2024 (10) TMI 981 - AT - Service Tax

Refund claim - rejection on the ground that the amount paid under RCM is not admissible Rule 9(1)(bb) of CENVAT Credit Rules 2004 and was hence not eligible to be transited as input tax credit in the GST regime as stated in section 142(8)(a) of CGST Act - HELD THAT - It is seen from the Rule that since tax is paid under RCM, the relevant provision is Rule 9(1)(e) ibid and not Rule 9(1)(bb), as evoked in the OIO and the impugned order and hence credit cannot be denied. In POLYGENTA TECHNOLOGIES LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, NASIK-I 2018 (2) TMI 804 - CESTAT, MUMBAI a similar matter was examined by CESTAT Mumbai where it was held that 'It is apparent that the appellant is not service provider and therefore Rule 9(i)(bb) would not be applicable to them. The appellant is paying service tax on reverse chare basis in terms of Rule 2(1)(d) of Service Tax Rules, 1994 and therefore credit can be availed in terms of Rule 9(i)(e) of Cenvat Credit Rules. Since Rule 9(i)(bb) is not applicable to the appellant, the credit cannot be denied.' Transition of credit - HELD THAT - The transition provisions contained under section 142 of CGST Act 2017 allows refund of any amount of CENVAT credit, duty, tax or interest paid under the existing law. As per section 140 of the GST Act, 2017, the appellant was eligible to transfer the amount as TRAN-1 credit. Further the amount was paid on 18/12/2017 and the last date for availment as TRAN-1 credit was on 27/12/2017, the appellant had applied within time. No fraud etc. was alleged, by issuing a SCN, hence the error of non-payment of tax was inadvertent in nature. The rejection of the claim on 21/02/2023 citing non-declaration of the amount in Service Tax returns was hyper technical as the tax was paid after being pointed out by Audit, by which time the CGST law had come into force on 01/07/2017. Section 142(8)(b) also makes it clear that where in pursuance of an assessment or adjudication proceedings instituted, whether before, on or after the appointed day, under the existing law, any amount of tax, interest, fine or penalty becomes refundable to the taxable person, the same shall be refunded to him in cash under the said law - once the credit is found eligible, it is to be refunded in cash. In such a situation the appellant is eligible for refund as per section 142 of CGST Act 2017. In the case of Adfert Technologies Pvt. Ltd. Vs UOI and Others 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. The impugned order rejecting the refund claim is not proper. The same is hence set aside - Appeal allowed.

Summary

Issues:
Refund claim rejection under Rule 9(1)(bb) of CENVAT Credit Rules 2004 and section 142(8)(a) of CGST Act.

Detailed Analysis:

Issue 1: Refund Claim Rejection under Rule 9(1)(bb) of CENVAT Credit Rules 2004
The appellant, engaged in non-banking financial services, paid service tax under reverse charge mechanism. The appellant sought a refund of 50% of the service tax paid, claiming eligibility for CENVAT credit. The department rejected the refund claim on the grounds that the amount paid under RCM was not admissible under Rule 9(1)(bb) of CENVAT Credit Rules 2004. However, the appellate tribunal noted that the relevant provision for credit was Rule 9(1)(e) and not Rule 9(1)(bb). The tribunal cited a similar case where Rule 9(1)(bb) was found inapplicable, emphasizing that the appellant, not being a service provider, was eligible for credit under Rule 9(1)(e). Consequently, the tribunal held that the credit cannot be denied based on Rule 9(1)(bb).

Issue 2: Refund Claim Rejection under section 142(8)(a) of CGST Act
The authorized representative argued that the refund claim was rightly rejected under section 142(8)(a) of the CGST Act, as the service tax paid did not fall under the category of excess or erroneously paid tax. However, the tribunal disagreed, pointing out that the appellant was eligible to transfer the amount as TRAN-1 credit under section 140 of the GST Act. The tribunal highlighted that the tax was paid before the GST law came into force, and the rejection based on non-declaration in service tax returns was hyper-technical. The tribunal referenced section 142(8)(b) of the CGST Act, which allows refund of tax amounts paid under the existing law. The tribunal concluded that since no fraud was alleged, the appellant was eligible for a refund under section 142 of the CGST Act, supported by legal precedents emphasizing the protection of transitional credit rights.

Conclusion:
The appellate tribunal set aside the impugned order rejecting the refund claim, allowing the appeal with consequential relief. The tribunal held that the appellant was entitled to the refund under section 142 of the CGST Act, emphasizing the protection of transitional credit rights and dismissing the technical grounds for rejection.