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TMI Blog2022 (2) TMI 934X X X X Extracts X X X X X X X X Extracts X X X X ..... .2. b. For setting aside the order in Original dated 25.1.2019 (Annexure-2) passed by the adjudicating authority i.e. the Respondent No. 3. c. For setting aside the show-cause notice bearing dated 24.7.2018, issued by the adjudicating authority proposing to reject the refund application of the petitioner of CENVAT Credit of Rs. 10,88,328/-. d. For a relief of refund of CENVAT Credit of the aforesaid amount of input service credit in terms of transitional provision under Section 142(3) of Central Goods and Service Tax Act, 2017 read with Section 11-B of Central Excise Act, 1944 and Rule 2(l) and Rule 3 of the CENVAT Credit Rules, 2004. 4. The following are the foundational facts for filing of the present writ petition: - Date Events period 26.04.2017 to 29.04.2017 The petitioner was registered under Central Excise Act, 1944 for manufacture of excisable goods in which the inputs Iron Ore, Coal, Dolomite etc. are used. The petitioner used to procure input i.e. coal, domestically as well as from outside the territory of India and for importing coal, the petitioner availed input services such as 'Port Services'. period 26.04.2017 to 29.04.2017 At the relevant point of time, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per the provisions of Clause- a of sub-Rule (8) of Rule 12 of the Central Excise Rules, 2002. 30.07.2017 Monthly ER-1 return for the month of June, 2017 was revised on 30.07.2017 claiming all the CENVAT Credit up to 30.06.2017 for which duty paying documents/bills were already received by the petitioner except credit of aforesaid amount of Rs. 10,88,328/- as the bill dated 23.05.2017 in original was not yet received by the petitioner. 20.09.2017 The 'original' of the bill dated 23.05.2017 was delivered to the petitioner only on 20.09.2017 and it is the specific case of the petitioner that such delay was beyond their control. 22.09.2017 on 22.09.2017 the petitioner filed their ST-3 return for the period April, 2017 to June, 2017 under Chapter V of the Finance Act, 1994 taking all service invoices where they were liable to pay service tax under reverse charge basis. Further it is the case of the petitioner that in the said ST-3 return the petitioner disclosed the said Input Service Credit on "port services" amounting to Rs. 10,88,328/- with a view to keep the said transaction above the board so that their claim is not lost. 31.10.2017 The time for filing TRAN-1 for claiming ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e limitation for filing ER-1 would have expired. Hence, in such case mere disclosure of the receipt of services in the books of accounts is enough. Section 141 of CGST Act deals with the transitional provision relating to job work which is not relevant in the present case. It is the specific case of the petitioner that Section 142 of CGST Act deals with miscellaneous transitional provisions which are not covered under Section 140 or Section 141 of the CGST Act. The case of the petitioner is covered under Section 142 (3) of the CGST Act which is the substantive provision which allows refund of CENVAT Credit in certain contingencies as transitional measures. ii) Sub-Section 3 of Section 142 of the CGST Act, inter alia provides for refund of CENVAT Credit in cash accruing to the assessee under the CENVAT Credit Rules. The provisions of Section 142 are residuary substantive provisions which deal with refund of CENVAT Credit in cases/contingencies which are not specifically covered or contemplated under Section 140 of the Central Goods & Services Tax Act. iii) The second proviso to Section 142 (3) envisages that if carry forward of the transitional credit is claimed (under Section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 23.05.2017 was received by the petitioner on 20.09.2017 i.e., after coming into force of GST Act. ix) It is submitted by the petitioner that the CENVAT Credit of said amount of service tax paid on port service earned lawfully under the existing laws which is a substantive benefit conferred by and earned under the existing law which cannot be defeated or taken away without authority of law contrary to mandates of Article 14, Article 19 (1) (g), Article 265 and Article 300A of the Constitution of India. x) The respondent authorities erred in law while holding that there is no provision of law granting refund of tax paid on input services under Section 11 B of Central Excise Act relatable to the facts and circumstances of this case. xi) The legislature was well aware of the fact that during the transitional period, there might be situations which might not be covered under Section 140 of the CGST Act and such claims are required to be refunded in cash and therefore, saved Section 11B (2) of the Central Excise Act and provided for such refund under Section 142 (3) of the Act. xii) In spite of specific plea of the petitioner that their claim is under Section 142(3) of the CGST ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reported in (2018) 7 SCC 233 to submit that excise duty / CENVAT is value added tax. j) "Kunal Kumar Tiwari Alias Kunal Kumar Vs. State of Bihar and Another" reported in (2018) 16 SCC 74 to submit that an interpretation which advances the purpose or object underlying the Act should be preferred. k) "M/s DMR Constructions Vs. Assistant Commissioner, Commercial Tax Department, Rasipuram Namakkal District", a judgement passed by Hon'ble Madras High Court reported in 2021- TIOL-831-HC-MAD-GST to submit that considering the purposive construction, the Hon'ble Madras High Court has granted transition of credit of tax deducted at source under VAT law even when Section 140 of Tamil Nadu GST Act, 2017 does not specifically provide for it. l) "Glaxo Smith Kline PLC and others Vs. Controller of Patents and Designs and Others" reported in (2008) 17 SCC 416 to submit that pre-existing right prior to coming into force of the new law continues to be governed by the old law and their rights under the old statute are not destroyed. 6. Submission of the Respondents: - Learned counsel for the respondents, on the other hand, has vehemently opposed the prayer of the petitioner and has submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has no applicability. The petitioner was rightly served show cause notice denying the refund of CENVAT Credit of "input service" under Section 142 read with Section 174 of CGST Act, 2017 read with Section 11 B of Central Excise Act, 1944 as made applicable under Section 83 of Chapter V of the Finance Act, 1994. The petitioner failed to incorporate the CENVAT Credit in ER- 1 return in time and consequently, was not eligible to claim the said credit through TRAN - 1 under Section 140 of CGST Act, 2017 read with Rule 117 of CGST Rules. He submits that the petitioner was entitled to CENVAT Credit had he claimed the same in time by reflecting it in monthly return ER-1 and then through TRAN - 1 and there is no other mechanism to claim input tax credit other than TRAN- 1. It is further submitted that the petitioner had illegally taken credit of the impugned amount of service tax in ST-3 return though the petitioner was not an output service provider and was registered under Service Tax only for the purposes of discharging its liability under reverse charge mechanism. The petitioner failed to declare the CENVAT Credit arising out of input service tax in the last return ER-1 filed for the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aw. There is no constitutional right to refund. Refund is always a matter of a statutory prescription and can be regulated by the statute subject to conditions and limitations; (iii) Even in the case of an illegal levy or a levy which is unconstitutional, the decision of the nine judges Bench in Mafatlal Industries Limited v. Union of India held that the right of refund is not automatic. The burden of proof lies on the claimant to establish that it would not cause unjust enrichment; (iv) Though tax enactments are subject to Articles 14 and 19(1)(g) of the Constitution, this is subject to two well-settled principles: (a) Discriminatory treatment under tax laws is not per se invalid. It is invalid only when equals are treated unequally or unequals are treated equally. Both under the Constitution and the CGST Act, goods, services, input (goods) and input services are not one and the same. These are distinct species, though covered by a common code; and (b) The legislature is entitled to the widest latitude when it identifies categories of classification and unless things constituting the same class are treated differently without a rationale, the provision cannot be declared a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d) but a restriction which must govern the grant of refund under Section 54(3). We therefore, accept the submission which has been urged by Mr. N Venkataraman, learned ASG. 93. Parliament engrafted a provision for refund Section 54(3). In enacting such a provision, Parliament is entitled to make policy choices and adopt appropriate classifications, given the latitude which our constitutional jurisprudence allows it in matters involving tax legislation and to provide for exemptions, concessions and benefits on terms, as it considers appropriate. The consistent line of precedent of this Court emphasises certain basic precepts which govern both judicial review and judicial interpretation of tax legislation. These precepts are........ 94. The principles governing a benefit, by way of a refund of tax paid, may well be construed on an analogous frame with an exemption from the payment of tax or a reduction in liability [Assistant Commissioner of Commercial Tax (Asst.) v. Dharmendra Trading Company reported in (1988) 3 SCC 570]. 98. Parliament while enacting the provisions of Section 54(3), legislated within the fold of the GST regime to prescribe a refund. While doing so, it has co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned counsel of the petitioner. 10. The learned counsel for the petitioner has also referred to the judgment passed in the case of Union of India vs. Filip Tiago De Gama of Vedam De Gama (supra) on the point that the transitional provisions are to be purposefully construed and the paramount object in statutory interpretation is to discover what the legislature intended and this intention is primarily to be ascertained from the text of the enactment in question. This principle of statutory interpretation is well settled. 11. So far as the case of K. S. Paripoornan (supra) is concerned, the Hon'ble Supreme Court has considered the role of "Transitional Provision" and the learned counsel for the petitioner has referred to Para-71 of the said judgment, which is quoted as under: - "71. Section 30 of the amending Act bears the heading "Transitional provisions". Explaining the role of transitional provisions in a statute, Bennion has stated: "Where an Act contains substantive, amending or repealing enactments, it commonly also includes transitional provisions which regulate the coming into operation of those enactments and modify their effect during the period of transition. Where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oner in any manner in view of the fact that there is no conflict amongst the various provisions of CGST Act referred to by the learned counsel for the petitioner during the course of argument, particularly with reference to Sections 140, 142 and 174 of the CGST Act. The provisions have been interpreted in later portion of this judgement. 14. The learned counsel has further referred to the judgment in the case of CIT vs. J. H. Gotla reported in (1985) 4 SCC 343 to submit that even in taxation, if strict literal construction leads to absurdity, construction which results in equity rather than injustice, should be preferred. However, during the course of argument, the learned counsel has failed to demonstrate as to how any of the provisions of CGST Act which have been referred to by the petitioner has led to any absurdity. The interpretation of the provisions of CGST Act particularly with reference to refund as contemplated in the Act itself is required to be seen in the light of the principles as has been laid down by the Hon'ble Supreme Court in the case of Union of India vs. VKC Footsteps (supra), whose relevant portions have already been quoted above. There can be no doubt that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s under: - "17. The learned Single Judge's view that the provisions of Section 78 of the Amendment Act have no application to the proceedings which stood concluded before the appointed day appears to be the correct view governing the issue. Since Chapter IV-A in question was merely repealed, the situation has to be dealt with in line with Section 6 of the General Clauses Act. The provisions of Section 78 are conditional provisions and are not intended to cover cases where the application for EMR had been rejected with reference to Section 21 of the amending enactment. As noted above, Chapter IV-A was repealed. The effect of the repeal has to be ascertained in the background of Section 6 of the General Clauses Act. That being so, the order of the Division Bench cannot be sustained and that of the learned Single Judge has to operate. The appeal is allowed but in the circumstances without any order as to costs." 18. In the case of Eicher Motors Ltd. Vs. Union of India (supra), it has been held that the rights of credit facilities accrued under existing law are not to be altered. Paragraphs-5 and 6 of the aforesaid judgment are quoted as under: - "5. Rule 57-F(4-A) was introduced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the assessee on the date when they paid the tax on the raw materials or the inputs and that right would continue until the facility available thereto gets worked out or until those goods existed. Therefore, it becomes clear that Section 37 of the Act does not enable the authorities concerned to make a rule which is impugned herein and, therefore, we may have no hesitation to hold that the Rule cannot be applied to the goods manufactured prior to 16-3-1995 on which duty had been paid and credit facility thereto has been availed of for the purpose of manufacture of further goods." 19. The learned counsel has also referred to the judgment passed in the case of CCE vs. Grasim Industries Ltd. (supra) to submit that excise duty/CENVAT is value added tax. There is no doubt about the aforesaid proposition, as it is not in dispute in the instant case that the petitioner was entitled to take credit of the service tax paid to the port authorities for the "port services" by way of CENVAT Credit as per the provisions of the rules. 20. However, in the instant case the petitioner has failed to follow the prescribed procedure to avail such a credit and consequently having lost such a right, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Service tax only as a person liable to pay service tax under Reverse Charge Mechanism. Admittedly, the "port services" involved in this case is not covered under Reverse Charge Mechanism and therefore the same was not includable in the service tax return filed by the petitioner under ST-3. Accordingly, the petitioner was not entitled to avail credit of the impugned service tax paid on the "port services" in its service tax ST-3 return. 25. It is not in dispute that the petitioner was entitled to claim CENVAT Credit on the service tax paid on "port services" if used in the manufacturing activity for which the petitioner was registered under the Central Excise Act, 1944. 26. The petitioner had imported coal through Bill of entry dated 27.04.2017 for using the same in or in relation to manufacture of dutiable final products. In course of the import, they received a bundle of services from M/s Kolkata Port Trust during 26.04.2017 to 29.04.2017 in the nature of "port services" who issued Bill dated 23.05.2017 for Rs. 89,36,836/- which included service tax of Rs. 10,88,328/-. The petitioner claims to have paid the entire bill including service tax on port services in the month of Apr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pugned services were used for export of goods or services. Thus, under the existing law the claim of refund of service tax paid by the petitioner on port services was not admissible. 30. The case of the petitioner is that since they received the original copy of the Bill dated 23.05.2017 as late as on 20.09.2017, they could not take CENVAT Credit in their last ER-1 return for June, 2017 filed on 30.07.2017. However, the petitioner took the credit of Rs. 10,88,328/- in their ST-3 return for April-June, 2017 filed on 22.09.2017 with a view to keep the said transaction above board so that their claim was not lost. It is also not in dispute that the last date for filing TRAN-1 was extended up to 31.10.2017. 31. From the entire records of the case this court does not find any explanation from the side of the petitioner as to under what circumstances the Bill dated 23.05.2017 was received by them as late as on 20.09.2017 (although as per the petitioner the port services were availed and the payment including service tax was made to the port authorities in the month of April 2017), except the statement that delayed receipt of the bill was beyond their control. 32. It is the case of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2(3) there is no statutory precondition that in order to claim the transitional credit, the claim must be disclosed in the ER-1 return; (iv) Section 142(3) of the CGST Act, 2017 provides for refund of CENVAT Credit in cash accruing to the assessee under CENVAT Credit Rules, 2004. Section 142 is a residuary provision which deals with cases/contingencies which are not specifically covered or contemplated under Section 140 or 141. Since, in the instant case the provision of Section 140(5) or any other sub-Section does not cover the contingencies as in the present case, it would be covered by the residuary provision of Section 142(3); (v) Section 142(3) specifically saves Section 11B(2)(c) of Central Excise Act which deals with refund of CENVAT Credit which remained un-utilized for one or another reason; (vi) Referring to the second proviso to Section 142(3) of the CGST Act, 2017 which provides that if carry forward of the transitional credit is claimed (under Section 140), then refund of such CENVAT Credit would not be admissible. Therefore, from a plain reading of section 142(3) it is crystal clear that CENVAT Credit lawfully admissible/earned under the CENVAT Credit Rules, 200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vide their letter dated 29.06.2018 under residuary provision of Section 142(3) read with Section 174(2)(c) of the CGST Act and Section 11B(2)(c) of the Central Excise Act, 1944; iii. There is no requirement under Section 142(3) of the CGST Act of disclosure of the CENVAT Credit in the ER-1 return like Section 140(5) and unlike Section 140(1). 38. The appellate authority rejected the appeal with the following findings: a. The transitional provisions contained in Section 140 of the CGST Act, 2017 provide for carrying forward of closing balance of the amount lying in CENVAT Credit account as reflected in the statutory returns for the period immediately preceding the appointed day i.e. 01.07.2017. b. The Appellant could not carry forward the credit of Rs. 10,88,328/- of service tax, paid to Kolkata Port Trust for procurement of a raw material used in manufacture of excisable goods, is not under dispute nor is the eligibility of CENVAT Credit under "input service" under dispute. c. The transitional provisions under the CGST Act, 2017 provides specifically transition of credit through TRAN-1. The appellant has failed to declare the same in time in ER-1 return and also in TRAN- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provides for payment of amount of refund to the applicant only in situations specified in proviso to sub-section (2) of Section 11B of the Central Excise Act, 1944. The appellate authority held that the petitioner has attempted to claim something which the law does not permit at all. g. The appellate authority also held that the claim of refund is not a matter of right unless vested by law. The plea of injustice or hardship cannot be raised to claim refund in the absence of statutory mandate. In this regard, a reference was made to the judgment of the Hon'ble Supreme Court setting out the fundamental legal principles that in a fiscal statute, nothing can be read into its provisions and rather should not be read, which is expressly not there. In other words, an implied meaning cannot be given. Para 20 of the judgement passed by the Hon'ble Supreme Court, Union of India and Ors. v. Ind-Swift Laboratories Limited - (2011) 4 SSC 635 was referred as under: - "20. A taxing statute must be interpreted in the light of what is clearly expressed. It is not permissible to import provisions in a taxing statute so as to supply any assumed deficiency. In support of the same we may refer to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay be prescribed: PROVIDED that the registered person shall not be allowed to take credit in the following circumstances, namely: - (i) where the said amount of credit is not admissible as input tax credit under this Act; or (ii) where he has not furnished all the returns required under the existing law for the period of six months immediately preceding the appointed date; or (iii) where the said amount of credit relates to goods manufactured and cleared under such exemption notifications as are notified by the Government. 140 (5) A registered person shall be entitled to take, in his electronic credit ledger, credit of eligible duties and taxes in respect of inputs or input services received on or after the appointed day but the duty or tax in respect of which has been paid by the supplier under the existing law, within such time and in such manner as may be prescribed, subject to the condition that the invoice or any other duty or tax paying document of the same was recorded in the books of account of such person within a period of thirty days from the appointed day: PROVIDED that the period of thirty days may, on sufficient cause being shown, be extended by the Commis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or suffered thereunder; or (c) affect any right, privilege, obligation, or liability acquired, accrued or incurred under the amended Act or repealed Acts or orders under such repealed or amended Acts: PROVIDED that any tax exemption granted as an incentive against investment through a notification shall not continue as privilege if the said notification is rescinded on or after the appointed day; or (d) affect any duty, tax, surcharge, fine, penalty, interest as are due or may become due or any forfeiture or punishment incurred or inflicted in respect of any offence or violation committed against the provisions of the amended Act or repealed Acts; or (e) affect any investigation, inquiry, verification (including scrutiny and audit), assessment proceedings, adjudication and any other legal proceedings or recovery of arrears or remedy in respect of any such duty, tax, surcharge, penalty, fine, interest, right, privilege, obligation, liability, forfeiture or punishment, as aforesaid, and any such investigation, inquiry, verification (including scrutiny and audit), assessment proceedings, adjudication and other legal proceedings or recovery of arrears or remedy may be institut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of existing law and if any such amount accrues the same shall be paid in cash. Such right to refund in cash has been conferred notwithstanding anything to the contrary contained under the provisions of existing law other than the provisions of sub-section (2) of section 11-B of the Central Excise Act, 1944. 42. It is not in dispute that the refunds under the existing law of Service Tax as well as Central Excise Act, 1944 are governed by section 11B of the Central Excise Act, 1944 and subsection 2 of section 11 B also refers to application for refund made under section 11 B(1) of Central Excise Act, 1944. Further section 11B(3) of Central Excise Act, 1944 clearly provides that all kinds of refunds including those arising out of judgement , decree or orders of court or tribunal are to be dealt with in accordance with the provisions of section 11B (2) of Central Excise Act, 1944 . It is also important to note that section 11B(2) of Central Excise Act, 1944 deals with the manner in which applications for refund under section 11B (1) are to be dealt with as it uses the word "such application" which is clearly referrable to section 11B (1) of Central Excise Act, 1944. Further, the prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3) does not confer a new right which never existed under the old regime except to the manner of giving relief by refund in cash if the person is found entitled under the existing law in terms of the existing law. Section 142(3) does not create any new right on any person but it saves the existing right which existed on the appointed day and provides the modalities for refund in cash if found entitled under the existing law as the entire claim is mandated to be dealt with as per the existing law. It neither revive any right which stood extinguished in terms of the existing law nor does it create a new right by virtue of coming into force of CGST, Act. 46. Section 174 of the CGST Act read with section 6 of the General Clauses Act saves the right acquired, accrued or vested under the existing law and does not create any new right which never existed on the appointed day i.e on 01.07.2017 under the existing law. 47. The argument of the petitioner by referring to second proviso to section 142(3) of CGST Act that it indicates that section 142(3) would apply to the situations where the assessee has failed to take transitional credit under section 140(1), is also devoid of any merits. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... either entitled to include nor included the same as transitional credit in TRAN-1 under CGST Act. As per the notification (Annexure-5) extending the date of filing TRAN-1 to 31.10.2017, the same was in relation to certain service tax issues which were paid after 30.06.2017 under reverse charge basis to cover instances of bills raised on 30.06.2017 since credit is available only if the payment is made and the payment in such cases could be made only after 30.06.2017. However, in the instant case the bill was admittedly generated on 23.05.2017, services availed and bill amount including service tax was paid in April 2017 but the original bill did not reach the petitioner for unknown/undisclosed reasons. 51. It is apparent from the impugned orders that the specific case of the respondent is that the petitioner had claimed CENVAT Credit under ST-3 return thereby treating the services involved in the present case as their input services used for providing output service, whereas they are not output service provider and the same cannot be used for providing output services. Therefore, it cannot be their input services under Rule 2 (l) of CENVAT Credit Rules, 2004. I am also of the consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the petitioner do not entitle a person like the petitioner to any relief in the circumstances of acts and omissions of the service provider (port authority) or the service recipient (the petitioner) who have failed to comply the provision of law, both under the existing law and also under the CGST Act. The relied upon provisions of CGST Act do not cover any such situation relating to any consequences due to inter parte acts and omissions. In the instant case, as per the case of the petitioner, the entire problem has cropped up due to non-receipt of the invoice in original from the port authorities although the port services were availed and payments for the same to the port authorities were made by the petitioner in the month of April 2017, the invoice was generated by the port authorities in the month of May 2017 but the original invoice was received by the petitioner only on 20.09.2017 i.e after coming into force of CGST Act. The late receipt of the invoice is essentially between the petitioner and the port authorities and the tax collecting authorities had nothing to do in the matter. Certainly, the delay in receipt of original invoice is not attributable to the respondent au ..... X X X X Extracts X X X X X X X X Extracts X X X X
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