2023 (1) TMI 107 - AT - Service Tax

CENVAT credit of service tax paid - duty paying documents - service tax on reverse charge basis in respect of ocean freight services - suppression/misdeclaration of facts or not - HELD THAT - A perusal of the impugned order shows that the order first decides that the appellant are not entitled to cenvat credit invoking Rule 9(1)(bb) of the Cenvat Credit Rules. On that account, the impugned order denies the refund claimed by the appellant. The issue regarding admissibility of credit under Rule 9(1)(bb) has nothing to do with the CGST Act and therefore, the reference made to the larger bench in the case of M/S. BOSCH ELECTRICAL DRIVE INDIA PRIVATE LIMITED VERSUS COMMISSIONER OF G.S.T. AND CENTRAL EXCISE, CHENNAI 2021 (10) TMI 1345 - CESTAT CHENNAI has no relevance in the instant case. The instant case is solely based on the admissibility of credit under Rule 9(1)(bb). In view of that, it is apparent that the claim of the appellant to avail credit on the strength of Challan of Service Tax paid by them in the capacity of service recipient cannot be denied under Rule 9(1)(bb). Moreover, there is no evidence on record to show that the appellants have engaged in any mis-declaration, suppression etc. especially in view of the fact that the levy of service tax on Ocean Freight itself was held ultra virus by Hon ble High Court of Gujarat in case of MESSRS SAL STEEL LTD. 1 OTHER (S) VERSUS UNION OF INDIA 2019 (9) TMI 1315 - GUJARAT HIGH COURT . It is held that the appellants are entitled to take credit of CENVAT credit paid on ocean freight - matter is remanded to the original adjudicating authority for fresh consideration - Appeal allowed by way of remand.

Summary

Issues:
1. Entitlement to cenvat credit for service tax paid on reverse charge basis.
2. Denial of refund under Rule 9(1)(bb) of Cenvat Credit Rules.
3. Applicability of Rule 9(1)(bb) in claiming cenvat credit.
4. Reference to the Larger Bench regarding refund claims under Section 142(3) of GST Act.

Entitlement to Cenvat Credit:
The appellant, M/s Raman Polymers, filed an appeal regarding the payment of service tax on reverse charge basis for ocean freight services. The appellant contended that no show cause notice was issued for suppression or misdeclaration, especially considering the High Court's ruling on the ultra vires nature of service tax on ocean freight. The appellant sought a refund of the service tax credit paid. The impugned order denied the refund, citing Rule 9(1)(bb) of the Cenvat Credit Rules. The counsel argued that the credit was availed based on their own challan, not a supplementary invoice, bill, or challan from the service provider, as per the Tribunal's decision in Swami Constructions case. Therefore, the denial of cenvat credit was deemed incorrect.

Denial of Refund under Rule 9(1)(bb):
The Authorized Representative supported the impugned order, stating that the refund claim was made under Section 142(3) of the GST Act. Referring to a Tribunal decision involving BOSCH Electrical Drive, the Representative suggested keeping the matter in abeyance. However, the Tribunal clarified that the issue of credit under Rule 9(1)(bb) was separate from the CGST Act, making the reference to the Larger Bench irrelevant. The crux of the matter revolved around the admissibility of credit under Rule 9(1)(bb) alone.

Applicability of Rule 9(1)(bb) in Claiming Cenvat Credit:
In the case of Swamy Construction, the Tribunal highlighted that the appellant's eligibility for credit was based on Rule 9(1)(e) rather than Rule 9(1)(bb). Rule 9(1)(e) allows for cenvat credit on a challan evidencing payment of service tax on a reverse charge mechanism. The Tribunal emphasized that the appellant's claim to avail credit based on their challan for service tax paid as a recipient could not be denied under Rule 9(1)(bb). Furthermore, there was no evidence of misdeclaration or suppression, especially given the High Court's ruling on the ultra vires nature of service tax on ocean freight. Therefore, the impugned order was set aside, affirming the appellant's entitlement to cenvat credit for the service tax paid on ocean freight.

Reference to Larger Bench on Refund Claims:
The Tribunal clarified that the matter at hand focused solely on the admissibility of credit under Rule 9(1)(bb) and was not related to the CGST Act. Therefore, the reference made to the Larger Bench in a separate case regarding refund claims under Section 142(3) of the GST Act was deemed irrelevant. The Tribunal emphasized that the instant case's core issue pertained to the admissibility of credit under Rule 9(1)(bb) of the Cenvat Credit Rules.