2021 (12) TMI 621 - AT - Service Tax

Reversal of CENVAT Credit - reversal in the Books of Accounts instead of transfer of the said amount to the electronic ledger is a valid reversal or not - whether the Books of accounts of the appellants / private record can be considered as record admissible into evidence or as to whether it is statutory document? - HELD THAT - Hon ble Madras in the case of BNP PARIBAS GLOBAL SECURITIES OPERATIONS PRIVATE LIMITED VERSUS THE ASSISTANT COMMISSIONER OF GST CENTRAL EXCISE 2021 (4) TMI 783 - MADRAS HIGH COURT has held that for the transaction pertaining to the period prior to 30.6.2017, the assessee since could not file the ST 3 return post July, 2017, any reversal/ credit shown in his private accounts/ the Books of accounts become the statutory documents as admissible in evidence. Further perusal of this decision shows that the facts of the said case were identical to that of present one in the terms that the appellants in both the cases are exporter of the services. Hon ble High Court had held that refund of Cenvat Credit to such an exporter of services in terms of Rule 5 of Cenvat Credit Rules, 2004 read with Notification No. 27/2012 date 18.6.2012 is the denial of legitimate export incentive coming to the exporter of services. Same cannot be denied merely because of intervening changes. The perusal of this provisions makes it abundantly clear that refund of any duty or tax which was paid for the period prior to coming into force of the GST law can be claimed even after the appointed date of 01.07.2017. The provision itself makes it clear that such claim is to be dealt with in terms of earlier existing law - Apparently and admittedly, there is no reason showing that the refund was otherwise not available to the appellant. Second proviso of this provision is abundantly clear that the amount which stand entered otherwise on the appointed date, refund thereof shall not be allowed. These observations about section 142 of the GST Act, are sufficient to hold that Commissioner (Appeals) has failed to appreciate the provisions as a whole and has wrongly held that in terms of section 142 the impugned refund was not allowed. The Commissioner (Appeals) has miserably failed to observe that with the introduction of the GST Act filing of ST-3 return was absolutely done away due to which there was no other possible way with the appellant to debit and to reflect the existing credit in its ST-3 return. The Notification No. 27/2012 dated 18.6.2012 with its condition No 2(h), was applicable only during the period prior to GST regime. Since the GST regime has done away with the ST 3 return, there remain no provision in GST system to reflect the refund claim in the CENVAT credit balance. The only option was to show its reversal in the Books of accounts. Such reversal still amounts to non availment of Credit and refund whereof remains eligible. In the present case, the reversal was shown in the Books of Accounts prior to filing of refund claim, there seems no reason, in my opinion, for rejection of such a claim - Tribunal, Bangalore in another case of M/S INGUEST TECHNOLOGIES SOFTWARE PVT LTD VERSUS COMMISSIONER OF CENTRAL TAX, BANGALORE NORTH 2019 (6) TMI 565 - CESTAT BANGALORE has allowed the refund clam of such transitional period when the reversal from Books of accounts was shown even after filing of refund. The rejection of two refund claims for the period January, 2017 to March 2017 and April, 2017 are held to have wrongly been rejected - Appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against rejection of refund claims for unutilized credit; Compliance with Notification No. 27/2012 dated 18.6.2012; Interpretation of Section 142 of GST Act; Validity of reversal of credit in Books of Accounts; Applicability of Rule 15 of Cenvat Credit Rules 2017.

Analysis:
The appellant, engaged in export of Management and Business Consultancy Service, filed three refund claims for different periods. The first claim was rejected as time-barred, and the remaining two were rejected for non-compliance with Para 2(h) of Notification No. 27/2012 dated 18.6.2012. The appeal against this rejection was dismissed, leading to the appellant approaching the Tribunal.

The appellant argued that the reversal of credit in their accounts was valid, as it was for the pre-GST era, and the amount had been shown as reversed in their records before filing the refund claim. The appellant contended that the Commissioner (Appeals) failed to properly apply Section 142 of the GST Act and ignored a Chartered Accountant certificate confirming the reversal of CENVAT credit. The appellant highlighted statutory permissibility under Section 142 and the transitional phase changes, citing relevant case laws.

On the other hand, the Department's Authorized Representative supported the findings of the Order under challenge, emphasizing the non-compliance with Notification No. 27/2012 and the strict conditions for availing benefits under it.

Upon review, the Tribunal observed that the reversal of credit in the Books of Accounts was valid, especially for the period before the CGST Act, 2017 came into effect. The Tribunal referenced a previous case to establish the admissibility of private records as statutory documents for pre-GST transactions. It further analyzed Section 142 of the CGST Act, emphasizing the availability of refund claims for duties paid before the GST law's enforcement. The Tribunal also addressed Rule 15 of Cenvat Credit Rules 2017, clarifying that the appellant's action of reversing credit in Books of Accounts was lawful, given the lack of provision to reflect such claims in the GST system.

Ultimately, the Tribunal set aside the order under challenge, allowing the appeal and holding that the rejection of the refund claims for the specified periods was incorrect. The judgment underscored the legality of the appellant's actions in reversing credit and the applicability of relevant legal provisions in the given context.