2021 (9) TMI 1404 - AT - Service Tax

Refund claim under C.G.S.T. upon the introduction of the Central Goods and Services Tax Act, 2017 - Jurisdiction of CESTAT, having been constituted under the Customs Act, 1962, to look into and decide refund claims - difference of opinions - HELD THAT - There are divergent views, which are required to be ironed out by a Larger Bench, in the interests of justice - thus, this is a fit case to be referred to the Larger Bench to decide the following question Whether the CESTAT, having been constituted under the Customs Act, 1962, can look into and decide refund claims under C.G.S.T. upon the introduction of the Central Goods and Services Tax Act, 2017, which is a self-contained code having its own appellate mechanisms? Accordingly, the Registry is directed to place this file before the Hon ble President to consider constitution of a Larger Bench to decide the above question of law.

Issues:
1. Dispute over refund of Service Tax under reverse charge mechanism.
2. Eligibility of availing CENVAT Credit for services received from foreign companies.
3. Rejection of refund claim by lower authorities.
4. Interpretation of provisions of the Central Goods and Services Tax Act, 2017 by CESTAT.

Analysis:

Issue 1: Dispute over refund of Service Tax under reverse charge mechanism
The appellant, engaged in manufacturing automobile parts, entered into service agreements with foreign companies for technical know-how transfer. The appellant availed services since 2009 and discharged Service Tax under reverse charge mechanism. An audit objection was raised regarding short payment of Service Tax, leading to the appellant seeking a refund under Section 142(3) of the CGST Act, 2017. The Department issued a Show Cause Notice proposing to reject the refund claim, alleging lack of eligibility for CENVAT Credit. The Order-in-Original and subsequent appeal rejection were based on the appellant's delayed tax payment, leading to the present appeal.

Issue 2: Eligibility of availing CENVAT Credit for services received
The appellant's eligibility to avail CENVAT Credit for services received from foreign providers was a key contention. The Department disputed the eligibility, leading to the rejection of the refund claim. The appellant contended that they were entitled to the credit under the CENVAT Credit Rules, 2004. The lower authorities rejected the claim citing non-payment of Service Tax in time, deeming it as 'tax arrear' ineligible for CENVAT Credit. The issue of substantiating eligibility for CENVAT Credit was a crucial aspect of the dispute.

Issue 3: Rejection of refund claim by lower authorities
The lower authorities rejected the appellant's refund claim under Section 142(8) of the CGST Act, 2017, as it was based on Section 142(3). The appellant's reliance on previous tribunal orders supporting the refund claim was countered by a contradictory decision by a co-ordinate Hyderabad Bench, which questioned the jurisdiction of CESTAT in interpreting CGST Act provisions. This divergence in views necessitated a reference to a Larger Bench to resolve the issue.

Issue 4: Interpretation of provisions of the Central Goods and Services Tax Act, 2017 by CESTAT
The presiding Member noted the conflicting decisions on the jurisdiction of CESTAT in interpreting or applying CGST Act provisions. The need for a Larger Bench to address the question of whether CESTAT can decide refund claims under CGST Act, given its establishment under the Customs Act, 1962, was highlighted. The decision to refer the matter to a Larger Bench for clarity and consistency in interpreting the law was made in the interest of justice.

This detailed analysis of the judgment highlights the key issues involved in the dispute over the refund of Service Tax under reverse charge mechanism, eligibility for CENVAT Credit, rejection of the refund claim by lower authorities, and the interpretation of CGST Act provisions by CESTAT, leading to the decision to refer the matter to a Larger Bench for resolution.

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