2021 (12) TMI 736 - AT - Service Tax

CENVAT Credit - consequential refund of Service Tax paid - reverse charge mechanism - HELD THAT - There is no mala fide on the part of the appellant in not depositing the service tax on ocean freight under the reverse charge mechanism. Even otherwise, leviability of service tax on ocean freight has been highly debatable issue, and the same travelled to this Tribunal earlier also in different Appeals as well as before the higher courts. The appellant is entitled to Cenvat credit of the said amount deposited under the erstwhile service tax law. As the Cenvat credit is not available, due to the implementation of GST w.e.f. 1st July 2017, the appellant is entitled to claim refund under the transitional provision of Section 142 (3) of CGST Act. The adjudicating authority is directed to disburse the refund to the appellant within a period of 30 days from the date of receipt of the copy of this order, alongwith interest as per Rules - Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
Entitlement to Cenvat credit and refund of Service Tax paid under reverse charge mechanism.

Analysis:

Issue 1: Entitlement to Cenvat credit and refund of Service Tax paid under reverse charge mechanism
The appeal revolved around the question of whether the Appellant was entitled to Cenvat credit and consequent refund of Service Tax paid under reverse charge mechanism. The Appellant, a manufacturer of poly bags, imported raw materials and faced an audit objection for non-payment of Service Tax under reverse charge mechanism on ocean freight. The audit pointed out the non-payment, leading the Appellant to deposit the service tax amount along with interest. However, the Appellant could not avail Cenvat credit due to the transition to the GST regime. The Revenue contended that the Appellant was not eligible for Cenvat credit or refund under the CGST Act. The Commissioner (Appeal) upheld this decision, citing Section 142(8)(a) of the CGST Act, which restricts input tax credit. The Appellant argued that they were unaware of the levy introduced in April 2017 and missed the payment due to the transition to GST. The Tribunal found no mala fide intent on the Appellant's part and acknowledged the debatable nature of the service tax on ocean freight. Consequently, the Tribunal ruled in favor of the Appellant, allowing the claim for Cenvat credit and refund under the transitional provision of Section 142(3) of the CGST Act. The adjudicating authority was directed to disburse the refund along with interest within 30 days.

This judgment highlights the complexities arising from the transition to the GST regime and the implications on Cenvat credit and refund claims under the CGST Act. It underscores the importance of considering the circumstances surrounding non-compliance and the applicability of transitional provisions in such cases.