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2022 (6) TMI 978 - HC - Central ExciseRefund of Service tax - service tax invoices subsequently cancelled by issuing credit notes to the customers which had the effect that payment of service tax on such cancelled invoices were not required as per law - parties renegotiated the invoices issued under the Finance Act, 1994 and the Appellant had issued a credit note which annulled/cancelled the invoices issued and the denial of refund of the stated amount would be in violation of the Statutory Provisions - amount of tax paid under Finance Act, 1994 due to renegotiation of invoice with the service receiver and having given a credit note of the payment made, the tax so paid should have to be refunded to the appellant - HELD THAT - In MADRAS PORT TRUST VERSUS HYMANSHU INTERNATIONAL 1979 (1) TMI 105 - SUPREME COURT , it is held that it is high time that the Government and Public Authorities have got the practice of not relying upon technical pleas. It was also argued by Shri. Ravi Shankar that when the CESTAT has been following Total Environment, but yet in the instant case has denied the relief. In view of the undisputed facts that the appellant has paid the service tax and also the GST; and the Commissioner of Central Excise has held that appellant was not liable to pay GST, rejection of applications for refund is untenable. Having paid the service tax in the year 2017 and having submitted its application, the appellant is awaiting the refund from March 2018 till date. Respondents are directed to refund Rs.17,84,952/- with statutory interest payable under Section 11BB of the Central Excise Act, 1944 within three months from the date of receipt of a copy of this order - Appeal is allowed - substantial questions of law are answered in favour of the assessee and against the Revenue.
Issues:
1. Dismissal of appeal upholding rejection of refund claim of service tax paid despite GST payment on the same transaction. 2. Rejection of refund claim of service tax due to cancellation of invoices and issuance of credit notes. 3. Compliance with Rule 6(3) of the Service Tax Rules, 1994 regarding renegotiated invoices and credit notes. 4. Refund of tax paid under Finance Act, 1994 due to renegotiation of invoices post GST implementation. Issue 1: Dismissal of Appeal Regarding Refund Claim: The appellant raised invoices for service tax payment, subsequently transitioning to GST invoices due to client reservation. The appellant sought a refund of service tax after issuing credit notes for the original invoices. The Tribunal dismissed the appeal despite the appellant paying both service tax and GST. The Commissioner and CESTAT upheld the rejection, leading to the current appeal. The appellant argued that the rejection was unjustified, citing legal precedents. The High Court noted the payment of both taxes by the appellant and the Commissioner's acknowledgment that GST was not due. The CESTAT's dismissal lacked reasoning, and relevant case laws were not considered. The Court analyzed the legal principles and ruled in favor of the appellant, directing the refund of the service tax amount. Issue 2: Rejection Based on Invoice Cancellation and Credit Notes: The appellant's refund claim was rejected due to the cancellation of service tax invoices and issuance of credit notes to clients. The appellant argued that post-GST implementation, the cancellation of invoices relieved them from the service tax liability. The Tribunal upheld the rejection, emphasizing the inapplicability of cited case laws. The High Court reviewed the appellant's submissions and legal authorities, including the Supreme Court's stance on erroneous levies and refunds. The Court highlighted the obligation to return wrongly recovered amounts and criticized the denial of relief despite the payment of both service tax and GST. The Court found the rejection untenable and ordered the refund with statutory interest under the Central Excise Act. Issue 3: Compliance with Rule 6(3) of Service Tax Rules, 1994: The appellant contended that the denial of refund violated Rule 6(3) concerning renegotiated invoices and credit notes under the Finance Act, 1994. The appellant's actions of canceling original invoices and issuing credit notes were aimed at transitioning to GST compliance. Despite compliance with the procedural requirements, the refund claim was rejected at various stages. The High Court examined the statutory provisions and the appellant's adherence to the rules. The Court found the denial of refund contrary to the legal framework and ordered the refund with interest, emphasizing the appellant's rightful entitlement to the refund under Rule 6(3). Issue 4: Refund of Tax Paid under Finance Act, 1994 Post GST Implementation: The appellant sought a refund of service tax paid under the Finance Act, 1994 following the renegotiation of invoices and issuance of credit notes post-GST implementation. The Tribunal and lower authorities rejected the claim despite the appellant's compliance with tax payments and procedural requirements. The High Court analyzed the legal precedents cited by the appellant and the Commissioner's acknowledgment of no GST liability. The Court emphasized the appellant's right to refund under Section 142(3) of the CGST Act, 2017, and directed the respondents to refund the tax amount with statutory interest within a specified timeframe. The judgment favored the appellant, highlighting the necessity of honoring legitimate refund claims in alignment with the statutory provisions.
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