2024 (3) TMI 182 - AT - Service Tax

Refund of service tax on ocean freight under reverse charge mechanism - Claim of refund in cash as per section 142 (8) (b) of the Central Goods and Service Tax Act, 2017 - rejection of refund on the ground that the appellant is belonging to a taxable territory and he is not liable for CENVAT Credit of the service tax paid - HELD THAT - From the perusal of the Section 35 C (1) of the Central Excise Act, 1944 it is quite evident that the appellate tribunal cannot allow any ground which would have amounted to a fresh refund claim while deciding the appeal. In the case of LIFE INSURANCE CORPORATION OF INDIA VERSUS SANJEEV BUILDERS PRIVATE LIMITED ANR. 2022 (9) TMI 1564 - SUPREME COURT Hon ble Supreme Court observed The delay in filing the application for amendment of the pleadings should be properly compensated by costs and error or mistake which, if not fraudulent, should not be made a ground for rejecting the application for amendment of plaint or written statement. In the case of MILES INDIA LIMITED VERSUS ASSISTANT COLLECTOR OF CUSTOMS 1984 (4) TMI 63 - SC ORDER Hon ble Supreme Court has held If really the payment of the duty was under a mistake of law, the appellant may seek recourse to such alternative remedy as it may be advised. There are no infirmity in the impugned order - appeal dismissed.

Issues Involved:
1. Payment of Service Tax on Ocean Freight.
2. Admissibility of CENVAT Credit.
3. Entitlement to Refund under Section 142(3) of CGST Act.
4. Applicability of Unjust Enrichment Principle.
5. Consideration of New Grounds for Refund Claim.

Summary:

1. Payment of Service Tax on Ocean Freight:
The appellant was engaged in the manufacture of menthol and allied products and was required to pay service tax on transportation services provided by foreign shipping lines under reverse charge mechanism (RCM) as per Notification No. 03/2017-ST dated 12.01.2017. The appellant paid Rs 6,53,724/- towards tax, along with interest and penalty.

2. Admissibility of CENVAT Credit:
The appellant filed a refund claim for Rs 6,53,724/- citing Notification No 10/2017-CE (NT) dated 13.04.2017. The show cause notice issued challenged the admissibility of CENVAT Credit under Rule 9(1)(b) of the Cenvat Credit Rules, 2004. The adjudicating authority and Commissioner (Appeal) rejected the claim, stating that credit of tax paid on input service was not barred under the said rule.

3. Entitlement to Refund under Section 142(3) of CGST Act:
The impugned order observed that the appellant's claim for refund was not tenable as the liability to pay service tax was not contested and the appellant had paid the tax along with interest. The refund claim was rejected on the grounds that the appellant failed to claim CENVAT Credit within the prescribed time and did not include the amount in their TRAN-1 for migration to GST.

4. Applicability of Unjust Enrichment Principle:
The appellant argued that unjust enrichment was not applicable as the amount was paid in lump sum and not charged to the buyer. However, the authorities held that the refund claim was not maintainable as the appellant had failed to follow the prescribed procedure under the existing law and CGST Act.

5. Consideration of New Grounds for Refund Claim:
The appellant cited the Hon'ble Gujarat High Court's decision in Mohit Minerals (P) Ltd. v. Union of India, which held the levy of service tax on ocean freight as ultra vires. However, the Tribunal held that considering this ground would amount to a new refund claim, which was not permissible. The appellant was advised to file a fresh refund claim on this ground if maintainable.

Conclusion:
The Tribunal dismissed the appeal, upholding the rejection of the refund claim. The appellant's failure to claim CENVAT Credit within the prescribed time and the non-inclusion of the amount in TRAN-1 were key factors in the decision. The Tribunal also emphasized that new grounds for refund claims could not be entertained at the appellate stage.

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