2022 (6) TMI 675 - AT - Service Tax

Refund of CENVAT Credit - refund rejected for the sole reason of non-compliance of para 2 (h) of Notification No.27/2012 dated 18.06.2012 - whether mere procedural irregularity can curtail the substantial benefit or not - HELD THAT - No doubt, in terms of para 2 (h) Notification No.27/2012 dated 18.06.2012 the amount that is claimed as refund should have been debited by the assessee from his Cenvat Credit account as maintained under Cenvat Credit Rule. Commissioner (Appeals) has observed that there is no condition in the Notification empowering the dispensation of said procedural compliance and the said finding has become the sole reason for rejection of the claim. The issue is no more res-integra. Hon ble Apex Court in the case of CCE VERSUS M/S HARI CHAND SHRI GOPAL 2010 (11) TMI 13 - SUPREME COURT has held that a mere attempted compliance may not be sufficient, but actual compliance of those factors which are considered as essential. In the case of BNP Paribas Global Securities Operations Pvt. Ltd. Vs. the Assistant Commissioner of GST and Central Excise 2021 (4) TMI 783 - MADRAS HIGH COURT it has been 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. In the present case the amount in question was deposited under mistake of law, hence, was a deposit instead of being duty. Section 11 B of Central Excise Act, 1944 and the time bar therein cannot be applied to the present case. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Refund claim rejection based on non-compliance with Notification No.27/2012 dated 18.06.2012.

Analysis:
The appeal was filed by the Department against the sanction of a refund of Rs.14,97,670, which was initially rejected by the adjudicating authority but later sanctioned. The Department challenged this sanction, leading to a series of reviews and appeals. The Commissioner (Appeals) rejected the refund claim based on non-compliance with para 2(h) of Notification No.27/2012 dated 18.06.2012, which requires the claimed refund amount to be debited from the Cenvat Credit account. The appellant argued that procedural irregularity should not negate substantial benefit, especially considering the transition period with the implementation of GST. The appellant cited relevant case laws to support their plea for refund sanction.

The Tribunal observed that the rejection of the refund claim was solely based on the procedural non-compliance with the notification. Citing the doctrine of substantial compliance, the Tribunal referred to a Supreme Court decision emphasizing the importance of actual compliance with the substance essential to the statute's objectives rather than strict procedural adherence. The Tribunal also highlighted a previous case where rejection based on similar grounds was deemed a violation of the Constitution.

In another case, the Tribunal noted that the introduction of the GST Act eliminated the requirement for filing ST-3 returns, impacting the process of reflecting credit balances. The Tribunal emphasized that the absence of a provision in the GST system to reflect refund claims in the Cenvat credit balance should not disqualify legitimate refunds. The Tribunal referenced cases where the non-transition of credit to the GST regime did not hinder refund eligibility.

Regarding the deposit under a mistake of law, the Tribunal held that Section 11B of the Central Excise Act, 1944, and its time bar provisions were not applicable to the present case. The Tribunal concluded that the Commissioner (Appeals) failed to consider judicial precedents and set aside the order, allowing the appeal for the refund claim.

In summary, the Tribunal's decision focused on the principle of substantial compliance, the impact of the GST regime on procedural requirements, and the mistake of law in the deposit, ultimately leading to the allowance of the appeal for the refund claim.