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TMI Blog2021 (10) TMI 531X X X X Extracts X X X X X X X X Extracts X X X X ..... irecting the appellant to pay Rs..11,03,876/- being the service tax on Business support services on foreign remittances under RCM.. The appellant paid the amount along with interest vide challan dated 22.01.2018. The appellant was eligible to avail credit of the service tax paid as these were input services used for their manufacturing activity. However, since the period was after 01.07.2017, consequent to the implementation of CGST Act, 2017, the appellant was unable to avail the credit and utilize the credit as admissible under Cenvat Credit Rules, 2004 as amended. The appellant also was unable to transfer the credit to TRAN-1 credit, as the date of filing TRAN-1 had expired on 27/12/2017. They then filed refund claim for Rs. 11,03,876/-. The original authority rejected the refund claim holding that as per Section 142 (8) (a) of the CGST Act,2017, credit is not admissible and therefore not eligible for refund in cash. The appellant preferred appeal before the Commissioner (Appeals), who upheld the order of the original authority. 2, On behalf of the appellant learned Counsel Ms. D. Naveena, appeared and argued. She adverted to paragraph-5 of the impugned order and submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (6) (a) every proceeding of appeal, review or reference relating to a claim for CENVAT credit initiated whether before, on or after the appointed day under the existing law shall be disposed of in accordance with the provisions of existing law, and any amount of credit found to be admissible to the claimant shall be refunded to him in cash, notwithstanding anything to the contrary contained under the provisions of existing law other than the provisions of sub-section (2) of section 11B of the Central Excise Act, 1944 and the amount rejected, if any, shall not be admissible as input tax credit under this Act: Provided that no refund shall be allowed of any amount of CENVAT credit where the balance of the said amount as on the appointed day has been carried forward under this Act; (b) every proceeding of appeal, review or reference relating to recovery of CENVAT credit initiated whether before, on or after the appointed day under the existing law shall be disposed of in accordance with the provisions of existing law and if any amount of credit becomes recoverable as a result of such appeal, review or reference, the same shall, unless recovered under the existing law, be recover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the input tax credit would not be admissible under the CGST Act. In the present case, there has been no assessment or adjudication proceedings. Section 142 (8) (a) of GST Act, provides for the recovery of arrears pursuant to assessment or adjudication proceedings. As per the erstwhile Central Excise Act, 1994, assessment falls under Chapter 2 and adjudication proceedings under chapter 6. In the present case the spot memo was issued by the audit officers under Rule 22 of the Central Excise Rules, 2002. Hence, there was neither any adjudication nor any recovery so as to demand the payment made by the appellant as recovery of arrears. The present situation falls beyond the scope of Section 142 (8) (a) of GST Act, 2017. 3.2 When the department admitted that the credit is eligible, then the same ought to have been refunded to the appellant as the appellant could not carry forward the credit to TRAN-1. In terms of Section 140 of the GST Act, 2017, the appellant indeed was eligible to transfer the credit as TRAN-1 credit. Only because the last date for availment as TRAN-1 credit falls on 27.12.2017, the appellant was unable to carry forward the Cenvat Credit to the GST regime. The credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der Section 142(8) for the reason that unless the tax is paid correctly, the assessee is not eligible to credit. The appellant herein not having paid the tax correctly during the relevant years is not eligible to credit. He also stated that the input tax credit is not a vested right and relied upon the decision of the jurisdictional High Court in the case of M/s. P.R. Mani Electronics Vs UOI and Others in a writ petition No. 8890/2020 dated 13.07.2020. 5. Heard both sides. 6.1 It is not in dispute that the appellants have been called upon to pay service tax under reverse charge mechanism. During the process of audit it was noticed that they have made certain foreign remittances and that they are liable to pay service tax for the input services received from their parent company. Consequently, they are eligible for credit. However, the said omission or default for not paying the tax under the reverse charge mechanism came to the knowledge of the appellant only after the Audit Officers pointed out the same. They immediately paid the amount on 22.01.2018. Though they were eligible for credit since the time to carry forward the Cenvat Credit to the GST regime had expired on 27.12.201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax paid is claimed as credit under the existing law. The sub-section states that input tax credit will not be available under GST Act. It does not say that credit is not eligible under existing law (erstwhile law). This means in consequent to recovery of arrears in assessment/adjudication proceedings no input credit can be availed under GST Act, 2017. To be more clear, if there are any arrears to be recovered under the existing law, the same can be recovered by invoking the transitional provisions of the GST Act, however, input tax credit will not be admissible under the GST Act, The ingredients of Section 142 (8) (a) is as under:- a) Amount of tax is recoverable consequent to an assessment or adjudication proceedings; b) Such amount has not been recovered under the existing law;(erstwhile law) c) Such amount can be recovered as an arrear of tax under CGST Act, 2017. d) On the amount so recovered, input tax credit will not be admissible under the CGST Act, 2017. 6.3 Further, as rightly argued by the learned Counsel for the appellants, the above provision deals with recovery of arrears under the erstwhile law after implementation of CGST Act, 2017. In the present case ..... 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