CESTAT allows refund of CENVAT credit on Service Tax Payment made during the GST regime

This appeal deals with the issue of denial to avail CENVAT credit on Service Tax paid during GST regime under Reverse Charge Mechanism on import of services by the Appellant manufacturing company.

Factual backdrop of the case, in brief, is that Appellant is undisputedly covered under Rule 7 of Point of Taxation Rules, 2011, i.e. meant for “associated enterprises” and it was required to pay service tax under Reverse Charge Mechanism in terms of the provisions of Section 68(2) of the Finance Act, 1994 read with Notification No. 30/2012-ST dated 20.06.2012 as “receiver of service” from the date of debit in the books of account as “receiver of service” or from the date of making payment, whichever is earlier.

Appellant-manufacturer made the final booking in terms of provision of Service Tax during the finalisation of its balance sheet on 30.11.2017 and 31.12.2017 for the period ending on 31.03.2017 and on June, 2017 against which Service Tax of Rs.9,01,368/- and Rs.9,42,054/- were paid respectively alogwith interest in the month of November, 2017 and January, 2018.

Refund application was filed on 27.03.2011 within the limitation period of one year in terms of Section 11B of Central Excise Act, 1944 seeking refund of Service Tax, as after the onset of GST regime w.e.f. 01.07.2017, it could not avail the credit and sought cash refund by invoking protection granted under Section 174 and 142 of the CGST Act, 2017. Learned adjudicating authority rejected the refund application on the ground that GST was payable on the recorded transactions since final booking was made in the books of account on 30.11.2017 and 31.12.2017 though service had been rendered during pre GST regime i.e. prior to July, 2017. Appellant’s plea before the Commissioner (Appeals), challenging the said order of rejection of refund, yielded no fruitful result for which appellant preferred this appeal before this forum.

Contention of Taxpayer

During the course of hearing of the appeal learned Counsel for the appellant Shri S. Narayanan, with reference to the provision contain in Section 143(3), 142(6)(a), 142(5) and Section 174 of CGST Act vis-a-vis judicial decisions rendered by four different Benches of this Tribunal in the case of M/s. NSSL Pvt. Ltd. Vs. Commissioner of CGST & Central Excise, Nagpur [2021-TIOL-469- CESTAT-MUM, M/s Terex India Pvt. Ltd Vs. The Commissioner Of GST And Central Excise [2021-TIOL-696-CESTAT-MAD], M/s Circor Flow Technologies India Pvt. Ltd Vs. The Principal Commissioner Of GST and Central Excise – Coimbatore – 641018-Service Tax Appeal No. 40597 of 2020, M/s Jagannath Polymers Pvt. Ltd. Vs. Commissioner of CGST, Jaipur-1 [2022-TIOL-66 CESTAT-DEL], Flexi Caps And Polymers Pvt. Ltd. Vs Commissioner of CGST and Central Excise, Indore- [2021-TIOL-611-CESTAT-DEL], Rawalwasia Ispat Udyog Pvt. Ltd. Vs. Commissioner of Central Excise, Panchkula- [2019 (26) G.S.T.L. 196 (Tri. – Chan.)] submitted that the claim filed by the Appellant merits consideration and Appellant was eligible to avail credit of Service Tax paid as input services were used for manufacturing activity.

Also since carrying forward of CENVAT credit to GST regime had expired on 27.12.2017 and there was no other alternative except to get the CENVAT credit in cash as contemplated under Section 142(3) of the CGST Act Appellant found no other alternative except invoking the jurisdiction of this Tribunal for appropriate remedy.

Contention of Department

Appeal Against the order u/s 107 to 109 of the GST Act in the exercise of Sec 142 of the said Act, can only be maintainable before the CGST Tribunal, which is yet to be constituted

The, learned Authorised Representative for the Respondent-Department Mr. Dilip M. Shinde, while supporting the reasoning and rationality of the order passed by the learned Commissioner (Appeals), also raised strong objection to the jurisdiction of CESTAT in scrutinising the legality of the order passed by the Commissioner (Appeals) under Section 107 to 109 of the GST Act in exercise of Section 142 of the said Act, since appeal against such an order can only be maintainable under Section 112 of the CGST Act before the CGST Tribunal, which is yet to be constituted.

In citing CESTAT order reported in 2020 (41) GSTL 323 (Tri.-Hyd.) in the case of Aditya Steel Rolling Mills Pvt. Ltd. Vs. CCT, Visakhapatnam-GST wherein it was held that decision pertaining to transitional provisions being decisions under CGST Act which officers are fully competent to deal with but not the Tribunal that is competent to decide such appeals, it is the GST Appellate Tribunal which can hear appeals against such decisions, for which he seeks no indulgence of CESTAT in the appeal preferred by the present Appellant.

CESTAT Order

Whether the Appeal is maintainable at CESTAT?

Any proceeding including an appeal if filed after the appointed day under the Repealed Act also, the same shall be continued under the said Act as if GST Act has not come into force and the previous Act has not been amended or Repealed.

The CESTAT was of firm opinion that this appeal is maintainable before the CESTAT and this Bench is competent to decide the issue of refund of CENVAT credit as such an order has been passed in accordance with the existing law and not under the GST Act.

The Appeal was rejected by the Commissioner (Appeals) solely on the ground that GST was payable and no evidence of payment of GST was available is also not tenable and is erroneous to the extent that under the GST Act recovery provisions are also available which can be resorted to by the competent authority instead of making a pre-condition of payment of GST to facilitate the refund process that was instituted under the erstwhile Central Excise Act in borrowing force from the new GST Act itself. That apart, the forwarding memo of the Order-in-Original reveals that appeal under Section 85 of the Finance Act, 1994 shall be maintainable and the Order-in-Appeal forwarding memo also reveals that appeal lies to CESTAT under Section 35B of the Central Excise Act, 1944 / Section 86(1) of Chapter–V of the Finance Act, 1994.

CESTAT sets aside the order of denial to avail CENVAT credit on Service Tax paid during GST regime under Reverse Charge Mechanism (RCM)

The appeal is allowed and the order passed by the Commissioner of Central Tax (Appeals-I), Pune vide Order-in-Appeal No. PUN-EXCUS-001-APP-526/2018-19 dated 18.12.2018 is hereby set aside. Appellant is entitled to get the refund of CENVAT credits against which payment of Service Tax was made during the GST regime and accepted by the Respondent-Department. The Respondent-Department is directed to pay the refund amount of Rs.18,43,422/- alongwith applicable interest within three months of receipt of this order.