2024 (10) TMI 823 - AT - Service Tax

Refund of input service credit in cash - denial on the ground that CENVAT rules ceased to be in force and their claim cannot be considered under CGST Act, 2017 in as much as the Service Tax was paid on 08.12.2017 after the CGST Act came into force - whether the Appellant is eligible for refund of CENVAT credit in terms of Sec. 142(3) of CGST Act, 2017 which could not be claimed under the erstwhile laws due to implementation of GST laws with effect from 01.07.2017? HELD THAT - The Order-in-Original dated 24.04.2019 had invoked Section 142(7) of the CGST Act, however the Impugned order has attempted to reject refund by invoking provisions of Section 142(8) of the CGST Act. A standalone perusal of the Impugned Order reveals that there is no ground whatsoever raised under the existing law, under which the refund has been denied. Invocation of Section 142(8) in the present case, for the purpose of denying refund is not warranted as none of the circumstances under Section 142(8) are attracted in the instant case. Section 142(8) invocation is warranted in a situation where amounts become recoverable from an assessee in pursuance of an assessment or adjudication proceedings initiated before, on or after the appointed date. The payment of service tax in the instant case is not pursuant to the circumstances set out in Section 142(8) but merely pursuant to audit undertaken of the accounts / records of the appellant. The rejection of the refund claim cannot be justified - the impugned order dated 21.09.2019 is set aside - appeal allowed.

Summary

Issues Involved:

1. Eligibility for refund of CENVAT credit under Section 142(3) of the CGST Act, 2017.
2. Applicability of Sections 142(7) and 142(8) of the CGST Act, 2017.
3. Jurisdiction of the Tribunal to hear appeals regarding refund claims under the CGST Act, 2017.

Issue-wise Detailed Analysis:

1. Eligibility for Refund of CENVAT Credit:
The primary issue was whether the appellant was eligible for a refund of CENVAT credit under Section 142(3) of the CGST Act, 2017, which could not be claimed due to the implementation of GST laws from 01.07.2017. The appellant had paid service tax under the Reverse Charge Mechanism (RCM) after the CGST Act came into force and sought a refund, claiming the amount as eligible CENVAT credit under the Credit Rules, 2004. The Tribunal considered the provisions of Section 142(3) which allow for the disposal of refund claims in accordance with existing laws, and any amount accruing should be paid in cash. The Tribunal relied on previous decisions, including Assistant Commissioner (Review), CGST & Central Excise vs. M/s. Shakti pumps (I) Ltd., which supported the appellant's claim for a cash refund of CENVAT credit.

2. Applicability of Sections 142(7) and 142(8):
The Department initially rejected the refund claim citing Section 142(7) and later Section 142(8), arguing the service tax paid was an arrear of revenue, not eligible for input tax credit. Section 142(8) deals with the recovery of amounts as arrears of tax under the CGST Act and states that such amounts are not admissible as input tax credit. However, the Tribunal found that the circumstances under Section 142(8) were not applicable, as the payment was not pursuant to assessment or adjudication proceedings but due to an audit. The Tribunal emphasized that Section 142(3) was the correct provision for handling refund claims post-GST implementation, and the rejection of the refund claim under Section 142(8) was misplaced.

3. Jurisdiction of the Tribunal:
The matter was referred to a larger bench due to conflicting judgments on the Tribunal's jurisdiction over refund claims under the CGST Act, 2017. The larger bench clarified that appeals concerning Section 142(3) of the CGST Act, 2017, fall within the Tribunal's jurisdiction. This decision allowed the Tribunal to proceed with the disposal of the appeal, ultimately ruling in favor of the appellant.

Conclusion:
The Tribunal set aside the impugned order dated 21.09.2019, allowing the appeal with consequential relief. The Tribunal concluded that the appellant was entitled to a refund of the CENVAT credit in cash, as the claim was valid under Section 142(3) of the CGST Act, 2017. The decision was pronounced in open court on 16.10.2024.