2024 (10) TMI 1070 - AT - Service Tax

Refund of service tax paid under Reverse Charge Mechanism (RCM) - rejection on the allegation that there was no provision which allowed refund of service tax paid under RCM - substantive right of the appellant to avail CENVAT Credit - Interpretation of Section 11B of the Central Excise Act, 1944, and Section 142(3) of the CGST Act, 2017 - HELD THAT - There are no relevance of the decisions of tribunal relied by appellant in the matter as the issue has been authoritatively considered by Hon'ble High Court of Jharkhand in the case of Rungta Mines 2022 (2) TMI 934 - JHARKHAND HIGH COURT where it was held ' the petitioner on the one hand did not claim CENVAT Credit as per the procedure established by law under the existing law and on the other hand violated the provisions of law while filing his service tax returns and claimed the amount as input service and thereafter filed his petition for refund on 28.06.2018 referring to Section 142(3) of the CGST Act. The petitioner never had a right to claim refund under the existing law and had failed to exercise their right to claim CENVAT Credit as per law and wrongly claimed the impugned amount as credit in Service Tax Return (S.T. 3 return).' Appellant placed reliance on the decision of Hon'ble Bombay High Court in case of Combitic Global Caplet Pvt Ltd 2024 (6) TMI 498 - BOMBAY HIGH COURT and Simbhaoli Sugar Ltd. 2024 (8) TMI 7 - CESTAT ALLAHABAD - these decisions have not been rendered in respect of the amounts which became due to the concerned parties prior 30.06.2017. Thus these decisions are clearly distinguishable and do not support the case of the appellant. There are no merits in the appeal - appeal dismissed.

Issues Involved:

1. Eligibility for refund of service tax paid under Reverse Charge Mechanism (RCM).
2. Applicability of CENVAT Credit and its transition under the GST regime.
3. Interpretation of Section 11B of the Central Excise Act, 1944, and Section 142(3) of the CGST Act, 2017.
4. Legal precedents and their applicability to the case.
5. Procedural compliance for claiming CENVAT Credit and refund.

Issue-wise Detailed Analysis:

1. Eligibility for Refund of Service Tax Paid Under RCM:

The appellant, engaged in manufacturing carpets, paid service tax under RCM on various services in June 2017. However, due to the introduction of the GST regime on July 1, 2017, the appellant could not carry forward the CENVAT Credit. The appellant filed a refund claim under Section 11B of the Central Excise Act, 1944, read with Section 142(3) of the CGST Act, 2017. The Assistant Commissioner rejected the claim, stating no provision existed for refund of service tax paid under RCM. The appellate authority upheld this decision, emphasizing that the CENVAT Credit scheme ended on June 30, 2017, and the credit could not be transitioned to the GST regime.

2. Applicability of CENVAT Credit and Its Transition Under the GST Regime:

The appellant argued that the CENVAT Credit is a substantive right and should be refunded in cash if not carried forward. The Assistant Commissioner noted that the credit could be transitioned using TRAN-1 under the GST Act, but the appellant failed to do so. The appellate authority reiterated that the credit was not earned before the GST rollout and could not be transitioned post-June 30, 2017. The tribunal confirmed that the appellant's failure to reflect the credit in the ST-3 return or revise it before the deadline resulted in the loss of the right to transition the credit.

3. Interpretation of Section 11B of the Central Excise Act, 1944, and Section 142(3) of the CGST Act, 2017:

The tribunal examined the provisions of Section 11B and Section 142(3), concluding that these sections did not support the appellant's claim for a refund. Section 11B allows refunds only in specific circumstances, such as export rebates, and does not cover accumulated CENVAT Credit. Section 142(3) provides for refund of amounts accruing under existing law but does not create new rights or revive extinguished rights. The tribunal emphasized that the appellant's claim did not meet the criteria for a refund under these provisions.

4. Legal Precedents and Their Applicability to the Case:

The appellant cited several judgments supporting cash refunds of CENVAT Credit. However, the tribunal found these precedents inapplicable, as they pertained to different contexts, such as export rebates or surrender of registration. The tribunal referred to the Bombay High Court's decision in Gauri Plasticulture, which held that no provision existed for refund of accumulated CENVAT Credit. The tribunal also cited the Supreme Court's decision in VKC Footsteps, which clarified that refund is a statutory right, not a constitutional right, and must adhere to statutory conditions.

5. Procedural Compliance for Claiming CENVAT Credit and Refund:

The tribunal noted that the appellant failed to comply with procedural requirements for claiming CENVAT Credit. The appellant did not include the credit in the ST-3 return filed before the GST rollout and did not revise the return within the allowed period. The tribunal emphasized that the appellant's actions, such as paying service tax after the deadline and not utilizing the TRAN-1 form, resulted in the forfeiture of the right to claim the credit. The tribunal concluded that the appellant's claim for a refund was not supported by law, as the credit was not earned or transitioned according to statutory provisions.

Conclusion:

The appeal was dismissed, with the tribunal affirming the decisions of the lower authorities. The tribunal held that the appellant's claim for a refund of service tax paid under RCM was not permissible under the existing legal framework, as the appellant failed to comply with procedural requirements and statutory provisions governing CENVAT Credit and its transition under the GST regime.

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