Time period for claiming refund of excess Service Tax paid under TRAN-1, to be counted from date of it’s reversal

The Hon’ble CESTAT Ahmedabad, in Pujan Builders Engineers & Contractors v. CCE and ST Vadodara-II [Service Tax Appeal No. 10516 of 2020, decided on February 11, 2021] set aside the order passed by the Commissioner (Appeals) rejecting the refund claim of excess paid Service Tax of INR 1,61,203/- on the ground of time barred. Held that, the time period for claiming the excess Service Tax paid under GST TRAN-1 is to be counted from date of its reversal. Hence, the same is not time barred.

Facts:

Pujan Builders Engineers & Contractors (“the Appellant”) during the period of April to June 2017 filed ST-3 Return on August 14, 2017. Due to cancellation of some of the invoices, the Appellant has revised the Returns on September 21, 2017, which was accepted by the department as no objection was raised. Due to cancellation of some of the invoices, the amount of Service tax, relevant to those cancelled invoices were paid in excess. In the revised Return, an amount of INR 1,61,203/- was considered as excess Service tax amount which was credited in TRAN-1.

The GST department took objection and the amount which was transferred in TRAN-1 was reversed along with payment of interest by the Appellant on February 27, 2019, thereafter the Appellant filed a refund application on April 05, 2019 for excess payment of Service tax made by the Appellant. By the Order-In- Original dated February 13, 2020 (“OIO”) the refund was rejected on the ground of time barred by treating the relevant date is the date of payment of Service tax i.e., July 05, 2017 under Section 11B of Central Excise Act, 1944 (“Central Excise Act”).

Being aggrieved by the OIO, the Appellant filed an appeal before the Commissioner (Appeals) which was also rejected maintaining the OIO, therefore, the present appeal has been filed by the Appellant.

Issue:

Whether the denial on the ground of time limitation by the adjudicating authority for claiming the refund of excess Service tax paid under TRAN-1 is correct?

Held:

The Hon’ble CESTAT Ahmedabad, in Service Tax Appeal No. 10516 of 2020, decided on February 11, 2021 held as under:

• Observed that, the facts in the present case are not under dispute that the Appellant have paid the excess Service tax during the quarter April to June 2017, however, the Appellant under bona fide belief transferred the said excess paid Service tax into their TRAN-1 as balance in personal ledger account. Subsequently, on objection raised by the GST department the Appellant have reversed the said amount and also paid an interest of ₹ 52,256/- on February 27, 2019. Noted that, the Appellant has transferred the amount of excess paid Service tax in the TRAN-1 and same was reversed on February 27, 2019, therefore till the date up to February 27, 2019, there was no cause for claiming refund of this amount. The refund is arising only after the Appellant reversed the amount on February 27, 2019.
• Held that, the refund was admittedly filed on April 05, 2019 i.e., well within the prescribed time limit of 1 year in terms of Section 11B of the Central Excise Act. Therefore, the refund was filed well within the time. Hence, the same is not time barred.
• Stated that, the issue of unjust enrichment need to be verified at the time when the refund is to be granted to the assessee. Therefore in the present case also though the refund is not hit by limitation but the fact that whether the incidence of the refund amount has been passed on or otherwise needs to be examined by the sanctioning authority.
• Set aside the OIO and remanded back the matter to the adjudicating authority to only verify the unjust enrichment and accordingly, to dispose of the refund claim of the Appellant.

Comments:

Under GST regime, any person claiming the refund of the GST, or the interest paid should make an application within a period of two years from the relevant date using the Form GST RFD-01 electronically. The refund of tax is dealt under Section 54 of the CGST Act that reads as below:

“54. (1) Any person claiming refund of any tax and interest, if any, paid on such tax or any other amount paid by him, may make an application before the expiry of two years from the relevant date in such form and manner as may be prescribed:

Provided that a registered person, claiming refund of any balance in the electronic cash ledger in accordance with the provisions of sub-section (6) of section 49, may claim such refund in the return furnished under section 39 in such manner as may be prescribed.”

The meaning of relevant date is very important in regard to refund provisions under the CGST Act, as it states that any person claiming refund may make an application before the expiry of two years from the relevant date which has been defined under Explanation (2) to the Section 54 of the CGST Act, the same reads as below:

(2) “relevant date” means-

(a) in the case of goods exported out of India where a refund of tax paid is available in respect of goods themselves or, as the case may be, the inputs or input services used in such goods,––

(i) if the goods are exported by sea or air, the date on which the ship or the aircraft in which such goods are loaded, leaves India; or

(ii) if the goods are exported by land, the date on which such goods pass the frontier; or

(iii) if the goods are exported by post, the date of despatch of goods by the Post Office concerned to a place outside India;

(b) in the case of supply of goods regarded as deemed exports where a refund of tax paid is available in respect of the goods, the date on which the return relating to such deemed exports is furnished;

(c) in the case of services exported out of India where a refund of tax paid is available in respect of services themselves or, as the case may be, the inputs or input services used in such services, the date of––

(i) receipt of payment in convertible foreign exchange or in Indian rupees wherever permitted by the Reserve Bank of India, where the supply of services had been completed prior to the receipt of such payment; or

(ii) issue of invoice, where payment for the services had been received in advance prior to the date of issue of the invoice;

(d) in case where the tax becomes refundable as a consequence of judgment, decree, order or direction of the Appellate Authority, Appellate Tribunal or any court, the date of communication of such judgment, decree, order or direction;

(e) in the case of refund of unutilised input tax credit under clause (ii) of the first proviso to sub-section (3), the due date for furnishing of return under section 39 for the period in which such claim for refund arises;

(f) in the case where tax is paid provisionally under this Act or the rules made thereunder, the date of adjustment of tax after the final assessment thereof;

(g) in the case of a person, other than the supplier, the date of receipt of goods or services or both by such person; and

(h) in any other case, the date of payment of tax.

Relevant Provision:

Section 11B(1) of Central Excise Act:

“Claim for refund of duty and interest, if any, paid on such duty –

Any person claiming refund of any duty of excise and interest, if any, paid on such duty may make an application for refund of such duty and interest, if any, paid on such duty to the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise before the expiry of one year from the relevant date in such form and manner as may be prescribed and the application shall be accompanied by such documentary or other evidence (including the documents referred to in section 12A) as the applicant may furnish to establish that the amount of duty of excise and interest, if any, paid on such duty in relation to which such refund is claimed was collected from, or paid by, him and the incidence of such duty and interest, if any, paid on such duty had not been passed on by him to any other person :

Provided that where an application for refund has been made before the commencement of the Central Excises and Customs Laws (Amendment) Act, 1991, such application shall be deemed to have been made under this sub-section as amended by the said Act and the same shall be dealt with in accordance with the provisions of sub-section (2) substituted by that Act:

Provided further that the limitation of one year shall not apply where any duty and interest, if any, paid on such duty has been paid under protest.”

Explanation (B) to Section 11B of the Central Excise Act:

(B) “relevant date” means,-

(a) in the case of goods exported out of India where a refund of excise duty paid is available in respect of the goods themselves or, as the case may be, the excisable materials used in the manufacture of such goods,-

(i) if the goods are exported by sea or air, the date on which the ship or the aircraft in which such goods are loaded, leaves India, or

(ii) if the goods are exported by land, the date on which such goods pass the frontier, or

(iii) if the goods are exported by post, the date of despatch of goods by the Post Office concerned to a place outside India;

(b) in the case of goods returned for being remade, refined, reconditioned, or subjected to any other similar process, in any factory, the date of entry into the factory for the purposes aforesaid;

(c) in the case of goods to which banderols are required to be affixed if removed for home consumption but not so required when exported outside India, if returned to a factory after having been removed from such factory for export out of India, the date of entry into the factory;

(d) in a case where a manufacturer is required to pay a sum, for a certain period, on the basis of the rate fixed by the Central Government by notification in the Official Gazette in full discharge of his liability for the duty leviable on his production of certain goods, if after the manufacturer has made the payment on the basis of such rate for any period but before the expiry of that period such rate is reduced, the date of such reduction;

(e) in the case of a person, other than the manufacturer, the date of purchase of the goods by such person;

(ea) in the case of goods which are exempt from payment of duty by a special order issued under sub-section (2) of section 5A, the date of issue of such order;

(eb) in case where duty of excise is paid provisionally under this Act or the rules made thereunder, the date of adjustment of duty after the final assessment thereof;

(ec) in case where the duty becomes refundable as a consequence of judgment, decree, order or direction of appellate authority, Appellate Tribunal or any court, the date of such judgment, decree, order or direction ;

(f) in any other case, the date of payment of duty.”

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