Custom, Excise & Service Tax Tribunal
Mr Colorplast Systems Pvt Ltd vs Ce & Cgst Noida on 5 May, 2025
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
ALLAHABAD
REGIONAL BENCH - COURT NO.II
Service Tax Appeal No.70009 of 2021
(Arising out of Order-in-Appeal No. NOI-EXCUS-001-APP-718-20-21, dated -
22/09/2020 passed by Commissioner (Appeals) CGST, Noida)
M/s Colorplast Systems Pvt. Ltd. .....Appellant
(C-8, Sector 65,
Noida, Uttar Pradesh 201301)
VERSUS
Commissioner, CGST, Noida ....Respondent
(Noida)
APPEARANCE:
Ms. Stuti Saggi, Advocate for the Appellant
Shri Santosh Kumar, Authorized Representative for the Respondent
CORAM: HON'BLE MR. SANJIV SRIVASTAVA, MEMBER (TECHNICAL)
FINAL ORDER NO.-70283/2025
DATE OF HEARING : 05.05.2025
DATE OF DECISION : 05.05.2025
SANJIV SRIVASTAVA:
This appeal is directed against Order-in-Appeal No. NOI-
EXCUS-001-APP-718-20-21 dated 22.07.2020 of the
Commissioner, CGST (Appeals), Noida. By the impugned order
the order in original No. 101/R/AC/CGST/Div-III/20-21 dated
05.05.2020, in which the Assistant Commissioner rejected the
refund claim of Rs. 4,53,986/- filed by the Appellant.
2.1 The Appellant is engaged providing/ receiving of Business
Auxiliary Services, Packing Services, Certification Service, Legal
Consultancy Service and Ocean Freight Service
2.2 During course of audit for period from 01.04.2016 to
30.06.2017 it was observed that Appellant had short/ not paid
service tax required to be paid on reverse charge basis on:
2 Service Tax Appeal No.70009 of 2021
Import of certification services - Rs 10,75,425/-
Legal Consultancy Service - Rs 37,500/-
Ocean Freight Service - Rs 30,051
2.3 Appellant on being pointed out by the audit deposited the
above amounts along with interest and penalty through various
challans dated 08.02.2018.
2.4 Appellant vide letter dated 25.04.2018 received in the
office of jurisdictional Assistant Commissioner on 26.04.2018
claimed refund of the amount (Rs 11,42,972/-) under Section
11B of Central Excise Act, 1944 read with Section 142(3) of the
Central Goods and Services Tax Act, 2017, stating that:
The amount paid by them under reverse charge
mechanism is available to them as CENVAT Credit;
due to implementation of CGST Act, 2017 with effect from
01.07.2017, they cannot claim the CENVAT credit of the
same or carry forward this to the GST-ITC account, as the
time for claiming the same has elapsed;
as they cannot avail the credit of this amount or carry
forward the same GST-ITC account they are claiming the
refund of the same.
2.5 A show cause notice dated 28.09.2018 was issued to the
Appellant proposing to reject the refund claim basis the
allegation that there was no provision which allowed refund of
service tax paid under RCM.
2.6 The show cause notice was adjudicated by the Assistant
Commissioner vide order in original referred in para 1 above
whereby, the refund claim was rejected. The Assistant
Commissioner specifically stated that the CENVAT Credit for the
previous period can be carried forward under the provision of the
GST Act and Rules in the form of TRAN - 1 and that the Rules
allowed the transfer of CENVAT Credit amount which they
received prior to the roll out of GST in the prescribed manner,
and therefore, the claim of the Appellant for refund cannot be
allowed or extended and there is no provision under the
3 Service Tax Appeal No.70009 of 2021
erstwhile law which governs the refund of service tax paid under
RCM.
2.7 The appeal filed by the Appellant was dismissed by the
impugned Order referred in Para 1 above.
2.8 Aggrieved Appellant has filed this appeal.
3.1 I have heard Ms Stuti Saggi, Advocate for the Appellant
and Shri Santosh Kumar, Authorized Representative for the
Revenue.
3.2 Arguing for the Appellant learned counsel submits that the
amount paid by the Appellant under reverse charge mechanism
was available to them as CENVAT Credit and hence the situation
was totally revenue neutral. Thus the amount claimed as refund
by them should have been allowed in their favour in terms of
Section 11B of the Central Excise Act, 1944 read with Section
142 (3) of CGST Act, 2017 as have been held by the Tribunal in
series of cases.
3.3 Learned authorized representative reiterated the findings
recorded in the impugned order
4.1 I have considered the impugned order along with the
submissions made in appeal and during the course of arguments.
4.2 Impugned order records the findings as follows for
dismissing the appeal-
"5. I have carefully gone through the issue involved and find
that the amount of Service Tax that was deposited under
RCM which was deposited on 08/02/2018 was not made by
Appellant voluntarily. The taxability of the service was
known to them but they never paid the Service Tax during
the material period from 1s April 2016 to 30th June 2017,
and they completely suppressed the facts from the
department. It was only after the detection by the officers
of Audit that such non - payment of Service Tax came out in
the open which was belatedly deposited by them in the
month of February, 2018. In view of such factual situation, I
find that the CENVAT Credit cannot accrue to them even
4 Service Tax Appeal No.70009 of 2021
though it was a payment made under the Reverse Charge
Mechanism. Moreover, by the time the payment was made,
the transition period for transferring the accumulated
CENVAT Credit as on 30/06/2017 was already closed, and
no more available for transition towards ITC in the GST
regime. Such transition through TRAN - 1 is available only
to the extent which was admissible and available as on the
date of transition to the new taxation regime (as on
30/06/2017), therefore, transition to the GST is out of the
question. It is also found that at the time of payment of the
Service Tax under the RCM the provision of CENVAT Credit
under the CENVAT Credit Rules, 2004 was no more
operative, and if the Appellant had taken such book entry
in their books of accounts, it would tantamount to a mere
formality without any substance. Such empty formality of
book entry, if any, made by the Appellant without any
authority of law cannot be a basis for claiming or granting
the refund of a non-existing amount of a ghost credit
6. The mere accumulation of CENVAT Credit if any, is also
not a reason to allow the refund of duty in cash, unless it is
provided for in the law. I find that the transition provision
under CGST Act, 2017 is only an enabling provision which
allows the refund of duty even after the coming into force of
the new taxation regime. But that does not mean that a
non-existing refund claim should also be allowed under the
provision of the transition provision under Section 147
ibid. Section 11 B (2), Clause C provided for refund of
CENVAT Credit if it is provided for in the Rules, as well as, if
a notification is issued for such purpose, such is not the
case here. I also find that Rule 5 of the CENVAT Credit Rules
allows refund of accumulated CENVAT Credit on account of
exports, however, such is not the case here.
7. The issue of accumulated CENVAT Credit and refunds
thereof was a subject matter of serious concerned, and the
Hon'ble Bombay High Count in the case of
5 Service Tax Appeal No.70009 of 2021
Gauri_plasticulture Pvt. Ltd. Versus CCE reported in 2019
(30 GSTL 224), which was a reference to a Larger Bench
had examined the issue exhaustively, and came to the
conclusion that accumulated CENVAT Credit could not be
refunded even though it may not be possible to utilize such
accumulated credit, unless it is provided for in the Rules or
a notification issued on such behalf. The Hon'ble Court also
find that Rule 5 of the CCR, 2004 is also not applicable to
such refund claims as Rule 5 specifically pertains to
accumulation of Credit on account of exports only.
8. In view of the binding decision of the Hon'ble
Bombay High Court in view of the facts and circumstances
of the case involved in the present Appeal, I find that the
payment of Service Tax under RCM by the Appellant after
detection by the department is not available as CENVAT
Credit under Rule 9 of the CCR, 2004, and therefore, the
claim of the Appellant for refund of such non existing credit
is without any basis. The claim of the Appellant for invoking
the transition provision of the CGST Act is also without any
basis, in as much as, the transition provision will apply only
to cases where the refund of duty is actually admissible or
available under the existing Law and not otherwise.
4.3 The Order-In-Original records the findings as follows:
"I have carefully gone through the record of the case,
defence submission of the noticee and record of personal
hearing. Examination of the record revealed that the noticee
company filed a claim of refund of Rs.11,42,976/-vide their
letter dated 25.04.2018. The ground for refund has been
cited as "The amount is being claimed as Cenvat paid within
the ambit of service tax law. The demand raised by
department belongs to invoices pertaining to certification
service, legal and professional charges and Ocean freight
and that service tax had been deposited under the
provisions of Reverse Charge Mechanism. Due to
implementation of GST w.e.f. 01.07.2017, the amount of
6 Service Tax Appeal No.70009 of 2021
tax deposited by them which belonged to prevalent law
applicable during the subject tax period and for which they
were legitimately entitled for taking credit, had lapsed as
per transitional provisions contained in GST Law in as much
as the tax was deposited on 08.02.2018 and transitional
provisions for taking credit has lapsed much earlier, Thus
though, they were entitled for refund of taxes deposited
under reverse charge mechanism, yet they technically got
forbidden against taking credit. They therefore preferred a
claim of refund
It is however, observed in the course of scrutiny of their
refund claim that the noticee company was not entitled for
availment of cenvat credit as well as for claiming refund of
the amount on the above stated ground. They were
therefore, served with notice to show cause as to why their
claim of refund may not be rejected being not admissible to
them. It was alleged in the show cause notice that the party
was under obligation to maintain proper record for the
receipt and consumption of the input services in which the
relevant information regarding the value, tax paid, cenvat
credit taken and utilized, under the provisions of sub Rule 6
of Rule 9 of Cenvat Credit Rules, 2004, which they failed to
declare. The suppression of such information was obvious
with a view to evade payment of tax which in consequence
rendered them ineligible for taking credit in ratio to the
provisions of Rule 9(ii) of Cenvat credit Rules, 2004. It was
observed that the amount of tax was detected by the audit
officers of the department which was got deposited with the
provisions of penalty and interest. Therefore, in the light of
the explicit provisions of Rule 9 of Cenvat Credit Rules,
2004, which debar them to take credit of the amount so got
deposited after detection of case by audit involving
suppression of information from the department. Hence the
noticee was not found entitled for availment of cenvat credit
of tax deposited under reverse charge mechanism, being
violative of Rule 9(ii) of Cenvat credit Rules 2004.
7 Service Tax Appeal No.70009 of 2021
The aforesaid allegations contained in show cause notice
were not commented upon by the noticee party in their
defence submission as well as in the course of personal
hearing. They instead of replying to the specific allegations
contained in the show cause notice raised the bogey of
legality of the audit conducted by the department which
appears anything in the nature irrationality bereft of
substance and just an argument for the sake of argument.
Therefore, needs no discussion and examination. Their
argument regarding taxability of certification service and
legal and professional service also find no merit being
outside the scope and ambit of Finance Act' 1994 hence not
tenable,
It is observed that the assesse suppressed the material
information from the department and the service tax was
deposited on being detected by audit with penal provision,
such deposit of tax do not qualify for taking credit under the
scheme of Rules as discussed aforesaid. In view of the
matter the assesse appears not entitled for cenvat credit.
Their request for allowing cenvat credit is therefore, not
supported by the provisions of law as discussed supra. I
also find that there is no reason for them to claim refund of
the amount deposited as tax due to them.
In view of the matter, I am convinced that no refund is
payable to them therefore, their claim of refund is liable to
be rejected."
4.4 It is not provided in law that the all the amounts paid
under RCM should be admissible as refund to the Appellant. Both
the authorities below have concluded that the CENVAT Credit of
the amount paid by the Appellant under reverse charge
mechanism was not admissible to them, in terms of Rule 9 (1)
(b) of the CENVAT Credit Rules, 2004 as the amount of service
tax paid by them was against the amount which was not paid on
account of suppression of facts from the department. The
amount was paid along with and penalty by the Appellant which
8 Service Tax Appeal No.70009 of 2021
was applicable. Appellant has in the present appeal not shown as
to why the such finding recorded by the authorities below is
erroneous except for stating that because the issue is revenue
neutral refund should be admissible to them. It is settled
position in law that such an argument cannot support the case
sought to be pleaded by the Appellant for revenue neutrality. In
case of Jay Yushin Ltd. [2000 (119) E.L.T. 718 (Tribunal -
LB)] larger bench (five member bench) of Tribunal observed
as follows:
"11. We have considered the rival submissions and have
perused the case law. We find that in five cases in the list of
cases referred to in Para 9 above and relied upon by the ld.
Counsel for the Appellants, viz., cases at Sl. Nos. 2,4,6,7
and 8, two options were available to the assessee, one of
paying the duty at the time of clearance of the goods and
the other, clearing the excisable goods without payment of
duty either under some Exemption Notification or under
some other legal provision. It was in such circumstances
that the Tribunal had taken the view that when the option of
clearing the goods without payment of duty was
simultaneously available to the assessee, the non-
paymert/short payment was not attributable to any
intention to evade payment of duty. In the other seven
cases viz., cases against Sl. No. 1,3,5,9,10,11 and 12 in the
list of cases mentioned in Para 9 above, the option of
availing Modvat credit was available to the assessee even
though he was not availing of it. In the present case, the
claim of the Appellants that duty free clearance under Notfn.
No. 214/86 was concurrently available to them and
therefore no intention to evade duty payment can be
inferred does not appear to merit acceptance since it is not
in dispute that the Appellants were admittedly availing of
modvat credit under Rule 57A and Rule 57Q. There is also
no evidence on record to show that MUL had given any
undertaking under Para 2 of Notfn. No. 214/86 in relation to
the manufactured items sold by the Appellants to MUL. The
9 Service Tax Appeal No.70009 of 2021
said defence cannot therefore be accepted for want of
factual substantiation. As regards the contention of the
Appellants that the SCN issued under Section 11A(1) would
apply only to a situation where a duty payment is subsisting
at the time of issue of notice and where no such outstanding
duty liability exists at the time of issuing the SCN, we are of
the view that a careful reading of Section 11A(1) does not
allow such a construction to be put on the said provision.
Inasmuch as Section 11A(1) gives power to the Central
Excise Officer to serve a notice within a period of six months
from the 'relevant date' from the date when non-levy/non-
payment or short levy/short payment has occurred, we are
of the view that so long as it is not in doubt that there has
been an occurrance of non-levy/short levy/ or non-
payment/short payment on the relevant date the pre-
conditions for issuance of SCN under Section 11A(1) are
fully met and notice validly issued. In the instant case there
is no dispute that clearance of excisable goods on short
payment of duty had taken place. The fact that the
differential duty was subsequently debited (albeit
voluntarily) by the assessee before the issue of SCN will not
debar the issuance of SCN in relation to the short payment
occurring on the relevant date. Further, to the extent the
Appellants had stated in their price list declaration that no
extra consideration had been received from the suppliers of
the components despite the known fact that the said
components were received free of cost, the allegation of
suppression of facts in terms of the proviso to Section
11A(1) has to be held to have been established. The fact
that there was a huge duty differential of an amount of over
Rs. 55 lakhs between the duty paid by the Appellants and
debited by them later, is a strong circumstance which
supports the inference of their intention to evade duty as
the said amount has undeniably resulted in a financial gain
for the Appellants during the period and this financial gain
flowed directly from the non-inclusion of the cost of the
10 Service Tax Appeal No.70009 of 2021
components in the assessable value. We are therefore
satisfied that there will be no illegality in invoking the
extended period of limitation under Section 11A(1) in a case
like this.
12. As regards the demand of penalty under Section 11AC,
as has been stated above the ingredients for invoking the
said provision are in par materia with the ingredients to
proviso to Section 11A(1). Having regard to the view we
have taken above, where no legal infirmity in invoking the
proviso to Section 11A(1) is shown to exist, there will also
be no infirmity in invoking of penal provision under Section
11AC.
13. In the light of the above discussion, we answer the
reference as under:
(a) Revenue neutrality being a question of fact, the same
is to be established in the facts of each case and not
merely by showing the availability of an alternate
scheme;
(b) Where the scheme opted for by the assessee is found
to have been misused (in contradistinction to mere
deviation or failure to observe all the conditions) the
existence of an alternate scheme would not be an
acceptable defence;
(c) With particular reference to Modvat scheme (which
has occasioned this reference) it has to be shown that
the Revenue neutral situation comes about in relation
to the credit available to the assessee himself and not
by way of availability of credit to the buyer of the
assessee's manufactured goods;
(d) We express our opinion in favour of the view taken in
the case of M/s. International Auto Products (P) Ltd.
(supra) and endorse the proposition that once an
assessee has chosen to pay duty, he has to take all
the consequences of payment of duty."
11 Service Tax Appeal No.70009 of 2021
4.5 Thus if the amount paid by the Appellant under reverse
charge mechanism was not admissible to them as CENVAT Credit
then the orders of lower authorities cannot be faulted with.
4.6 Even if it is held that the claim of Appellant to CENVAT
credit could have been entertained then also the refund cannot
be allowed to them. The scheme of CENVAT Credit as per
CENVAT Credit Rules, 2004 had extinguished on 30.06.2017,
and the amounts of CENVAT Cedit available as balance with the
manufacturer/ service providers was allowed to be transited into
newly introduce GST Regime in the manner as provide under
Section 140 of the CGST Act, 2017. The phrase "CENVAT Credit"
also got erased from the law from that date and the claim made
by the Appellant that this amount was available as CENVAT
Credit cannot have any sanctity in law on the date when the
Appellant paid these amounts claimed as refund under the name
of un-utilized CENVAT Credit. The credit which was never taken
in the book of accounts or was not due during the prevalence of
the said scheme could not be claimed as the credit earned. I do
not find any merits in the submissions made by the Appellant on
this account.
4.7 Appellant have relied upon series of decision of the
Tribunal to support their case. However I do not find any
relevance of the decisions of Tribunal in the matter as the issue
has been authoritatively considered by Hon‟ble High Court of
Jharkhand in the case of Rungta Mines [2022-TIOL-252-HC-
JHARKHAND-GST] and following has been held:
"Legal proposition on the point of refund: -
7. In a recent judgement of the Hon'ble Supreme Court, in
the case of "Union of India and Others vs VKC Footsteps
India Private Ltd." reported in 2021 SCC online SC 706 =
2021-TIOL-237-SC-GST, the Hon'ble Supreme Court dealt
with the provision of refund of tax under Section 54 of the
CGST Act and has extensively dealt with the principles of
refund in the matter of taxation. In the said case, the
Hon'ble Supreme Court was dealing with the conflicting view
12 Service Tax Appeal No.70009 of 2021
of Hon'ble Gujarat High Court and Hon'ble Madras High
Court on the point of validity of Rule 89 (5) which provided
a formula for a refund of ITC and the case of refund on
account of inverted duty structure under sub-Section 3 and
Section 54 inter alia dealing with credit accumulation on
account of rate of tax on inputs being higher than the rate
of tax on output supplies. The Hon'ble Supreme Court
ultimately upheld the view of the Hon'ble Madras High Court
which held that refund is statutory right and the extension
of the benefit of refund only to the unutilised credit that
accumulates on account of rate of tax on input goods being
higher than the rate of tax on output supplies, by excluding
unutilised input tax credit that accumulated on account of
input services, is a valid classification and a valid exercise of
legislative power. The Hon'ble Supreme Court accepted the
submission of Mr. N. Venkataraman, learned ASG on the
legal proposition on the point of refund. The submissions of
Mr. N. Venkataraman, learned ASG on the point of legal
proposition have been recorded in para-D.1.3 Part (III), as
under: -
"(i) Article 265 of the Constitution provides that no tax shall
be levied or collected except by authority of law. There
being no challenge either to the levy or collection of taxes in
these cases, taxes paid into the coffers of the Union
Government or the States become the property of the
Union/States;
(ii) The refund of taxes is neither a fundamental right nor a
constitutional right. The Constitution only guarantees that
the levy should be legal and that the collection should be in
accordance with law. 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
13 Service Tax Appeal No.70009 of 2021
Mafatlal Industries Limited vs 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 as
unconstitutional;
(v) The doctrine of reading down is employed to narrow
down the scope of a proviso under challenge, when it may
otherwise be unconstitutional. The doctrine cannot result in
expansion of a statutory provision for refund which would
amount to rewriting the legislation;
(vi) Accepting the submission of the assessees that goods
and services must be treated at par can lead to drastic
consequences in terms of:
(a) rates of taxes;
(b) concessions, benefits and exemptions;
(c) intervention in the areas of political, economic and
legislative policies;
(vii) Refund of taxes is one form of granting exemption;
(viii) Once a refund is construed as a form of exemption
from taxes, the provision has to attract strict interpretation;
14 Service Tax Appeal No.70009 of 2021
(ix) Exemptions, concessions and exceptions have to be
treated at par and must be strictly construed;
(x) ITC is not a matter of right and the burden of proof is on
the assessee to establish a claim for a concession or
benefit;
(xi) The manner in which a proviso can be construed has
been elucidated in the precedents of this Court. A proviso
may not be only an exception but may constitute a
restriction on the operation of the main statutory provision;
and
(xii) A legislative amendment which reflects a policy choice
is not subject to judicial review."
8. The Hon'ble Supreme Court crystalised and laid down the
law in connection with refund under Taxation and some of
the paragraphs of the judgement are quoted as under:
"87. We must be cognizant of the fact that no constitutional
right is being asserted to claim a refund, as there cannot
be. Refund is a matter of a statutory prescription.
Parliament was within its legislative authority in determining
whether refunds should be allowed of unutilised ITC tracing
its origin both to input goods and input services or, as it has
legislated, input goods alone. By its clear stipulation that a
refund would be admissible only where the unutilised ITC
has accumulated on account of the rate of tax on inputs
being higher than the rate of tax on output supplies,
Parliament has confined the refund in the manner which we
have described above. While recognising an entitlement to
refund, it is open to the legislature to define the
circumstances in which a refund can be claimed. The
proviso to Section 54(3) is not a condition of eligibility (as
the assessees' Counsel submitted) 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.
15 Service Tax Appeal No.70009 of 2021
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.)
vs Dharmendra Trading Company reported in (1988) 3 SCC
570] = 2002-TIOL-1803-SC-CT.
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 confined the grant
of refund in terms of the first proviso to Section 54(3) to the
two categories which are governed by clauses (i) and (ii). A
claim to refund is governed by statute. There is no
constitutional entitlement to seek a refund. Parliament has
in clause (i) of the first proviso allowed a refund of the
unutilized ITC in the case of zero-rated supplies made
without payment of tax. Under clause (ii) of the first
proviso, Parliament has envisaged a refund of unutilized
ITC, where the credit has accumulated on account of the
rate of tax on inputs being higher than the rate of tax on
output supplies. When there is neither a constitutional
guarantee nor a statutory entitlement to refund, the
submission that goods and services must necessarily be
treated at par on a matter of a refund of unutilized ITC
cannot be accepted. Such an interpretation, if carried to its
logical conclusion would involve unforeseen consequences,
16 Service Tax Appeal No.70009 of 2021
circumscribing the legislative discretion of Parliament to
fashion the rate of tax, concessions and exemptions. If the
judiciary were to do so, it would run the risk of encroaching
upon legislative choices, and on policy decisions which are
the prerogative of the executive. Many of the considerations
which underlie these choices are based on complex balances
drawn between political, economic and social needs and
aspirations and are a result of careful analysis of the data
and information regarding the levy of taxes and their
collection. That is precisely the reason why courts are
averse to entering the area of policy matters on fiscal
issues. We are therefore unable to accept the challenge to
the constitutional validity of Section 54(3)."
9. Though in the instant case we are not dealing with
section 54 of CGST Act but are concerned with transitional
provisions dealing with "refund" under section 142(3) of the
CGST Act "in cash" under certain circumstances in
connection with taxes suffered under the previous regime.
However, the fundamental concepts and the interpretation
of law relating to refund would still be the same and what is
to be seen is whether the petitioner qualifies for entitlement
of refund under section 142(3) of CGST Act in the light of
the facts and circumstances of this case.
Legal proposition on the point of interpretation of
transitional provisions, vested rights etc with
reference to the judgements relied upon by the
learned 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
17 Service Tax Appeal No.70009 of 2021
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 an Act fails to include such provisions
expressly, the court is required to draw inferences as to the
intended transitional arrangements as, in the light of the
interpretative criteria, it considers Parliament to have
intended."
(Francis Bennion : Statutory Interpretation, 2nd Edn., p.
213)
The learned author has further pointed out:
"Transitional provisions in an Act or other instrument are
provisions which spell out precisely when and how the
operative parts of the instrument are to take effect. It is
important for the interpreter to realise, and bear constantly
in mind, that what appears to be the plain meaning of a
substantive enactment is often modified by transitional
provisions located elsewhere in the Act." (p. 213)
Similarly Thornton in his treatise on Legislative Drafting has
stated:
"The function of a transitional provision is to make special
provision for the application of legislation to the
18 Service Tax Appeal No.70009 of 2021
circumstances which exist at the time when that legislation
comes into force."
For the purpose of ascertaining whether and, if so, to what
extent the provisions of sub-section (1-A) introduced in
Section 23 by the amending Act are applicable to
proceedings that were pending on the date of the
commencement of the amending Act it is necessary to read
Section 23(1- A) along with the transitional provisions
contained in sub-section (1) of Section 30 of the amending
Act."
12. There is no doubt about the aforesaid proposition that
the transitional provisions are made to make special
provision for the application of legislation to the
circumstances which exist at the time when the legislation
comes into force and are applicable to proceedings that
were pending on the date of the commencement of the
amending Act.
13. So far as the judgment in the case of J. K. Cotton
Spinning and Weaving Mills Co. Ltd. (supra) is concerned,
the petitioner has referred to paragraphs-10 of the said
judgment, which is quoted as under: -
"10. Applying this rule of construction that in cases of
conflict between a specific provision and a general provision
the specific provision prevails over the general provision and
the general provision applies only to such cases which are
not covered by the specific provision, we must hold that Cl.
5(a) has no application in a case where the special
provisions of Cl. 23 are applicable."
The aforesaid judgment does not help the petitioner 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.
19 Service Tax Appeal No.70009 of 2021
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 = 2002-TIOL-131-SC-IT-LB 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 the right to refund in the matter of taxation is a
statutory right which is neither a fundamental right nor a
constitutional right and there is no equity in taxation. The
right crystalizes only when the statute permits refund as per
law and prescribed procedure.
15. It has been submitted that in the case of Gammon India
Ltd. vs Chief Secretary (supra), it has been held that the
rights which are saved by saving provisions continues even
after repeal. Further in the judgment passed by the Hon'ble
Supreme Court in the case of Baraka Overseas Trader
(supra), it has been held that the accrued rights under old
law is to be continued under the new law. However, the
moot question in the instant case is as to whether there was
any existing right of availing CENVAT Credit or refund on
the date of coming into force of the CGST Act in favour of
the petitioner which can be said to have accrued or vested
and consequently saved by the repealing provision of CGST
Act. The finding in later part of this judgement holds that
the petitioner did not have any existing right of availing
CENVAT Credit or refund on the date of coming into force of
the CGST Act which can be said to have accrued or vested
20 Service Tax Appeal No.70009 of 2021
and consequently saved by Section 174 (repeal and saving)
read with Section 6 of General Clause Act.
16. The learned counsel has themselves relied upon a
judgment passed by the Hon'ble Supreme Court in the case
of State of Punjab and Ors. vs Bhajan Kaur and Ors.
(supra), wherein Section 6 of General Clauses Act has been
interpretated by holding that the said provision inter-alia
saves a right accrued, but it does not create a right.
Paragraph-14 of the aforesaid judgment is quoted
hereinbelow for ready reference: -
"14. ................. Section 6 of the General Clauses Act,
therefore, inter alia, saves a right accrued and/or a liability
incurred. It does not create a right. When Section 6 applies,
only an existing right is saved thereby. The existing right of
a party has to be determined on the basis of the statute
which was applicable and not under the new one. If a new
Act confers a right, it does so with prospective effect when it
comes into force, unless expressly stated otherwise."
17. In the case of Glaxo Smith Kline PLC and Others
(supra), the Hon'ble Supreme Court has upheld the view of
the learned single judge of the High Court and held at Para-
17 as 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
21 Service Tax Appeal No.70009 of 2021
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 into the Rules pursuant
to the Budget for 1995-96 providing for lapsing of credit
lying unutilised on 16-3-1995 with a manufacturer of
tractors falling under Heading No. 87.01 or motor vehicles
falling under Headings Nos. 87.02 and 87.04 or chassis of
such tractors or such motor vehicles under Heading No.
87.06. However, credit taken on inputs which were lying in
the factory on 16-3-1995 either as parts or contained in
finished products lying in stock on 16-3-1995 was allowed.
Prior to the 1995-96 Budget, the Central excise/additional
duty of customs paid on inputs was allowed as credit for
payment of excise duty on the final products, in the
manufacture of which such inputs were used. The condition
required for the same was that the credit of duty paid on
inputs could have been used for discharge of duty/liability
only in respect of those final products in the manufacture of
which such inputs were used.
.............................
As pointed out by us that when on the strength of the Rules available, certain acts have been done by the parties concerned, incidents following thereto must take place in accordance with the Scheme under which the duty had been paid on the manufactured products and if such a situation is sought to be altered, necessarily it follows that the right, which had accrued to a party such as the availability of a scheme, is affected and, in particular, it loses sight of the fact that the provision for facility of credit is as good as tax 22 Service Tax Appeal No.70009 of 2021 paid till tax is adjusted on future goods on the basis of the several commitments which would have been made by the assessees concerned. Therefore, the Scheme sought to be introduced cannot be made applicable to the goods which had already come into existence in respect of which the earlier Scheme was applied under which the assessees had availed of the credit facility for payment of taxes. It is on the basis of the earlier Scheme necessarily that the taxes have to be adjusted and payment made complete. Any manner or mode of application of the said Rule would result in affecting the rights of the assessees.
6. We may look at the matter from another angle. If on the inputs, the assessee had already paid the taxes on the basis that when the goods are utilised in the manufacture of further products as inputs thereto then the tax on these goods gets adjusted which are finished subsequently. Thus, a right accrued 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.
23 Service Tax Appeal No.70009 of 2021
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, he cannot claim revival of such a right and claim refund of the same by virtue of transitional provisions under Section 140(3) of the CGST Act. The facts involved in the present case would demonstrate that the petitioner had no existing right on the date of coming into force of CGST Act to avail credit of the service tax paid on "port services" as CENVAT Credit and accordingly, the provision of Section 140(3) of the CGST Act cannot be construed to have conferred such a right which never existed on the date of coming into force of CGST Act.
21. So far as the judgment passed in the case of Kunal Kumar Tiwari vs State of Bihar (supra) is concerned, the same has been relied upon by the petitioner to submit that an interpretation which advances the purpose of object underlying the Act should be preferred. But the learned counsel for the petitioner has failed to show as to how the entitlements to CENVAT Credit on service tax paid on "port services" which the petitioner did not claim as per procedure prescribed by law can be construed to confer such a right to claim such credit under transitional provisions followed by cash refund and how such a position in law would advance the purpose and object of CGST Act. Rather, the aforesaid interpretation sought to be given by the petitioner is contrary to the very object and purpose of section 142(3) of CGST Act which has been discussed at a later part of the Judgement.
22. So far as the judgment passed in the case of M/s. DMR Constructions (supra) by Hon'ble Madras High Court is concerned, the same related to transition of accumulated tax deducted at source which existed on the date of coming into force of CGST Act and relief was granted to the 24 Service Tax Appeal No.70009 of 2021 petitioner in terms of transitional credit under section 140(1) of CGST Act.
23. However, in the instant case, the petitioner failed to claim transitional credit in terms of section 140(1) of the CGST, Act and wrongly took credit of the impugned service tax in ST-3 return and thereafter claimed refund of the same by referring to section 142(3) of CGST, Act. Accordingly, the said judgement does not apply to the facts and circumstances of this case.
The sequence of facts; case of the parties and the contents of the impugned orders
24. The petitioner was having Central Excise Registration for manufacture of sponge iron, billet and TMT Bar. The petitioner was also registered under 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/-.
25 Service Tax Appeal No.70009 of 2021 The petitioner claims to have paid the entire bill including service tax on port services in the month of April itself. The petitioner was entitled to claim the service tax paid on "port services" as CENVAT Credit in their ER-1 return as per the provisions of existing law. The petitioner has submitted that the CENVAT Credit was not taken as the original bill/invoice was not received though generated on 23.05.2017. Admittedly, the petitioner did not claim the service tax paid on "port services" involved in this case as CENVAT Credit in their relevant ER-1 return.
27. On account of non-inclusion of the service tax paid on port services in ER-1 Return, the petitioner could not have claimed the transition of the said CENVAT Credit as permissible transitional credit referrable to section 140 of CGST Act through TRAN-1 and could not utilise the same under CGST Regime. Admittedly, the time for filing TRAN-1 was extended till 31.10.2017 but still the impugned service tax on "port services" could not be included (although by this time the original bill/invoice was received on 20.09.2017) as this Service Tax as CENVAT Credit was not included in ER-1 return and the time for filing ER-1 return for the period in question had expired. Further the petitioner had claimed this amount in Service Tax return ST-3 filed on 22.09.2017.
28. Thus, the petitioner missed to exercise their rights to avail of transitional credit of the service tax paid on "port services" through the mechanism prescribed under the CGST Act (Section 140) read with the existing provisions of CENVAT Credit Rules, 2002. It is also important to note that the existing provision did not permit CENVAT Credit of service tax paid on "port services" without its inclusion in ER-1 Return and in absence of such inclusion within the prescribed time line the claim of credit stood completely lost and could not be claimed in TRAN - 1 as transitional credit under CGST Act. Admittedly, the petitioner was not entitled 26 Service Tax Appeal No.70009 of 2021 to claim the service tax paid on "port services" in their service tax return ST-3 as the petitioner was not an output service provider and was liable to file service tax return and pay service tax only under reverse charge mechanism. Admittedly, "port services" were not under reverse charge mechanism.
29. Further, Rule 5 of CENVAT Credit Rules, 2004 permits refund only when the services are used to export goods or services, which is not the case in the present case. It is not the case of the petitioner that the impugned 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 petitioner that they filed a refund claim for aforesaid amount of service tax paid to the port authority as they could not carry forward the aforesaid credit to their GST TRAN-1.
27 Service Tax Appeal No.70009 of 2021
33. On 28.06.2018 the petitioner filed application for refund in Form - R for refund of service tax paid on "port services"
to the port authorities by referring to provisions of Section 11B of Central Excise Act read with Section 142(3) of the C.G.S.T. Act, 2017.
34. Notice dated 24.07.2018 was issued to the petitioner asking them to show cause as to why the refund claim should not be rejected on following ground:
i. The petitioner had misled the Deptt By claiming refund since they had erred by not incorporating said CENVAT Credit in their ER-1 returns in time and claim the credit through TRAN-1 returns;
ii. The petitioner had erroneously taken CENVAT Credit of input service in their ST-3 return since the impugned service is not an input service for them as they are not engaged in provision of any output service;
iii. The petitioner had not submitted original copy of the service invoice and the refund application had not been pre- receipted with revenue stamp on the original copy.
35. In their reply to show -cause notice, the petitioner admitted that they had taken CENVAT Credit of input service in their ST-3 return filed under Service Tax. The petitioner tried to justify and explain their act as under: -
(i) The reason behind disclosure of CENVAT Credit claimed on input services in the ST-3 return was not for showing use of the said services for providing output services but there was no scope for them to disclose the same in ER-1 returns which was already filed before receipt of the duty paying document. The substantive benefit of CENVAT Credit should not be denied for technical breaches and that the legislation for granting input tax credit is beneficial piece of legislation and should be construed liberally;
(ii) The said services are used for procurement of inputs are amply covered in the definition of "input service" in terms of 28 Service Tax Appeal No.70009 of 2021 Rule 2(l) of CCR, 2004 and disclosure or non-disclosure of said credit in ST-3 and/or ER-1 are irrelevant.
(iii) Ultimate eligibility of the credit of the impugned services is not in dispute and the benefit of CENVAT Credit eventually accrues to them which is the heart and soul of Section 142(3) of the CGST Act, 2017 and under Section 142(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, 2004 shall be allowed to be carried forward in the Electronic Credit Ledger (as per ER-1) or shall be allowed to be refunded in cash where it is not possible to carry forward in Electronic Credit Ledger.
36. The Adjudicating Authority, after considering the submissions of the petitioner observed that the petitioner is a manufacturer of dutiable goods and is registered under 29 Service Tax Appeal No.70009 of 2021 Service tax only as a person liable to pay service tax under Reverse Charge Mechanism.
The petitioner is not an output service provider and, hence, the claim filed as refund is not maintainable.
The petitioner had erroneously taken credit in ST-3 return since the impugned service is not an output service.
The refund of CENVAT Credit is eligible only to export cases as per rule 5 of CENVAT Credit Rules, 2004 and the present case being not falling under rule 5, the petitioner is not entitled to refund under section 11B of Central Excise Act, 1944 read with Rule 5 of the CENVAT Credit Rules, 2004.
The Adjudicating Authority observed that the transitional provisions under the CGST Act specifically provide transition of credit through TRAN-1 and the petitioner had failed to declare its claim in proper return i.e. ER-1. Accordingly, the Adjudicating Authority, vide the Order-in-Original dated 25.01.2019, rejected the refund claim under the provisions of Section 11B of the Central Excise Act, 1944 made applicable to Service Tax vide Section 83 of the Finance act, 1994.
37. Aggrieved with the aforesaid Order in original the petitioner filed appeal reiterating the submissions made before the Adjudicating Authority. They made following main submissions before the appellate authority:
i. The services were received by them during 26.04.2017 to 29.04.2017 and payment, including service tax, was made in April, 2017. But they received the invoice on 20.09.2017 and they made provisional entry in their books of account.
They could not take credit in their last ER-1 return for June, 2017 which they filed on 30.07.2017 for the reason beyond their control. They could not have filed any return thereafter when Central Excise Act, 1944 and the rules made thereunder was repealed;
30 Service Tax Appeal No.70009 of 2021 ii. They could not avail the benefit of Section 140(5) of the CGST Act, 2017 for the same reason that the original copy of the invoice was received in September, 2017. They were left with no option than to file refund Application 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- 1 after enactment CGST Act. Section 140 of the CGST Act, 2017, which is a transitional provision, essentially preserves all taxes paid or suffered by a taxpayer. Credit thereof is to be given in electronic credit register under the provisions of CGST Act, 2017.
d. Further, the Board vide Circular No. 207/5/2017-ST clarified the issue related to payment of service tax after 30.06.2017, wherein it was clarified that the assessee can file TRAN-1 upto 30.10.2017 and same can also be revised.
31 Service Tax Appeal No.70009 of 2021 There could be parties who had billed on 30.06.2017 and not taken credit in electronic credit register and not transferred the same to GST regime.
e. In the present case the authority was considering a claim of refund of CENVAT Credit which was taken on 'input services". Section 11B (1) clearly says that a person claiming refund has to make an application for refund of such duty before the expiry of the period prescribed and, in such form, and manner. If the excisable goods are not used as inputs in accordance with the rules made, there is no question of any refund. The language of the Rule 5 of the CENVAT Credit Rules, 2004 indicates that where any input or input service is used in the final product, which is cleared for export etc. or used in the intermediate product cleared for export or used for providing output service which is exported, then, the CENVAT Credit in respect of the input or input service so used, shall be allowed to be utilised by the manufacturer or provider of output service towards payment of duty of excise on any final product cleared for home consumption or for export , on payment of duty or service tax on output service. When for any reason, such adjustment is not possible, the manufacturer shall be allowed refund of such amount subject to such safeguards, conditions and limitation as may be specified by the Central Government by a notification.
f. The appellate authority referred to a judgement passed by the North Zonal Bench of the CESTAT in the case of Purvi Fabrics & Texturise (P) Ltd. vs Commissioner of Central Excise, Jaipur-II - 2004 (172) E.L.T. 321 (Tri.- Del.) = 2004-TIOL-615-CESTAT-DEL, wherein it was held that there is no legal provision existing for refund either by cash or cheque. The only exception carved out is that the refund in cash is granted as an incentive measure to the exporter. The provisions and particularly Section 11B of the Central Excise Act provides for payment of amount of refund to the 32 Service Tax Appeal No.70009 of 2021 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. vs Ind-Swift Laboratories Limited - (2011) 4 SSC 635 = 2011-TIOL-21-SC-CX 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 the decision of this Court in CST vs Modi Sugar Mills Ltd. wherein this Court at AIR para 11 has observed as follows:
"11. ......... In interpreting a taxing statute, equitable considerations are entirely out of place. Nor can taxing statutes be interpreted on any presumptions or assumptions. The court must look squarely at the words of the statute and interpret them. It must interpret a taxing statute in the light of what is clearly expressed: It cannot imply anything which is not expressed; it cannot import provisions in the statutes so as to supply any assumed deficiency."
h. The appellate authority recorded that the petitioner had received the invoice from the service provider on 20.09.2017 and by that time, they had already filed their 33 Service Tax Appeal No.70009 of 2021 last ER-1 return for the month of June, 2017. The appellate authority found nothing in Rule 5 permitting refund of unutilised credit. The appellate authority held that the present situation is not a case of a manufacturer or producer of final products seeking to claim CENVAT Credit of the duty paid on inputs lying in stock or in process when the manufactured or produced goods ceases to be exempted goods or any goods become excisable. The appellate authority also held that refund of CENVAT Credit is permissible where any input is used for final product which is cleared for export under bond or letter of undertaking, as the case may be, or used in the intermediate products cleared for export. Therefore, in the scheme of the rules, what is sought by the petitioner is not permissible. Thus, the attempt by the petitioner to claim refund of CENVAT Credit was held to be not allowable and the appeal was rejected.
Interpretation of section 142(3) read with section 140(1), 140(5) and section 174 of CGST Act vis-a vis the facts of this case.
39. The relevant portions of the aforesaid sections as relied upon by the learned counsel for the petitioner during the course of arguments are as under.
Section 140 (1) and (5) of the CGST, Act reads as under:-
140. (1) A registered person, other than a person opting to pay tax under section 10, shall be entitled to take, in his electronic credit ledger, the amount of CENVAT Credit of eligible duties carried forward in the return relating to the period ending with the day immediately preceding the appointed day, furnished by him under the existing law within such time and in such manner as may be prescribed:
PROVIDED that the registered person shall not be allowed to take credit in the following circumstances, namely: -
34 Service Tax Appeal No.70009 of 2021
(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 Commissioner for a further period not exceeding thirty days:
PROVIDED FURTHER that said registered person shall furnish a statement, in such manner as may be prescribed, in respect of credit that has been taken under this sub- section."
Section 142(3) of the CGST Act reads as under:-
"142(3) Every claim for refund filed by any person before, on or after the appointed day, for refund of any amount of CENVAT Credit, duty, tax, interest or any other amount paid under the existing law, shall be disposed of in accordance with the provisions of existing law and any amount eventually accruing to him shall be paid in cash, notwithstanding anything to the contrary contained under the provisions of existing law other than the provisions of 35 Service Tax Appeal No.70009 of 2021 sub-section (2) of section 11B of the Central Excise Act, 1944 (1 of 1944):
PROVIDED that where any claim for refund of CENVAT Credit is fully or partially rejected, the amount so rejected shall lapse:
PROVIDED FURTHER 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"
The Sections 173 and 174 of CGST Act are quoted as under :-
"173. Amendment of Act 32 of 1994 Save as otherwise provided in this Act, Chapter V of the Finance Act, 1994 shall be omitted.
174. Repeal and saving (1) Save as otherwise provided in this Act, on and from the date of commencement of this Act, the Central Excise Act, 1944 (1 of 1944) (except as respects goods included in entry 84 of the Union List of the Seventh Schedule to the Constitution), the Medicinal and Toilet Preparations (Excise Duties) Act, 1955 (16 of 1955), the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957), the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978 (40 of 1978), and the Central Excise Tariff Act, 1985 (5 of 1986) (hereafter referred to as the repealed Acts) are hereby repealed.
(2) The repeal of the said Acts and the amendment of the Finance Act, 1994 (32 of 1994) (hereafter referred to as "such amendment" or "amended Act", as the case may be) to the extent mentioned in the sub-section (1) or section 173 shall not-
(a) revive anything not in force or existing at the time of such amendment or repeal; or 36 Service Tax Appeal No.70009 of 2021
(b) affect the previous operation of the amended Act or repealed Acts and orders or anything duly done 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 instituted, continued or enforced, and any such tax, surcharge, penalty, fine, interest, forfeiture or punishment may be levied or imposed as if these Acts had not been so amended or repealed;
(f) affect any proceedings including that relating to an appeal, review or reference, instituted before on, or after the appointed day under the said amended Act or repealed Acts and such proceedings shall be continued under the said amended Act or repealed Acts as if this Act had not come
37 Service Tax Appeal No.70009 of 2021 into force and the said Acts had not been amended or repealed.
(3) The mention of the particular matters referred to in sub- sections (1) and (2) shall not be held to prejudice or affect the general application of section 6 of the General Clauses Act, 1897 (10 of 1897) with regard to the effect of repeal."
40. Section 142 of the CGST Act, 2017 provide for Miscellaneous Transitional Provisions. The following are the pre-conditions of refund in cash under section 142(3) : -
a. Sub Section-(3) deals with claim for refund filed before, on or after the appointed day. Thus it, interalia, deals with applications for refund filed before the appointed date and pending on the appointed date apart from the refund applications filed on or after the appointed date.
b. Further the refund application should be for refund of any amount of CENVAT Credit, duty, tax, interest or any other amount paid under the existing law.
c. Such application filed before, on or after the appointed day is to be disposed of in accordance with the provisions of existing law.
d. If any amount eventually accrues the same is to be refunded in cash, 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.
e. It also provides that where any claim for refund of CENVAT Credit is fully or even partially rejected, the amount so rejected shall lapse.
f. The second proviso provides 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 the CGST Act.
38 Service Tax Appeal No.70009 of 2021
41. Thus, section 142(3) of CGST, Act clearly provides that refund application with respect of any amount relating to CENVAT Credit, duty, tax, interest or any other amount paid under the existing law is to be disposed of in accordance with the provisions 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 proviso to section 11B(2) deals with situations of rebate of duty; unspent advance deposits; principles of unjust enrichment in cases where duty of excise is paid by manufacturer or borne by buyer and who have not passed on the incidence of such duty to any other person; and also where duty of excise is borne by any other class of applicant as the central government 39 Service Tax Appeal No.70009 of 2021 may notify in official gazette with a further proviso regarding unjust enrichment.
43. The entire section 11B of Central Excise Act, 1944, as it stood immediately before the appointed date, does not sanction any refund where the assessee has failed to claim CENVAT Credit as per CENVAT Credit Rules, 2004 and has lost its right to claim such credit by not claiming it within the time prescribed. Further section 11B also has its own strict time lines for claiming refund. Rule 5 of the CENVAT Credit Rules provides for refund only when the inputs are used in relation to export, which is not the case here. These aspects of the matter have been rightly considered and decided against the petitioner while passing the impugned orders whose details have already been stated above.
44. Under the provisions of section 11B the right to claim refund was conferred not only to the assessee but also to such classes of applicants as notified by the central government and also covers situations arising out of judgements of courts and tribunals. On the appointed date there could be claims of refund of any amount of CENVAT Credit, duty, tax, interest or any other amount paid under the existing law in connection with which the applications for refunds were pending or time limit for claiming refund was yet to expire or may crystalize on account of any judgement of courts or tribunals in relation to pending litigations. These are some of the situations which would be covered by the miscellaneous transitional provisions as contained in section 142(3) of CGST, Act which would continue to be governed by section 11B(2) of Central Excise Act, 1944.
45. The provision of section 142(3) does not entitle a person to seek refund who has no such right under 40 Service Tax Appeal No.70009 of 2021 the existing law or where the right under the existing law has extinguished or where right under the new CGST regime with respect to such claim has not been exercised in terms of the provision of CGST, Act and the rules framed and notifications issued. Meaning thereby, section 142(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. The second proviso only indicates that if the assessee has taken transitional credit he will not be entitled to refund. Certainly, an assessee cannot simultaneously claim transitional credit as well as refund of the same amount. The second proviso to section 143(2) cannot be said to be 41 Service Tax Appeal No.70009 of 2021 an eligibility condition to claim refund but is only a condition which governs refund as an assessee cannot be permitted to have transitional credit as well as refund of the same tax amount.
48. Section 140(5) applies under the circumstances where input services are received after the appointed day but the tax has been paid by the supplier under the existing law within the time and in the manner prescribed with a further condition that the invoice etc are recorded in the books of account of the such person within a period of 30 days from the appointed day. Section 140(5) also does not help the petitioner. Section 140 (5) has no applicability to the facts and circumstances of this case. In the instant case, admittedly the services in the nature of "port services" were received by the petitioner in the month of April 2017 and invoice was also generated in the month of May 2017.
49. In the peculiar facts of this case, the petitioner did not claim transitional credit but claimed the impugned amount of service tax on "port services" as credit in their ST-3 return which they were admittedly not entitled as they were assessee under service tax only on reverse charge mechanism and admittedly the "port services" availed by the petitioner was not covered under reverse charge mechanism. Thus, the petitioner on the one hand illegally took credit of service tax on "port services" as credit in their ST-3 return and on the other hand filed application for refund of the same amount under section 142(3) of the CGST, Act which is certainly not permissible in law. The authorities have rightly considered these aspects of the matter also while rejecting the application for refund filed by the petitioner.
42 Service Tax Appeal No.70009 of 2021
50. It is not in dispute that the petitioner has claimed the credit of service tax involved in the present case paid on "port services" as "input service" in ST-3 return filed on 22.09.2017, though they were not entitled to claim such a credit. It is further not in dispute that the petitioner did not include the impugned service tax paid on "port services" in its ER-1 return and accordingly was neither 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 considered view that the petitioner could not have claimed the impugned service tax on port services in ST-3 return as they were registered for discharging their liability under the service tax only on reverse charge mechanism. Rather it is the case of the 43 Service Tax Appeal No.70009 of 2021 petitioner that they had included the impugned service tax in ST-3 Return under compelling circumstances of non-receipt of original invoice dated 23.05.2017 and this was done only attempting to save their credit which they had failed to claim through ER-1 return and then as transitional credit through TRAN-1 under section 140(1) of the CGST Act. Thus, the authority has rightly held that petitioner had wrongly claimed Credit of the impugned service tax under ST-3 return and omitted to claim the impugned service tax as CENVAT Credit in ER-1 Return.
52. Further case of the respondent is that the petitioner as a manufacturer was eligible to claim CENVAT Credit on impugned service i.e "port services" and should have claimed the credit in their ER-1 Return within the prescribed time and accordingly could have claimed transitional credit through TRAN-1 under section 140 of CGST, Act. Thus, late receipt of the original invoice which has been cited as the reason for failure to claim CENVAT Credit under the existing law and transitional credit under section 140(1) of the CGST, Act was wholly attributable to acts and omissions of the petitioner and its service provider of the "port services"
and the respondent authorities had no role to play. The petitioner had failed to avail the opportunity to claim CENVAT Credit of service tax on port services in terms of the existing law read with section 140 of CGST, Act and had no existing right of refund on the date of coming into force of CGST, Act. The petitioner having not used the port services for export was not entitled to claim refund under the existing law. The petitioner was also not entitled to refund on account of the fact that the petitioner had already taken credit of the service tax paid on port services in ST-3 Return of service tax although admittedly the petitioner was not entitled to take such credit in ST-3 Return. On account of aforesaid three distinct reasons the petitioner was rightly 44 Service Tax Appeal No.70009 of 2021 held to be not entitled to refund under section 142(3) of CGST, Act by the impugned orders.
53. All the aforesaid provisions referred to and relied upon by the learned counsel 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 authorities under the existing law or under the new law.
54. The authorities have held in the impugned orders that in the instance case, the timeline for claiming CENVAT Credit qua the service tax paid on port services was not followed by the petitioner, although the services were availed, the entire payment was made and the bill was also generated in the month of April/May, 2017. Further, it has also been held in the impugned orders that the petitioner not only failed to claim the CENVAT Credit as per law, but illegally 45 Service Tax Appeal No.70009 of 2021 claimed the credit of the same while filing service tax return although the petitioner was not entitled to do so as the petitioner was not registered as a service provider. The authorities have also held that the service tax paid on port service was not eligible for refund under the existing law as the said services were not utilised for export. Thus, the petitioner on the one hand did not claim CENVAT Credit as per the procedure established by law under the existing law and on the other hand violated the provisions of law while filing his service tax returns and claimed the amount as input service and thereafter filed his petition for refund on 28.06.2018 referring to Section 142(3) of the CGST Act. The petitioner never had a right to claim refund under the existing law and had failed to exercise their right to claim CENVAT Credit as per law and wrongly claimed the impugned amount as credit in Service Tax Return (S.T. 3 return)."
4.8 Appellant placed reliance on the decision of Hon'ble Bombay High Court in case of Combitic Global Caplet Pvt. Ltd. and my decision in case of Simbhaoli Sugar Ltd. I do not find that these decisions have been rendered in respect of the amounts which became due to the concerned parties prior 30.06.2017. Thus these decisions are clearly distinguishable and do not support the case of the appellant.
4.9 In view of the discussions as above I do not find any merits in this appeal.
5.1 Appeal is dismissed.
(Operative part of the order is pronounced in open court) Sd/-
(SANJIV SRIVASTAVA) MEMBER (TECHNICAL) Nihal