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2025 (4) TMI 314 - AT - Service TaxRecovery of wrong availment and utilization of input service credit with interest and penalty - appellant has taken input service credit under RCM - application of Rule 3(4)(e) of CCR 2004 - HELD THAT - The appellant has availed CENVAT Credit amount of Rs.30, 18, 941/- under RCM in June 2017 prior to the date of the payment of the said amount to Government Exchequer and filing of the ST-3 on 27.12.2017. I find that there is no dispute regarding the receipt of the service by the appellant and issue of the corresponding invoice for the same prior to 01.07.2017. Thus there is no dispute regarding the eligibility of the credit for the appellant. The ground under which the input service credit taken by the appellant under RCM basis during June 2017 was that the said amount was deposited to the Government Exchequer under Challans dated 27.12.2017. There is no infirmity in availing the credit by the appellant when the eligibility of credit was not in dispute. It is observed that in June 2017 when GST was introduced there were many issues related to availment of Cenvat credit. There was no clarity regarding availment of credit in respect of the services rendered and invoices issued prior to 1st July 2017 and payments made after 01.07.2017. In the present case the appellant has received the service and invoice prior to 01.07.2017 but payment of service tax was not made as on 01.07.2017 under reverse charge. To avoid any issue on the availment of credit later they took the purported credit amount of Rs.30, 18, 941/- in their credit ledger in the month of June 2017. It is observed that if the credit is not taken prior to 01.07.2017 and transferred through TRAN-1 the appellant would be eligible for refund of the said credit by cash as per the provisions of section 142(3) of the GST Act. This view has been held by the Hon ble Madras High Court in the case of Ganges International Pvt. Ltd. v Assistant Commissioner of GST C.Ex Puducherry 2022 (3) TMI 544 - MADRAS HIGH COURT where it was held that the applications should be considered for carrying forward the accrued credit to the electronic credit ledger of the GST regime not for refund in cash. Thus by relying on the decisions rendered by the Hon ble Madras High Court it is held that the appellant is eligible for taking utilizing and transferring the input tax credit of Rs. 30, 18, 941/- payment of which under RCM was made on 27.12.2017. Conclusion - The appellant is entitled to the CENVAT Credit under the transitional provisions of the GST regime. The demands confirmed in the impugned order set aside - appeal allowed.
ISSUES PRESENTED and CONSIDERED
The core legal issue considered in this judgment was whether the appellant, M/s. Patel Engineering Limited, was entitled to avail and utilize CENVAT Credit amounting to Rs. 30,18,941/- under the Reverse Charge Mechanism (RCM) for services rendered and invoiced prior to July 1, 2017, but paid to the Government Exchequer on December 27, 2017. The Tribunal also considered the applicability of transitional provisions under the GST regime and the relevant legal precedents. ISSUE-WISE DETAILED ANALYSIS Relevant Legal Framework and Precedents The legal framework revolves around the CENVAT Credit Rules, 2004, particularly Rule 3(4)(e), which stipulates that CENVAT credit can be utilized only to the extent available on the last day of the month or quarter for payment of tax. The transitional provisions under the GST Act, particularly Section 142(3), were also considered relevant for determining the eligibility of credit transfer. The Tribunal relied on precedents set by the Madras High Court in Ganges International Pvt. Ltd. v Assistant Commissioner of GST & C.Ex, Puducherry and SRC Projects Pvt. Ltd. v AC, GST & CE, Salem. Court's Interpretation and Reasoning The Tribunal interpreted that the appellant had availed CENVAT Credit under RCM in June 2017, before the payment of the said amount to the Government Exchequer and before filing the ST-3 return on December 27, 2017. The Tribunal noted that the receipt of services and issuance of invoices occurred before July 1, 2017, and there was no dispute regarding the eligibility of the credit. The Tribunal found that the appellant's action of availing credit prior to July 1, 2017, was to avoid issues related to credit availment post-GST implementation. Key Evidence and Findings The Tribunal found that the appellant had availed the credit in June 2017 and subsequently paid the amount to the Government Exchequer on December 27, 2017. The appellant filed the necessary ST-3 return on the same date. The Tribunal observed that the appellant's eligibility for credit was not in dispute, and the credit was taken to ensure it could be carried forward under the GST regime. Application of Law to Facts The Tribunal applied the legal precedents from the Madras High Court, which allowed for the consideration of credit under the transitional provisions of the GST regime. The Tribunal noted that if the credit was not taken and transferred through TRAN-1, the appellant would be eligible for a refund under Section 142(3) of the GST Act, as held in Ganges International Pvt. Ltd. Treatment of Competing Arguments The Tribunal considered the Department's argument that the credit was availed before the actual payment to the Government Exchequer, which was against the provisions of Rule 3(4)(e) of the CCR, 2004. However, the Tribunal found that the appellant's actions were justified given the transitional nature of the GST implementation and the lack of clarity at that time. Conclusions The Tribunal concluded that the appellant was eligible for taking, utilizing, and transferring the input tax credit of Rs. 30,18,941/- and set aside the demands confirmed in the impugned order. SIGNIFICANT HOLDINGS The Tribunal held that the appellant was entitled to the CENVAT Credit under the transitional provisions of the GST regime. It relied on the "Doctrine of Necessity" as articulated in the Madras High Court's decision in Ganges International Pvt. Ltd., which allowed for the credit to be carried forward in the electronic credit ledger under the GST regime. Core Principles Established The Tribunal established that in transitional scenarios where there is a lack of clarity, taxpayers could rely on judicial precedents to avail benefits under the GST regime. The Tribunal emphasized the importance of ensuring that eligible credits are not denied due to procedural technicalities, especially during the transition from one tax regime to another. Final Determinations on Each Issue The Tribunal determined that the appellant's appeal should be allowed, and the demands confirmed by the lower authorities were set aside. The Tribunal ordered that the appellant's claim for credit transfer under the GST regime be recognized, aligning with the precedents set by the Madras High Court.
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