2022 (8) TMI 1143 - HC - GST

Refund of service tax paid - reverse charge mechanism (RCM) - had paid the service tax for the period from April 2016 to June 2017 only on 02.05.2018 and hence, they were unable to avail credit of the service tax already paid by them.- received technical know-how / intellectual property right from foreign persons and paid royalty to them - H ELD THAT - It is an admitted fact that the assessee is eligible to claim cenvat credit under the erstwhile Central Excise Act, prior to 30.06.2017, but they were unable to claim, due to transitional provision has come into effect from 01.07.2017. It is also not in dispute that they had paid the service tax for the period from April 2017 to June 2017 belatedly i.e., on 02.05.2018, after pointing out the same through departmental audit. Thereafter, the assessee filed an application for refund. The appellant rejected the claim of refund made by the assessee on the premise that there is no provision in the new regime to allow such refund as input tax credit in GST/credit in Electronic cash ledger/ payment in cash. The assessee is entitled to avail cenvat credit of the service tax already paid, which fact was also admitted by the Revenue, but they were unable to claim, due to transitional provision has come into effect from 01.07.2017, ordered the writ petition by setting aside the rejection order of the appellant and remanding back the matter to the appellant for fresh consideration, with certain directions, which are aggrieved by the appellant / Revenue. This court is of the view that what was impugned herein is only the order of remand passed by the learned Judge and hence, there is no requirement to set aside the same in entirety - the order of the learned Judge is modified by directing the appellant to consider the application of the assessee under section 142(3) of the CGST Act, 2017, based on the available materials and dispose the same, on merits and after affording an opportunity of hearing to the assessee, within a period of six weeks from the date of receipt of a copy of this judgment. The appeal is disposed off.

Summary

Issues:
1. Appellant's challenge to the rejection of refund claim under CGST Act, 2017.
2. Interpretation of transitional provisions under CGST Act, 2017 for availing cenvat credit.
3. Applicability of section 142(3) of the CGST Act, 2017 in the case.

Analysis:

1. The appellant, challenging the rejection of the refund claim under the CGST Act, 2017, argued that the assessee failed to pay service tax timely, resulting in the inability to claim cenvat credit within the stipulated period. The appellant contended that the rejection order was in accordance with the law, emphasizing the strict interpretation of taxing statutes without invoking the doctrine of necessity. The appellant sought to set aside the learned Judge's order remanding the matter for fresh consideration, asserting that the assessee should have availed alternative remedies provided by the statute.

2. The respondent, on the other hand, highlighted the entitlement of the assessee to cenvat credit under the erstwhile Central Excise Act, pre-GST regime, which they could not claim due to the transitional provisions effective from 01.07.2017. The respondent argued that the learned Judge rightly set aside the rejection order, directing reconsideration under section 142(3) of the Act. The respondent emphasized that there was no need to quash the order, as the assessee's claim was valid under the transitional provisions of the CGST Act, 2017.

3. The court acknowledged that the assessee was eligible for cenvat credit under the pre-GST regime but faced challenges due to the transitional provisions post-GST implementation. The court noted that the assessee belatedly paid service tax after a departmental audit, leading to the rejection of their refund claim by the appellant. The court, considering the peculiar circumstances, ordered the remand of the matter for fresh consideration under section 142(3) of the CGST Act, 2017. The court modified the learned Judge's order, directing the appellant to reconsider the application based on available materials, afford an opportunity of hearing to the assessee, and dispose of the matter within six weeks from the date of the judgment.

In conclusion, the court upheld the entitlement of the assessee to cenvat credit under the transitional provisions of the CGST Act, 2017, and directed the appellant to reconsider the refund claim in light of the statutory provisions, ensuring a fair opportunity for the assessee to present their case.