A refund claim withdrawn before adjudication does not bar carry-forward of CENVAT credit under GST.

The appellant, a 100% Export Oriented Unit, filed a claim for refund of ₹66,97,395 in accumulated CENVAT credit under Rule 5 of the CENVAT Credit Rules, 2004.

After the department raised deficiencies, the appellant asked to withdraw the refund claim and subsequently carried the credit forward to its GST account through Form TRAN-1.

The adjudicating authority nevertheless rejected the refund claim; the Commissioner (Appeals) upheld the rejection and directed recovery of the transitional credit with interest.

The appellant appealed, contending, among other things, that the refund claim had been withdrawn and that the credit had not been found ineligible.

Whether the appellant could withdraw its refund claim before final adjudication and retain and carry forward the accumulated CENVAT credit through TRAN-1.

Whether the direction to reverse the transitional credit, with interest, was sustainable where no allegation or finding established that the underlying CENVAT credit was ineligible.

Whether the refund claim’s alleged delay or deficiencies justified treating it as filed only when complete documents were submitted.

Section 140 of the CGST Act, 2017 provides for the transitional carry-forward of eligible existing CENVAT credit, while Section 142(3) governs the disposal of refund claims relating to amounts under the existing law; its provisos address the consequences of rejection and the bar on refund where the relevant credit balance has been carried forward under the GST Act.

Rule 5 of the CENVAT Credit Rules, 2004 and Notification No. 27/2012-CE (NT) concern refund of accumulated credit and related conditions.

The Tribunal held that a refund claim is a voluntary statutory remedy that may be withdrawn before final adjudication; upon withdrawal, the claim is non est, and the claimant may retain and carry forward the credit, absent a valid finding that the credit itself is ineligible.

The Tribunal accepted that the appellant had requested withdrawal before the refund claim was finally adjudicated and had thereafter carried the credit forward through TRAN-1.

It considered that neither the show-cause notice nor the impugned order alleged or found the underlying CENVAT credit to be ineligible.

In those circumstances, rejection of the refund claim could not, by itself, support recovery of the carried-forward credit and interest.

The Tribunal also observed that the department’s treatment of the claim as filed only upon submission of complete documents did not establish delay, since the claim had earlier been submitted.

Its final reasoning, however, rested on the withdrawal of the claim and the absence of any finding of credit ineligibility.

It set aside the direction to reverse the transitional credit and pay corresponding interest, and allowed the appeal with consequential relief, if any, as per law.