2022 (6) TMI 1134 - AT - Service Tax

Refund of the service tax - no services were provided by the German company and that the amount having been refunded to them, they are not liable to pay service tax under reverse charge mechanism - section 142(3) of CGST Act, 2017 - HELD THAT - It is seen that there is no dispute that the appellant has not paid the service tax on the amount paid by them to the German company. So also there is no dispute that the contract was cancelled and the advance paid by them was returned by the foreign company to the appellant. Section 142(5) of CGST Act, 2017 provides that the refund claim of service tax paid under the existing law in respect of services not provided shall be disposed of under the existing law and has to be paid in cash. It states that such refund is subject to provisions of sub-section (2) of section 11B of Central Excise Act, 1944 only - In the present case, refund has been rejected on the ground of being filed beyond the period of one year as stipulated in sub-section (1) of section 11B. The contract having been annulled on 9.8.2018, it cannot be expected of the appellant to file the refund claim within a period of one year from the date (6.6.2017) of payment of service tax. Further, section 142(5) expressly states that the limitation provided in sub-section (1) of section 11B is not applicable. The Tribunal in the case of PUNJAB NATIONAL BANK VERSUS COMMISSIONER OF CENTRAL TAX, BANGALORE NORTH 2021 (7) TMI 326 - CESTAT BANGALORE had occasion to consider a similar issue as to whether limitation would apply to the refund filed after the introduction of GST, where it was held that appellant is entitled for cash refund in view of Section 142(9)(b) of the CGST Act but for the purpose of verification of original invoices/documents, I remand the case back to the original authority for the limited purpose of verification of the invoices/ documents. The original authority will grant the refund after verification of the document and after following the principles of natural justice. In the case of M/S. PKF SRIDHAR SANTHANAM LLP VERSUS COMMISSIONER OF GST CENTRAL EXCISE, CHENNAI 2021 (10) TMI 1230 - CESTAT CHENNAI , it was held that the department cannot retain any amount which is not collected under the authority of law. When there is no liability to pay the service tax, the amount paid by the appellant cannot be retained by the department. On perusal of section 142(5), it is stated that any amount accruing to the assessee has to be paid in cash notwithstanding anything contrary contained other than the provisions of sub-section (2) of section 11B of the Central Excise Act, 1944. The restriction with regard to limitation is contained in section 11B(1) of the Central Excise Act, 1944. This being the case, the rejection of refund on the ground that it is time-barred cannot be justified - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Refund claim of service tax paid under reverse charge mechanism.
2. Rejection of refund claim as time-barred.
3. Interpretation of Rule 6(3) of Service Tax Rules, 1994.
4. Application of section 142(5) of CGST Act, 2017.
5. Precedents related to refund claims and time limitations.

Analysis:

1. The appellant sought a refund of service tax paid under reverse charge mechanism to a German company for non-invasive prenatal diagnostic test technology transfer. The contract was annulled, and the amount refunded, leading to the refund claim. The appellant argued that as no service was provided, they were eligible for a refund.

2. The original authority and Commissioner (Appeals) rejected the refund claim as time-barred. The appellant filed the claim beyond the stipulated period of one year from the date of payment. However, the appellant contended that the limitation under sub-section (1) of section 11B of the Central Excise Act, 1944 did not apply in this case.

3. Rule 6(3) of Service Tax Rules, 1994 allows recredit of service tax when a service is not provided wholly or partially. The appellant, having paid the service tax under reverse charge mechanism, was considered akin to a service provider in this scenario.

4. Section 142(5) of CGST Act, 2017 mandates the disposal of refund claims for services not provided under the existing law, to be paid in cash. The section explicitly states that the limitation under sub-section (1) of section 11B does not apply. The appellant's refund claim fell under this provision.

5. Precedents such as Punjab National Bank case and PKF Sridhar & Santhanam LLP case were cited to support the appellant's argument for a refund. These cases emphasized the overriding effect of section 142(9)(b) of the CGST Act over the limitations of section 11B(2) of the Central Excise Act, 1944.

In conclusion, the Tribunal allowed the appeal, setting aside the impugned order and granting the appellant the refund claim. The judgment highlighted the applicability of Rule 6(3) and section 142(5) in determining the eligibility for refunds in cases where services were not provided, emphasizing the importance of statutory provisions over time limitations.