2021 (7) TMI 326 - AT - Service Tax

Refund of service tax - Transition of credit to GST - rejection of refund claim on the ground of non-submission of document - also refund claim was filed after the expiry of relevant date - Section 11B of the Central Excise Act - HELD THAT - Initially the appellant filed the ST-3 returns on 31/08/2017 for the period from April 2017 to June 2017 and utilized the entire cenvat credit and the closing balance was nil and in the transitional return in form GST Tran-1, he filed the nil value and did not carry forward any unutilized balance of cenvat credit. Subsequently, he realized that he did not avail the cenvat credit and KKC totally amounting to ₹ 16,50,384/- and filed a revised return in view of Section 142(9)(b) of CGST Act, 2017 but the original authority issued to the appellant, a show-cause notice proposing to deny the refund for non submission of documents and on the ground of limitation under Section 11B of the Central Excise Act. It is found that after the reply to the show-cause notice, appellant reduced the claim of cenvat credit for refund to the tune of ₹ 15,74,893/- by surrendering some amount of cenvat credit and KKC and restricted the refund to ₹ 15,74,893/-. Further both the authorities have not considered the submissions of the appellant that primarily the appellant is claiming the refund of cenvat credit in terms of Section 142(9) (b) of the CGST Act, 2017. Both the authorities have held that refund is time-barred in view of Section 11B of the Central Excise Act, 1944. The words notwithstanding anything contrary contain in said law means that the provisions of this Section will prevail over provisions of existing law except provision of Section 11B(2) of Central Excise Act, 1944. The Section 11B(2) of Central Excise Act, 1944 contains provisions relating to granting of refund in case of unjust enrichment. Thus, as far as conditions of Section 142(9)(b) of CGST Act, 2017 is concerned, the appellant has fulfilled the said conditions and hence is entitled for refund - it is a settled law that whenever two options are available, the assessee may choose the option which is more beneficial for them and in the present case the assessee/appellant has chosen to file the refund claim under Section 142(9)(b) of CGST Act, 2017 which has a overriding effect over Section 11B of Central Excise Act, 1994. The appellant did not choose to carry forward the credit in Tran-1 and preferred to claim cash refund as provided under Section 142(9) (b) of CGST Act, 2017. The impugned order holding that appellant is entitled for cash refund in view of Section 142(9) (b) of the CGST Act is set aside - case remanded back to the original authority for the limited purpose of verification of the invoices/documents - appeal allowed by way of remand.

Summary

Issues:
1. Time limit for filing refund claim under Section 11B of the Central Excise Act.
2. Entitlement for refund of cenvat credit under Section 142(9)(b) of the CGST Act, 2017.
3. Applicability of Rule 117 and 120A of the CGST Rules, 2017.
4. Validity of invoking new grounds beyond show-cause notice and Order-in-Original.

Analysis:

Issue 1: Time limit for filing refund claim under Section 11B of the Central Excise Act
The appellant initially filed service tax returns but later realized an error in availing cenvat credit. The refund claim was rejected by the original authority and Commissioner (Appeals) citing time-bar under Section 11B of the Central Excise Act. However, the appellant argued that Section 142(9)(b) of the CGST Act, 2017 allows for refund if the revised return increases the cenvat credit balance. The Tribunal agreed, emphasizing that Section 142(9)(b) overrides Section 11B, entitling the appellant to a refund.

Issue 2: Entitlement for refund of cenvat credit under Section 142(9)(b) of the CGST Act, 2017
The Tribunal analyzed Section 142(9)(b) which permits refund if a revised return increases cenvat credit balance. It found that the appellant fulfilled the conditions and was entitled to a refund. The Tribunal highlighted that the provision prevails over existing law, except Section 11B(2) of the Central Excise Act, which deals with unjust enrichment. The Tribunal held that the appellant's choice to claim cash refund under Section 142(9)(b) was valid, setting aside the Commissioner's rejection based on late filing of revised return.

Issue 3: Applicability of Rule 117 and 120A of the CGST Rules, 2017
The appellant argued that Rules should align with statutory provisions and cannot override them. The Tribunal agreed, stating that Rules must be in harmony with statutory provisions. The appellant's reliance on legal precedents supported the argument that procedural lapses should not bar substantive benefits, emphasizing the importance of statutory provisions over Rules.

Issue 4: Validity of invoking new grounds beyond show-cause notice and Order-in-Original
The Tribunal found that the Commissioner (Appeals) erred in introducing a new ground not raised in the show-cause notice or Order-in-Original to reject the refund claim. Citing legal precedent, the Tribunal emphasized that new grounds cannot be introduced beyond the scope of initial proceedings. The Tribunal remanded the case for verification of invoices, directing the original authority to grant the refund within three months, ensuring adherence to principles of natural justice.

This comprehensive analysis highlights the Tribunal's interpretation of statutory provisions, precedence over Rules, and procedural fairness in adjudicating the appellant's refund claim under the CGST Act, ultimately leading to the remand for verification and refund processing.