf of other person’s liability is available in the form of Cenvat credit. Hence, the adjudicating authority has correctly rejected the claim of the appellants on this issue and I do not find any infirmity in the impugned order.

11. Further, I find that the adjudicating authority has also rejected appellants claim on the ground that they had balance in TRAN-1 by the end of the quarter i.e. July, 2017 to September, 2017. In this regard I observe that the Scheme of Budgetary Support was introduced by the Ministry of Commerce and Industry vide their Notification dated 5-10-2017 followed by the Central Board of Excise & Customs Circular dated 27-11-2017 whereunder it has been made amply clear that the said scheme has been worked out on quarterly basis for which claims shall be filed on a quarterly basis (Para 5.4 of the Notification). Further Para 7.1 of the Notification dated 5-10-2017 reads as under :

“The manufacturer shall file an application for payment of budgetary support for the tax paid in cash, other than the amount of Tax paid by utilization of Input Tax Credit under the Input Tax Credit Rules, 2017, to the Assistant Commissioner or the Deputy Commissioner of Central Taxes, as the case may be, by the 15th day of the succeeding month after end of quarter after payment of tax relating to the quarter to which the claim relates.”

The jurisdictional Deputy/Assistant Commissioner shall ensure that the budgetary support is limited to the tax paid in cash after utilisation of the input tax credit on the specified goods manufactured by the eligible unit {Para 9(iii) of the Board’s Circular}.

12. In view of the above provisions of the Scheme it is quite evident that the refund under budgetary support can only be filed after the end of the quarter from the tax amount paid in cash once the entire credit is exhausted and not on monthly basis as has been pleaded by the appellant in the grounds of appeal. Moreover, I find that even the jurisdictional Range Officer in his report has categorically mentioned that at the end of the quarter the appellant had balance in their credit account and the claim of the refund on this account was not recommended for sanction. Accordingly, the adjudicating authority has correctly rejected the claim of the appellant in view of the provisions laid down in the scheme of budgetary support ibid. I do not find any infirmity in the impugned order and the same is upheld. As such the plea of the appellant mentioned in the grounds of appeal that on monthly basis they had no credit balance during the month of July 17 & August 17 is not tenable inasmuch as the refund under the scheme has to be assessed in view of the prescribed procedure i.e. the refund application is to be made on quarterly basis and accordingly refund is to be sanctioned on quarterly basis only.

13. Further, the appellant has pleaded that the amount of credit which was appearing at the end of the quarter primarily due to Transitional credit which had been subsequently utilized by the appellants in the future tax payments and accordingly, reduced the refund for the quarter ended 31 December, 2017, does not hold good because for any reason once the balance of credit figures out in the records of the appellant, the tax in cash during the said quarter is to be paid only once the entire credit has been exhausted in view of the provisions of the Scheme of Budgetary support. The refund has been correctly rejected by the adjudicating authority and I uphold the same.

14. Further, I also find that the Central Board of Indirect Taxes & Customs vide Circular No. 1068/1/2019-CX, dated 10-1-2019 while reviewing the progress of implementation of scheme of Budgetary Support to eligible industrial units has clarified in Para 9 as under :

“The support under the scheme is in the nature of grant and not refund of duty under taxation law. As such there is no requirement for any appellate forum as the decision of the sanctioning authority is final.”

The above said clarification given by the Board has made the things more clear in as much as the decision of the sanctioning authority is final and there is no requirement for any appellate forum to take a conclusion on the sanction order once passed by the sanctioning authority. As such, I hold that the adjudicating authority has correctly concluded the order under the provisions of budgetary support.

15. In view of the above, the appeal filed by the appellant is rejected and the impugned order passed by the adjudicating authority is upheld.