2024 (10) TMI 625 - AT - Service Tax

Refund of service tax paid under Reverse Charge Mechanism before migrating to GST regime - seeking refund of the amount on the basis that they were otherwise eligible to claim credit of the same, but in view of the introduction of GST, they were not able make use of said amount either in Central Excise/Service Tax or GST - HELD THAT - Appellant has paid the service tax voluntarily under self-assessment. The tax is paid under reverse charge mechanism for the services received by them from the service providers. On perusal of the OIO, it is seen that the Adjudicating Authority has denied refund of credit holding that the service tax has been paid voluntarily and also that no credit is available in GST regime. Section 174(2) of the GST Act says that the amended Act shall not affect any right, privilege, obligation, or liability acquired, accrued or incurred under the amended Act or repealed Acts. It is clear that the liability, if any, under the erstwhile law of Finance Act, 1994 to pay service tax would continue even after the introduction of GST. Conversely, the right accrued under the said Act in the nature of credit available under CCR, 2004 also is protected. In the case of ADFERT TECHNOLOGIES PVT. LTD. VERSUS UNION OF INDIA AND ORS. 2019 (11) TMI 282 - PUNJAB AND HARYANA HIGH COURT it has been held that transitional credit being a vested right, it cannot be taken away on procedural or technical grounds. Section 142(3) of GST Act provides how to deal with claims of refund of service tax of tax and duty/credit under the erstwhile law. It is stated that therein that such claims have to be disposed in accordance with the provisions of existing law and any amount eventually accruing has to be paid in cash - In the present case, there is no allegation that the credit is not eligible to the Appellant. It is merely stated that tax has been paid voluntarily and therefore credit is not available under the GST regime. Though credit is not available as Input Tax Credit under GST law, the credit under the erstwhile Cenvat Credit Rules is eligible to the Appellant. Such credit has to be processed under Section 142(3) of CGST Act, 2017 and refunded in cash to the assessee. In the present case, the claim is only for refund and not proceedings for assessment or adjudication. In such a scenario, only sub-section (3) of Section 142 will be attracted. Rejection of the refund claim by referring to sub-section (8) of Section 142 of CGST Act, 2017 is misplaced. For these reasons, rejection of refund is unjustified. Rejection of refund claim cannot be justified. The impugned order is set aside - Appeal allowed.

Summary

Issues:
1. Appellant's claim for refund of service tax paid under Reverse Charge Mechanism before migrating to GST regime.
2. Interpretation of Repeal and Savings Provision in Section 174(2) of the GST Act.
3. Analysis of Section 142(3) of the GST Act regarding refund claims under the erstwhile law.

Detailed Analysis:
1. The appeal was filed challenging the rejection of the Appellant's claim for refund of service tax paid under Reverse Charge Mechanism (RCM) before migrating to the GST regime. The Appellant deposited service tax under RCM for GTA and Manpower Services in June 2017. The Appellant sought clarification on claiming credit post-GST migration, but the claim was rejected in the Order-in-Original and upheld by the Commissioner (Appeals). The Tribunal reviewed the case.

2. The Appellant argued that their right to avail credit is protected under Section 174(2) of the GST Act, which states that rights acquired under the repealed Acts are preserved. The Appellant relied on the provision to support their claim for refund. The Tribunal considered the provision's implications on the Appellant's situation and its relevance to the refund claim.

3. Section 142(3) of the GST Act was crucial in determining the refund claim process for amounts paid under the erstwhile law. The Tribunal analyzed this section to address the Appellant's claim for refund of service tax paid before GST implementation. The Tribunal emphasized that refund claims under the previous law must be processed and paid in cash, irrespective of the GST regime's credit availability. The Tribunal referred to relevant case laws supporting the Appellant's right to transitional credit and the seamless flow of tax credits.

4. The Tribunal found the Adjudicating Authority's denial of the refund claim unjustified. It highlighted that the Appellant voluntarily paid the tax under RCM and should not be deprived of the credit available under the erstwhile law. The Tribunal emphasized that the rejection of the refund claim based on procedural grounds was unwarranted. Ultimately, the Tribunal set aside the impugned order, allowing the appeal with consequential relief, emphasizing the protection of the Appellant's right to claim refund under the transitional provisions of the GST Act.

5. The Tribunal's decision, delivered on 19th July 2024, upheld the Appellant's right to refund of service tax paid under RCM before migrating to the GST regime, emphasizing the preservation of rights acquired under the repealed Acts and the need to process refund claims under the erstwhile law in cash, as per Section 142(3) of the GST Act.