2025 (1) TMI 482 - AT - Service Tax

Denial of refund of Service Tax paid on input services, in pre- GST era on manufacturing of cut and polished diamonds which were exported post commencement of GST regime - Rule, 5 of the CENVAT Credit Rules, 2004 read with Notification No. 41/2012-ST dated 29.06.2012 (2016) - HELD THAT - It is a recognisable fact that Section 42 read with Section 174 of the CGST Act have made it crystal clear that Service Tax paid on inputs or input services before commencement of GST would be dealt by the Finance Act, 1994 and its connected notifications, rules etc. As could be noticed from the order passed by the Refund Sanctioning Authority, it has been clearly mentioned that Appellant/Claimant had issued export invoices after 01.07.2017 i.e. after the appointed day prescribed in CGST Act, 2019. This being the command of law, his finding that received concurrence of the Commissioner (Appeals) that provision of existing law would mean CGST Act is erroneous and contrary to the provision of law and therefore, Claimant s/Appellant s filing of refund applications was made appropriately under the provisions of Finance Act read with Rule, 5 of the CENVAT Credit Rules, 2004, that can t be said to be not maintainable. Since the Commissioner (Appeals) was supposed to pass his order in accordance to Section 35A(4) of the Central Excise Act, 1944, equally applicable to Service Tax matters, in view of operation of Section 85(5) of the Finance Act, 1994 and as no other ground or reason is cited by the Commissioner (Appeals) for refusal of refund, which Appellant is entitled to get the refund as sought under the existing law. Conclusion - Refund claims for taxes paid before the GST rollout should be processed under the existing law, not the CGST Act, 2017. Appeal allowed.

1. ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment include:

Whether the appellant is entitled to a refund of the Service Tax paid on input services for the export of cut and polished diamonds after the commencement of the GST regime.
Whether the refund claims should be processed under the provisions of the erstwhile Service Tax regime or the new GST regime.
Interpretation of the provisions of Section 142(4) and Section 174 of the CGST Act, 2017 concerning the refund of taxes paid under the existing law.
The applicability of the Notification No. 41/2012-ST and the CENVAT Credit Rules, 2004 in the context of the transition to the GST regime.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Entitlement to Refund of Service Tax

Legal Framework and Precedents: The appellant sought a refund under Rule 5 of the CENVAT Credit Rules, 2004, read with Notification No. 41/2012-ST, which allowed for the refund of Service Tax paid by manufacturers exporting goods without payment of duty under bond.
Court's Interpretation and Reasoning: The court examined whether the appellant's refund claims, filed after the GST rollout, should be processed under the Service Tax regime or the GST regime. The court found that the appellant's claims were appropriately filed under the existing law, i.e., the Finance Act, 1994, as the Service Tax was paid before the GST commencement.
Key Evidence and Findings: The court noted that the appellant had paid Service Tax on certification services before the GST rollout and that the exports took place between July 2017 and March 2018.
Application of Law to Facts: The court applied Section 142(4) of the CGST Act, which allows for the disposal of refund claims in accordance with the existing law for taxes paid before the appointed day.
Treatment of Competing Arguments: The respondent argued that the claims should be processed under the CGST Act, 2017, due to the repeal of the Notification No. 41/2012-ST. The court rejected this argument, emphasizing the applicability of the existing law for taxes paid before the GST rollout.
Conclusions: The court concluded that the appellant is entitled to the refund under the provisions of the Finance Act, 1994, and the CENVAT Credit Rules, 2004.

Issue 2: Interpretation of Section 142(4) and Section 174 of the CGST Act

Legal Framework and Precedents: Section 142(4) of the CGST Act provides for the disposal of refund claims for taxes paid under the existing law, while Section 174 deals with the repeal and savings of the existing law.
Court's Interpretation and Reasoning: The court interpreted "existing law" as referring to the law in force before the GST commencement, thus including the Finance Act, 1994, and related notifications.
Key Evidence and Findings: The court found that the claims were filed under the appropriate legal framework, as the taxes were paid before the GST rollout.
Application of Law to Facts: The court applied the provisions of Section 142(4) to determine that the refund claims should be processed under the existing law.
Treatment of Competing Arguments: The respondent's reliance on the Rungta Mines Ltd. judgment was countered by the appellant, who argued that the facts of that case were distinguishable.
Conclusions: The court concluded that the appellant's claims were valid under the existing law and should be processed accordingly.

3. SIGNIFICANT HOLDINGS

Verbatim Quotes of Crucial Legal Reasoning: "This being the command of law, his finding that received concurrence of the Commissioner (Appeals) that provision of existing law would mean CGST Act is erroneous and contrary to the provision of law and therefore, Claimant's/Appellant's filing of refund applications was made appropriately under the provisions of Finance Act read with Rule, 5 of the CENVAT Credit Rules, 2004, that can't be said to be not maintainable."
Core Principles Established: The court established that refund claims for taxes paid before the GST rollout should be processed under the existing law, not the CGST Act, 2017.
Final Determinations on Each Issue: The court allowed all four appeals, set aside the order of the Commissioner of GST & Central Excise (Appeals), and directed the respondent to refund the amount with applicable interest within two months.

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