2024 (3) TMI 915 - AT - Central Excise

Refund claim - amount was paid in GST era under Reverse Charge Mechanism towards banking and financial service received for expenses made in foreign currency for facilitation of external commercial borrowings (ECB) - time limitation - HELD THAT - The party has not only paid duty of extended period in 3 installments i.e. in April 2018, October, 2018 and November 2018 but has also paid interest and penalty there upon seggregating the three. On this issue, it is found at Commissioner (Appeals) has correctly held that payments made were part of the recovery action under the enforcement done by DGCI and therefore duty, interest and penalty were paid for extended period. It is also found that adjudicating authority whose findings have been endorsed in the impugned order, has correctly held that the amount is paid as part of the recovery action. The input credit or refund of the same cannot be allowed. It is held that in recovery action and when penalties imposed and are discharged and duty paid under extended period, the credit to person who has evaded tax and then paid duty, interest and penalty cannot be allowed - appeal dismissed.

Summary

Issues involved: Refund claim under Reverse Charge Mechanism in GST era, eligibility for CENVAT Credit, voluntary payment of duty vs. recovery action.

Refund Claim under Reverse Charge Mechanism:
- The appellant filed a refund claim of Rs. 36,34,040/- for expenses made in foreign currency for external commercial borrowings during 2013-2017 under section 11B of the Central Excise Act, 1944, defined under CGST Act, 2017.
- The department contended that the payment was part of recovery, not voluntary, and as no service tax under RCM was paid before the GST cutoff date, CENVAT Credit was not available.
- The appellant cited various case laws to support their claim of entitlement to credit for tax paid voluntarily under RCM.

Eligibility for CENVAT Credit:
- The lower authorities emphasized that the payment was part of recovery, not voluntary, and thus, the duty, interest, and penalty paid were not eligible for credit.
- The appellant's argument of entitlement to credit for voluntary payment under RCM was countered by the department's assertion that the payment was made in response to an inquiry, not voluntarily.

Voluntary Payment of Duty vs. Recovery Action:
- The appellant's case was compared to precedents where voluntary payment of service tax under self-assessment was deemed eligible for CENVAT Credit.
- The impugned order highlighted that the duty paid by the appellant was part of recovery proceedings initiated by the DGCEI, and thus, not eligible for refund or credit under Section 142(8)(a) of the CGST Act, 2017.
- The decision underscored that payments made as part of recovery action, including duty, interest, and penalty, cannot be allowed for credit to a party who evaded tax and then paid under enforcement action.