2021 (6) TMI 510 - AT - Service Tax

Refund of unutilized CENVAT Credit - rejection of refund on the ground that credit was transferred to GST regime through TRAN-1 - HELD THAT - Originally when the appellant filed the refund claim of ₹ 43,91,346/- under Notification No.05/2006, the same was partially allowed to the extent of ₹ 11,92,412/- and the original authority rejected the refund of ₹ 31,98,934/- only on the ground of time bar. The original authority took more than 4 years to decide the refund claim of the appellant and in the meantime GST Law has come into force. Now, the appellant filed the appeal before the Commissioner (Appeals) but as on the date of filing the appeal before the Commissioner, the appellant was uncertain about the outcome of the Order-in-Appeal and the due date to file TRAN-1 was fast approaching therefore the appellant decided to transfer the credit into TRAN-1 otherwise the appellant would have lost the entire credit if the same was not transferred into TRAN-1. Subsequently, the Commissioner (Appeals) remanded the matter back to the original authority with certain directions to examine the refund claim of the appellant on merits keeping in view the decisions of the Tribunal and the Circular No.120/2010 issued by the Board - the Commissioner (Appeals) has wrongly considered the claim under Notification No.27/2012 instead of Notification No.05/2006, it is pertinent to note that under Notification No.05/2006, the requirement for debiting the refund claim amount did not exist. Further, I find that it is not a case that the appellant has carried forward ineligible credit into TRAN-1. The credit so transferred by the appellant were eligible credit; the refund was rejected on the ground of time bar and subsequently rejected under GST by invoking the Section 142(3) of the CGST Act 2017. Matter remanded back to the original authority with a direction that TRAN-1 credit taken by the appellant be directed to be reversed and thereafter the original authority will consider the directions given - appeal allowed by way of remand.

Summary

Issues:
Appeal against rejection of refund claim under Service Tax Registration for Information Technology Software Services for the period February 2012 to March 2012. Original authority rejected refund on grounds of credit not pertaining to claim period, non-debiting of refund amount, and transfer of credit to GST regime through TRAN-1. Appellant contested rejection citing legal precedents, time bar limitations, and misinterpretation of Notification No.05/2006. Commissioner (Appeals) remanded the matter, but subsequent rejection upheld. Dispute arose due to delay in adjudication, uncertainty during appeal filing, and credit transfer to TRAN-1.

Analysis:
The appellant filed a refund claim under Notification No.05/2006 for &8377; 43,91,346, but only &8377; 11,92,412 was allowed, with the rest rejected due to time bar. The delay in deciding the claim led to GST implementation, prompting the appellant to transfer credit to TRAN-1 to avoid losing it. The Commissioner (Appeals) remanded the case, but the original authority rejected the refund beyond the scope of the show cause notice (SCN), invoking Section 142(3) of CGST Act 2017. The rejection was based on failure to debit the CENVAT credit account and misapplication of Notification No.27/2012 instead of No.05/2006. Legal precedents cited by the appellant supported the argument that orders beyond SCN scope are unsustainable.

The Tribunal found the rejection unsustainable, remanding the matter to the original authority. It directed reversal of TRAN-1 credit and consideration of the refund claim as per Commissioner (Appeals) directions and Tribunal decisions within 3 months. The Tribunal highlighted misinterpretations, time bar issues, and the appellant's predicament during the appeal filing process. The decision aimed to rectify procedural errors, ensure proper consideration of the claim, and address the impact of the delayed adjudication on the appellant's position.