2022 (3) TMI 1100 - AT - Service Tax

Refund of services tax / Cenvat Credit - tax deposited under reverse charge mechanism, pursuant to audit objection - revenue neutrality - Post GST regime - HELD THAT - The payment of service tax including the cess relating to the period prior to 30.06.2017, paid in the year 2018 during the GST regime, amounts to payment in accordance with law as the same has been paid on the insistence by the Department audit objection. Further, it is found that the demand pursuant to audit is also bad as the appellant was entitled to cenvat credit being a manufacturer of dutiable items, and as such the situation is revenue neutral. Further, the appellant under the erstwhile Cenvat Credit Rules was entitled to cenvat credit of the said amount - Further, in view of the provisions of Section 142(3) of CGST Act, provides that every claim for refund filed by any person before, on or after the appointed day, for refund of any amount of cenvat credit, duty, tax, interest or any other amount paid under the existing law, shall be disposed of in accordance with the provisions of existing law and any amount eventually accruing to him shall be paid in cash, notwithstanding anything to the contrary contained under the provisions of existing law other than the provisions of sub-section (2) of Section 11B of the Central Excise Act, 1944 (unjust enrichment). From a conjoint reading of sub-section (3), (5) and (8)(a) of the CGST Act, it is evident that an assessee is entitled to claim refund of service tax under RCM paid after the appointed day under the existing law and such claim has to be disposed of according to the provisions of the existing law. As the appellant was entitled to cenvat credit of the said amount of ₹ 9,85,827/-, which is now no longer available due to GST regime, they are entitled to refund of the said amount. The Adjudicating Authority is directed to grant refund of the said amount to the appellant within a period of 45 days from the date of receipt of copy of this order alongwith interest as specified under Section 11BB of the Central Excise Act - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Rejection of refund claim for service tax paid under reverse charge mechanism.
2. Applicability of refund provisions under the CGST Act.
3. Entitlement to cenvat credit and refund under the existing law.

Analysis:
The appeal centered on the rejection of a refund claim amounting to ?9,85,827 for service tax paid under the reverse charge mechanism. The appellant, engaged in manufacturing dutiable goods, faced an audit objection for not including PF amount in the assessable value for service tax payment on 'Manpower Supply Agency Service'. Despite depositing the tax amount as per audit findings, the refund claim was denied, stating that the tax was not overpaid.

Upon further review, the Commissioner (Appeals) highlighted that the appellant's payment of service tax under reverse charge mechanism post-GST implementation did not automatically entitle them to cenvat credit. The provisions of Section 142(6)(a) and Section 142(8) of the CGST Act were cited to support the denial of the refund claim, especially concerning the admissibility of cenvat credit and transitional provisions related to cess.

The Tribunal, after hearing both parties and examining the record, delved into the legal framework. Referring to Section 142(3), (5), and (8)(a) of the CGST Act, it was established that the appellant, having been eligible for cenvat credit under the previous regime, could claim a refund under the existing law for the amount paid. The Tribunal emphasized that the appellant's entitlement to cenvat credit, no longer available under the GST regime, justified the refund claim of ?9,85,827.

In conclusion, the Tribunal allowed the appeal, overturning the previous decision, and directed the Adjudicating Authority to refund the amount to the appellant within 45 days, along with applicable interest as per Section 11BB of the Central Excise Act. This ruling underscored the appellant's right to claim a refund based on their entitlement to cenvat credit under the previous law, despite the transition to the GST regime.