2022 (9) TMI 801 - AT - Service Tax

Denial of refund of CENVAT credit - service tax paid under reverse charge mechanism after 30.06.2017 - Rejection of refund on the ground that there was no statutory provision available under the existing law or in the CGST Act to grant refund - rejection also on the ground of time limitation - transitional provision under section 142(3) of the CGST Act - Principles of Unjust Enrichment - HELD THAT - It is found that under transitional provision under section 142(3) of CGST Act, the limitation has been done away with and the only thing required for refund under the facts and circumstances is to see whether unjust enrichment is attracted. In the facts and circumstances, it is held that no unjust enrichment is attracted as the appellant have admittedly paid service tax in August, 2018 out of their own pocket. Accordingly, this appeal is allowed and the impugned order is set aside - The adjudicating authority is directed to grant refund within a period of 60 days from the date of receipt of copy of this order along with interest under section 11BB of the Central Excise Act. Appeal allowed - decided in favor of appellant.

Summary

Issues involved: Denial of refund of Cenvat credit for service tax paid under reverse charge mechanism post 30.06.2017.

Analysis:

1. Refund Denial by Adjudicating Authority:
The appellant, a former service tax assessee transitioning to the GST regime, faced a denial of refund for service tax paid under reverse charge mechanism post 30.06.2017. The Revenue objected to an amount due for input services, which the appellant paid in August 2018. Despite being unable to claim credit in the GST regime or revise TRAN-1 due to expired time, the appellant sought a refund under service tax provisions. The adjudicating authority rejected the claim citing lack of statutory provision under existing law or the CGST Act for granting refunds, both on merits and limitation grounds.

2. Appeal to Commissioner (Appeals):
Aggrieved by the denial, the appellant appealed to the Commissioner (Appeals) who acknowledged the appellant's entitlement to credit for the service tax paid in August 2018. The Commissioner noted the absence of provisions under Cenvat Credit Rules for refunding service tax paid under reverse charge when the taxpayer cannot claim credit. He emphasized that refund eligibility is subject to limitation and unjust enrichment considerations under section 11B.

3. Transitional Provision and Legal Arguments:
The appellant's counsel argued that section 142(3) of the CGST Act mandates refunds for amounts paid under the existing law, irrespective of section 11B(2) of the Central Excise Act on unjust enrichment. They contended that no limitation applied in this case, and unjust enrichment was inapplicable since the appellant bore the tax under reverse charge mechanism directly.

4. Ruling and Directions from High Court:
The Authorized Representative for the revenue supported the adjudicating authority's decision and cited a ruling from the Hon'ble Madras High Court. The High Court's ruling in a similar case emphasized the eligibility of the assessee for Cenvat credit pre-GST regime but inability to claim it post-GST implementation due to transitional provisions. The High Court rejected the rejection of the refund claim, remanding the matter for fresh adjudication with specific directions to consider the refund application under section 142(3) of the CGST Act.

5. Tribunal Decision and Order:
Upon considering the arguments, the Tribunal Member found that under section 142(3) of the CGST Act, limitations were removed, and the key consideration for refund was unjust enrichment. Given that the appellant paid service tax out of pocket in August 2018, unjust enrichment was not applicable. Consequently, the Tribunal allowed the appeal, setting aside the impugned order and directing the adjudicating authority to grant the refund within 60 days along with interest under section 11BB of the Central Excise Act.

6. Conclusion:
The Tribunal's decision highlights the importance of transitional provisions in refund cases post-GST implementation, emphasizing the applicability of Cenvat credit entitlements and the necessity to consider unjust enrichment when assessing refund claims. The ruling provides clarity on refund procedures and obligations under the CGST Act, ensuring fair treatment for taxpayers transitioning between tax regimes.