2024 (12) TMI 606 - AT - Service Tax

Refund of Cenvat credit under Section 142(3) of CGST Act, 2017 - Applicability of Section 142(8)(a) of CGST Act, 2017 for rejection of refund - Impact of Section 73(3) of Finance Act, 1994 on the refund claim - Relevance of Rule 9(1)(bb) of Cenvat Credit Rules, 2004 in the context of reverse charge mechanism. Refund of Cenvat credit under Section 142(3) of CGST Act, 2017 - Applicability of Section 142(8)(a) of CGST Act, 2017 for rejection of refund - HELD THAT - From the plain reading of the Section 142 (8), it provides that if any duty pertaining to the period prior to 01.07.2017 is paid, the same shall not be available as an input tax credit under this Act, means CGST Act. In the present case the appellants have not claimed input tax credit in respect of the service tax paid for the period prior 01.07.2017. Therefore, on this ground, the refund was wrongly proposed to be rejected. As Section 142 (8) is only in respect of input tax credit not for Cenvat credit. For the purpose of refund of Cenvat credit which pertains to the period prior 01.07.2017, the special provision was made for cash refund under Section 142 (3) of CGST Act. Therefore, the invocation of Section 142 (8) of CGST Act, 2017 is misplaced. Impact of Section 73(3) of Finance Act, 1994 on the refund claim - HELD THAT - Section 73(3) is admission of the service tax liability and payment made therefore will not affect the admissibly of the Cenvat credit of such service tax. Had appellant claimed the refund of service tax paid by them the same can be barred under Section 73(3) which is not the case here. After payment of service tax, the appellant is eligible for Cenvat credit. Therefore, only because they opted for payment of service tax under section 73(3), admissibility of Cenvat credit cannot be questioned - The appellant have paid service tax admittedly and opted for section 73(3) of the Finance Act, 1994. This proposal has been accepted by the department and no show cause notice was issued that means the revenue has accepted the payment of service tax under Section 73(3) which provides that the service tax paid under Section 73(3) is without having any ingredient of suppression of facts, willful misstatement , collusion , fraud, etc. Had there been an allegation of department on the above ingredients, the proposal of the appellant could not have been excepted as the same is barred in the term of Section 73(4) of Finance Act, 1994 which has not been invoked by the department. Therefore, it is an established fact in the present case that there is neither any charge of suppression of fact, willfull, misstatement, etc. nor any adjudication thereon. Relevance of Rule 9(1)(bb) of Cenvat Credit Rules, 2004 in the context of reverse charge mechanism - HELD THAT - As the appellant have neither been issued any show cause notice nor was any order passed. In this undisputed fact Rule 9(1) (bb) of Cenvat Credit Rules, 2004 doesn t apply. Moreover, it is a settled Legal position that Rule 9 (1) (bb) is not applicable in case of payment of service tax under reverse charge basis - From the plain reading of the Rule 9 (1) (bb), it is clear that same is applicable only in case when the supplementary invoice, challan,etc., are issued by the service provider. In the present case since the service tax was paid by the appellant under reverse charge basis, there is no invoice, challan issued by the service provider on which the credit was taken. In the present case it is the appellant s own bank challan through which the service tax was paid. For this reason also Rule 9 (1) (bb) is clearly not applicable in the present case. The appellant is eligible for refund under Section 142(3) of CGST Act, 2017. Therefore, the impugned order is set aside - Appeal is allowed.

Summary

Issues Involved:

1. Eligibility for refund of Cenvat credit under Section 142(3) of CGST Act, 2017.
2. Applicability of Section 142(8)(a) of CGST Act, 2017 for rejection of refund.
3. Impact of Section 73(3) of Finance Act, 1994 on the refund claim.
4. Relevance of Rule 9(1)(bb) of Cenvat Credit Rules, 2004 in the context of reverse charge mechanism.

Detailed Analysis:

1. Eligibility for Refund of Cenvat Credit Under Section 142(3) of CGST Act, 2017:

The appellant argued that they are eligible for a refund of Cenvat credit under Section 142(3) of the CGST Act, 2017, for service tax paid on a reverse charge basis for services received before 01.07.2017. The Tribunal found that the refund claim was wrongly proposed to be rejected under Section 142(8) as it pertains to input tax credit, not Cenvat credit. The Tribunal concluded that Section 142(3) provides for a cash refund of Cenvat credit for periods prior to 01.07.2017, and thus, the appellant is eligible for the refund.

2. Applicability of Section 142(8)(a) of CGST Act, 2017 for Rejection of Refund:

The department rejected the refund claim citing Section 142(8)(a), which states that any tax recoverable under the existing law shall not be admissible as input tax credit under the CGST Act. The Tribunal clarified that Section 142(8) pertains to input tax credit and not Cenvat credit. Since the appellant did not claim input tax credit for the service tax paid, the invocation of Section 142(8) was deemed misplaced.

3. Impact of Section 73(3) of Finance Act, 1994 on the Refund Claim:

The Tribunal noted that the appellant paid the service tax under Section 73(3) of the Finance Act, 1994, which allows for waiver of show cause notice if the tax is paid voluntarily. The adjudicating authority's rejection of the refund on this basis was found to be beyond the scope of the show cause notice. The Tribunal emphasized that payment under Section 73(3) does not affect the admissibility of Cenvat credit, as the appellant did not seek a refund of the service tax itself but rather the Cenvat credit.

4. Relevance of Rule 9(1)(bb) of Cenvat Credit Rules, 2004 in the Context of Reverse Charge Mechanism:

The Tribunal addressed the applicability of Rule 9(1)(bb), which restricts credit on supplementary invoices issued by service providers in cases of fraud or suppression. The Tribunal found that this rule does not apply to reverse charge payments, as the service tax was paid by the appellant as a recipient, using their own bank challan, not a supplementary invoice from a service provider. Therefore, Rule 9(1)(bb) was deemed inapplicable in this case.

Conclusion:

The Tribunal concluded that the appellant is eligible for a refund under Section 142(3) of the CGST Act, 2017. The rejection of the refund claim based on Section 142(8) and Rule 9(1)(bb) was found to be incorrect. The Tribunal set aside the impugned order and allowed the appeal, affirming the appellant's entitlement to the refund.