CESTAT Ahmedabad Allows Refund of CVD & SAD in GST Era – Big Relief for Advance Authorization Importers

ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 13.02.2026

CESTAT Ahmedabad Allows Refund of CVD & SAD in GST Era – Big Relief for Advance Authorization Importers

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The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), West Zonal Bench, Ahmedabad, recently delivered a significant judgment in the case of Kiri Industries Limited vs. Commissioner of Customs, Ahmedabad (Customs Appeal No. ​ 10353 of 2020-SM). This case revolved around the refund claim of Rs. ​ 24,12,483/- filed by Kiri Industries Limited under Section 27 of the Customs Act, 1962, for Countervailing Duty (CVD) and Special Additional Duty (SAD) paid on MEIS Scrips. ​ The judgment, pronounced by Hon’ble Member Judicial, on February 12, 2026, has set a precedent for similar cases in the GST regime.

Background of the Case

Kiri Industries Limited filed a refund claim under Section 27 of the Customs Act, 1962, for CVD/SAD paid on excess import quantity of raw materials under Advance Authorization Licenses. ​ The company argued that prior to July 1, 2017, CENVAT credit for such duties was available under the pre-GST regime. ​ However, with the implementation of GST, no credit of such duties was available, prompting the company to seek a refund of Rs. ​ 24,12,483/-.

The refund claim was initially rejected by the Adjudicating Authority (Joint Commissioner) on the grounds that the non-availability of input tax credit under the GST regime does not qualify as a valid reason for claiming a refund under Section 27 of the Customs Act, 1962. ​ The authority also cited the principle of unjust enrichment as another reason for rejection. ​ Subsequently, the Commissioner (Appeals) upheld the decision, leading Kiri Industries Limited to file an appeal before the CESTAT.

Key Arguments Presented

Appellant’s Arguments

1. Provisions of Section 142 of CGST Act, 2017: The appellant argued that Section 142(3) and 142(6)(a) of the CGST Act, 2017, explicitly provide for the refund of CVD/SAD paid under the pre-GST regime in cash if the credit is no longer available under the GST regime. ​ The appellant contended that the department failed to consider these provisions while rejecting the refund claim. ​
2. Unjust Enrichment: The appellant submitted that the concept of unjust enrichment was not applicable in this case. ​ They provided a certificate from a Chartered Accountant confirming that the incidence of CVD paid on excess imported raw materials was not passed on to any other party. ​ Additionally, the refund amount was disclosed as receivable in the balance sheet and not claimed as an expenditure in the Profit and Loss Account. ​
3. Supporting Judgments: The appellant cited several judgments, including JSW Steel Limited vs. Commissioner of Central Tax & Central Excise and Granules India Limited vs. Commissioner of Central Tax, Hyderabad, which supported their claim for a refund under Section 142(3) of the CGST Act, 2017. ​

Department’s Arguments

1. Non-Admissibility of Refund: The department argued that the refund claim was not admissible under Section 27 of the Customs Act, 1962, as the duties were paid correctly in accordance with the relevant provisions of the Foreign Trade Policy and Customs Notifications. ​
2. Unjust Enrichment: The department raised concerns about unjust enrichment, suggesting that the appellant might have passed on the incidence of CVD/SAD to other parties. ​
3. Pending Supreme Court Appeal: The department highlighted that an appeal against a similar judgment in the Granules India Limited case was pending before the Hon’ble Supreme Court. ​

CESTAT’s Observations and Judgment ​

After hearing both sides, the Tribunal made the following observations:

1. Applicability of Section 142 of CGST Act, 2017: The Tribunal emphasized that Section 142(3) and 142(6)(a) of the CGST Act, 2017, provide for the refund of CVD/SAD paid under the pre-GST regime in cash if the credit is no longer available under the GST regime. ​ The Tribunal referred to previous judgments, including JSW Steel Limited vs. Commissioner of Central Tax & Central Excise and Granules India Limited vs. Commissioner of Central Tax, Hyderabad, which upheld similar refund claims.
2. Unjust Enrichment: The Tribunal found that the appellant had sufficiently demonstrated that the concept of unjust enrichment was not applicable in this case. ​ The Chartered Accountant’s certificate and financial disclosures provided by the appellant were deemed adequate to establish that the incidence of CVD/SAD was not passed on to other parties. ​
3. Legal Precedents: The Tribunal noted that the department’s reliance on the Sarvo Packaging Limited case was misplaced, as subsequent judgments, including Sri Chakra Polyplast India Private Limited, had departed from this decision. ​ The Tribunal also highlighted the principle that later judgments hold greater precedent value. ​

Final Decision

The Tribunal concluded that the learned Commissioner (Appeals) had failed to correctly interpret the provisions of Section 142(3) and 142(6)(a) of the CGST Act, 2017. ​ It held that the refund application filed by Kiri Industries Limited was in accordance with the law and should have been allowed. The appeal was thus allowed, and the appellant was granted consequential relief. ​

Key Takeaways

1. Importance of Section 142 of CGST Act, 2017: This case underscores the significance of Section 142 in addressing refund claims for duties paid under the pre-GST regime. ​ It clarifies that refunds of CVD/SAD paid before July 1, 2017, but not utilized due to the transition to GST, are eligible for cash refunds. ​
2. Unjust Enrichment: The judgment highlights the importance of providing adequate evidence, such as financial disclosures and certificates from Chartered Accountants, to counter claims of unjust enrichment. ​
3. Legal Precedents: The Tribunal’s reliance on recent judgments demonstrates the evolving nature of legal interpretations and the importance of staying updated on case law. ​

Conclusion

The decision in Kiri Industries Limited vs. Commissioner of Customs, Ahmedabad is a landmark ruling that provides clarity on refund claims under the CGST Act, 2017. It reinforces the principle that taxpayers are entitled to refunds of duties paid under the pre-GST regime if they are unable to avail credit under the GST framework. ​ This judgment is expected to have a significant impact on similar cases and serves as a guiding precedent for taxpayers and legal practitioners navigating the complexities of tax refunds in the post-GST era.

Source: CESTAT Ahmedabad

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