2025 (2) TMI 1111 - AT - Service Tax

Entitlement to Cash Refund - Denial of refund of Cenvat credit of service tax paid on Ocean Freight under RCM after onset of the GST regime - applicability of Section 11B of the Central Excise Act 1944 read with Section 142(3) and Section 174(2)(c) of the CGST Act 2017. Rejection of refunds on the grounds that Cenvat credit ceased to exist on 01.07.2017 and therefore the service tax so paid is not admissible as Cenvat credit post 01.07.2017 and that service Tax paid in financial year 2018-19 for pre-GST regime cannot be considered for refund under Section 142(3) of the CGST Act because it deals with the refund of the amount of Cenvat credit paid as on 30.06.2017. HELD THAT - Reference made to the decision of the CESTAT Hyderabad in the case of CAD Vision Engineers Pvt Ltd. Vs. Commissioner of Customs Central Tax (Appeals-I) 2024 (5) TMI 72 - CESTAT HYDERABAD wherein identical issue was raised and decided by considering the various decisions of the Tribunal as well as the High Court of Jharkhand in the case of Rungta Mines 2022 (2) TMI 934 - JHARKHAND HIGH COURT by the Ld. DR. It was held in the said case that the provision of Section 142(3) does not entitle a person to seek refund where no such rights occur under the existing law or new CGST regime in terms of provision of CGST Act and the rules framed and notification issued thereunder. Meaning thereby Section 142(3) does not confer a new right which never existed under the old regime to the manner of giving relief if the person is not entitled under the existing law. Conclusion - There was no provision under the existing law or the GST Act that entitled the appellant to a cash refund of unutilized Cenvat credit. The appellant s claims for cash refunds of service tax paid under RCM post-GST implementation rightly denied. Appeal dismissed.

ISSUES PRESENTED and CONSIDERED

The core legal question considered in this judgment is whether the appellant is entitled to a cash refund of service tax paid under the Reverse Charge Mechanism (RCM) after the implementation of the GST regime, specifically under Section 142(3) read with Section 174(2)(c) of the CGST Act, 2017. The Tribunal also considered whether the appellant's right to claim Cenvat credit, which was accrued under the pre-GST regime, is protected and can be refunded in cash post-GST implementation.

ISSUE-WISE DETAILED ANALYSIS

Relevant Legal Framework and Precedents

The legal framework involves the provisions of the Central Excise Act, 1944, the Cenvat Credit Rules, 2004, and the CGST Act, 2017. Specifically, Section 142(3) of the CGST Act deals with the refund of Cenvat credit and other amounts under the pre-GST laws, while Section 174(2)(c) addresses the repeal and savings of rights and obligations under the repealed laws. Relevant precedents include various decisions from CESTAT and High Courts, such as the Jharkhand High Court decision in Rungta Mines Limited and CESTAT decisions in cases like CAD Vision Engineers Pvt Ltd and others.

Court's Interpretation and Reasoning

The Tribunal interpreted that the transitional provisions under the GST regime, particularly Section 142(3), do not independently create a right to claim a refund of unutilized Cenvat credit unless such a right existed under the pre-GST laws. The Court emphasized that Section 142(3) is an enabling provision for processing refunds in cash but does not itself grant a new substantive right to a refund. The Tribunal relied on the interpretation that Section 174(2)(c) preserves existing rights but does not create new ones.

Key Evidence and Findings

The Tribunal found that the appellant had paid service tax under RCM after the GST implementation and sought a refund of this amount in cash, citing the protection of rights under Section 174(2)(c). However, the Tribunal noted that the appellant did not carry forward the Cenvat credit using the transitional provisions under the GST Act, such as Section 140, which allows for the carry forward of eligible credits.

Application of Law to Facts

The Tribunal applied the provisions of the CGST Act and the precedents to determine that the appellant's claim for a cash refund was not admissible. The Tribunal emphasized that the refund of Cenvat credit must be processed according to the existing law, which did not provide for a cash refund of unutilized credit in the circumstances presented by the appellant.

Treatment of Competing Arguments

The appellant argued that their right to claim a refund was preserved under Section 174(2)(c) and supported by various case laws. However, the Tribunal found these arguments unpersuasive, noting that the cited cases did not directly address the issue of cash refunds for unutilized Cenvat credit in the context of the GST transition. The Tribunal gave weight to the decisions supporting the view that Section 142(3) does not create new refund rights.

Conclusions

The Tribunal concluded that the appellant was not entitled to a cash refund of the service tax paid under RCM after the GST implementation. The Tribunal upheld the orders of the lower authorities rejecting the refund claims.

SIGNIFICANT HOLDINGS

The Tribunal held that "Section 142(3) does not confer a new right which never existed under the old regime to the manner of giving relief if the person is not entitled under the existing law." This principle underscores that transitional provisions do not create new substantive rights but preserve existing ones.

The Tribunal determined that there was no provision under the existing law or the GST Act that entitled the appellant to a cash refund of unutilized Cenvat credit. The Tribunal relied on the Jharkhand High Court's interpretation in Rungta Mines, which clarified that Section 142(3) does not create new rights for refunds.

In conclusion, the Tribunal dismissed the appeals, affirming the decisions of the Commissioner (Appeals) and denying the appellant's claims for cash refunds of service tax paid under RCM post-GST implementation.

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