Custom, Excise & Service Tax Tribunal
Ncl Industries Ltd vs The Commissioner-Hyderabad - G S T on 18 January, 2024
(1) Appeal No. ST/30033/2022
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
HYDERABAD
REGIONALBENCH- COURT NO.- II
Single Member Bench
Service TaxAppeal No.30033 of 2022
(Arising out of Order-in-Appeal No.HYD-SVTAX-HYC-APP-064-20-21 (APP-I), dated
25.02.2021passed byPr. Commissioner ofGST &Central Excise(Appeals-I), Hyderabad)
NCL Industries .. APPELLANT
7th Floor, NCL Pearl,
Opposite Hyderabad Bhawan,
East Maredpally,
Secunderabad,
Telangana - 500001.
VERSUS
Commissioner ofCentral Tax .. RESPONDENT
Hyderabad - GST
KendriyaShulkBhavan,
L.B. Stadium Road,
Basheerbagh, Hyderabad,
Telangana - 500 004.
.
APPEARANCE:
Shri Ashwani Pahwa, CA for the Appellant.
Shri A Rangadham, Authorised Representative for the Respondent.
CORAM: HON'BLE Mr. R. MURALIDHAR, MEMBER (JUDICIAL) FINAL ORDER No. A/30048/2024 Date of Hearing:18.01.2024 Date of Decision:18.01.2024 [ORDER PER: R. MURALIDHAR] The appellant has paid the Service Tax on Reverse Charge Mechanism (RCM) basis based on the audit objections raised for the transactions carried out prior to June 2017. They have made the Service Tax payments on Reverse Charge Basis in May 2019. In the normal course, they would have taken the Cenvat Credit. Since there is no provision under the present GST regime to take the Cenvat Credit, they have filed the refund claim under Section 142(3) of the CGST Act 2017. After due process, the Adjudicating Authority rejected their refund claim on the following ground:
(2) Appeal No. ST/30033/2022
74. In their submission before the personal hearing on 28.08.2020, the authorised representative on behalf of the claimant stated that they did not pay service tax before GST for which period it was payable and they admitted that they had paid the service tax amount only after the tax liability was detected by the audit after introduction of GST. They have not mentioned the duty elements in their last return under the existing law ST3 return. No where in the Section 142(3) CGST Act, 2017 supports the refund claim in above situation. As per the transitional provision specified under CGST Act, 2017, the credit balance not transitioned to GST Regime shall lapse and as such, the argument of claimant about the impugned claim amount did not lapse even after detected by the departmental audit officers during post GST Regime is not a ground for claiming refund. The claimant cannot circumvent the said legal provisions through the route of 142(3) CGST Act, 2017. It is also observed that there is no provision in the Cenvat Credit Rules, 2004 mandating refund of the impugned claim on the ground advanced by the claimant. The refund of the Cenvat Credit will arise only subject to the provisions of the statue in case of Cenvat Credit relating to the goods used in the export goods as per procedure prescribed in Rule 5 of Cenvat Credit Rules, 2004. The transitional provision 142(3) CGST Act, 2017 ibid are not meant to cover to refund the amount which they did not mention in their returns immediately preceding to the 01.07.2017. This amount of claim was not included for transition to GST Regime through TRAN-1. The various case laws cited by the appellant are not applicable to the present case as the same are clearly distinguishable or already distinguished.
2. Being aggrieved, the appellant preferred an appeal before the Commissioner (Appeals). Since the Department was not aggrieved with the Order-in-Original passed no further appeal was preferred by the Department before the Commissioner (Appeals). The Commissioner (Appeals) has dismissed appeal by holding as under:
8. The appellant's contention in appeal is that since the existing law has been subsumed by the CGST Act, 2017 refund of such credit in cash can be granted under the provisions of Section 142(3) of the CGST Act, 2017. The said provisions of Section 142(3) of the CGST Act, 2017 are reproduced hereunder for ready of reference:
"Section 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, (3) Appeal No. ST/30033/2022 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 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 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."
From a careful reading of the relevant provisions of Section 142(3) cited above, it is clear that the claim for refund filed by a claimant shall be disposed of in accordance with the provisions of existing law and refund payment has to be made in cash only if any amount is eventually found to be refundable. In the facts and circumstances of the instant case, there is no provision for claiming refund of Service Tax paid under reverse charge mechanism on input services under the provisions of the Cenvat Credit Rules, 2004 or the Finance Act, 1994 read with provisions of Section 11B of the Central Excise Act, 1944. First proviso to sub-rule (7) of Rule 4 of the Cenvat Credit Rules, 2004 only allows the tax payer to claim credit of the Service Tax paid under Reverse Charge Mechanism (RCM). There is no provision under the Cenvat Credit Rules, 2004 to allow any refund of the Service Tax paid under RCM in case the taxpayer is not in a position to take Cenvat Credit. There is no such provision either under the Finance Act, 1994 or Section 11B of the Central Excise Act, 1944 relevant for claiming refund. Further, there are no such Notifications, Orders, Rules or Regulations made prior to 01.07.2017 which allows such refund. In short, there is no provision under the "existing law" which allows such payment of refund in a situation as the present one. Therefore, the argument of the appellant that in addition to Rules 5, 5A and 5B of the Cenvat Credit Rules, 2004, 6 more mechanisms in transitional provisions of Section 142 of the CGST Act, 2017 exist for granting refund needs to be rejected as specious. It is clear that the appellant have misconstrued the provisions of Section 142(3) of the CGST Act, 2017. [Emphasis supplied]
3. Being aggrieved, the appellant is before the Tribunal.
(4) Appeal No. ST/30033/2022
4. Learned Consultant on behalf of the appellant submits that the issue is no more res integra and cites the case law of OSI Systems Pvt Ltd., Vs CCT, Ranga Reddy - GST [2022 (9) TMI 801 (CESTAT-HYD)],The Telex India Pvt Ltd., Vs CST, Selam [2022 (63) GSTL 238]. He submits that in all these decisions, the payment of service on RCM was done during the present GST regime.On finding that the assessees were not in a position to take the Cenvat Credit, nor were they in a position to transfer these amounts to GST account, the Tribunals have been consistently holding that such payment paid under RCM may be given as cash refund in terms of Section 142(3) of the CGST Act 2017. Therefore, he prays that the present appeal may be allowed with consequential relief.
5. Learned AR relies on the case law of M/s East West Seeds Pvt Ltd., [2023 (3) TMI 237 (CESTAT-Mumbai)]. He submits that in this case, the Tribunal has relied on the case law of M/s Rungta Mines Ltd., decided by Hon'ble High Court of Jharkhand [2022 (2) TMI 934 - Jharkhand HC]. He submits that the Tribunal has held in this case that the assessee would not be in a position to seek the cash refund in terms of Section 142(3) and accordingly has dismissed their appeal. In view of the same, he submits that the present appeal is liable to be dismissed.
6. Heard both sides and perused the documents.
7. The facts are not in dispute and admittedly the issue pertains to the Service Tax paid by the appellant during the present GST regime for the Service Tax which should have been paid by them under RCM basis during the previous Central Excise/Service Tax regime. The appellants have filed the refund claim seeking to get such amounts paid as cash refunds in terms of Section 142(3) of the CGST Act 2017. The issue as to whether in such cases whether this Tribunal has a Jurisdiction to decide the case or not was before the Hon'ble Larger Bench in the case of M/s Bosch Electrical Drive (5) Appeal No. ST/30033/2022 India Pvt Ltd. The Larger Bench vide their Interim Order No. 40021/2023 dated 21.12.2023 has held as under:
44. Under sub-section (3) of section 142 of the CGST Act, the claim for refund of any amount of CENVAT credit has to be disposed of in accordance with the provisions of the existing law. The existing law would be Chapter V of the Finance Act and the Central Excise Act. If an application for refund of CENVAT credit had been filed at a point of time when the CGST Act had not been enacted, an appeal would lie before the Tribunal against an order passed on the application filed for refund of CENVAT credit. What has to be seen is whether an appeal can be filed before the Tribunal after the coming into force of the CGST Act against an order passed under sub-section (3) of section 142 of the CGST Act. In view of the specific provisions of sub-section (3) of section 142 of the CGST Act, every claim for refund after 01.07.2017 has to be disposed of in accordance with the provisions of the existing law i.e. Chapter V of the Finance Act and the Central Excise Act. This would mean that the appellate provisions would continue to remain the same. This position is also explicit from the provisions of sub-section (6)(b) of section 142 of the CGST Act, wherein it has been provided that every proceeding of appeal, review or reference relating to recovery of CENVAT credit initiated whether before, on or after the appointed day under the existing law shall be disposed of in accordance with the provisions of the existing law.
45. Section 174(2)(f) of the CGST Act also provides that the repeal of the Central Excise Act under section 174(1) and amendment of the Finance Act under section 173 shall not affect any proceedings including that relating to an appeal 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 the repealed Acts as if the CGST Act had not come into force and the said Acts had not been amended or repealed.
46. There is, therefore, no manner of doubt that an appeal against an order passed under section 142 of the CGST Act would lie to the Tribunal.
47. This view also gains support from the fact the legislative intent could not have been to deprive either an assessee or the Revenue from the right of an appeal since an appeal against an order passed under section 142 of the CGST Act would not lie to the Appellate Tribunal constituted under the CGST Act.
8. Accordingly, now it is beyond doubt that this Tribunal has a Jurisdiction to decide these issues. The Larger Bench in the same Order has (6) Appeal No. ST/30033/2022 also gone into the aspect as to how the refund can be claimed in such matter and has held as under:
49. In the present case, the service tax was paid under the provisions of Chapter V of the Finance Act and refund was claimed under sub-section (3) of section 142 of the CGST Act, under which the claim was required to be disposed of in accordance with the provisions of the existing law. Therefore, even if the service tax had been deposited by the appellant after 01.01.2017, nonetheless the refund of any amount of the CENVAT credit could be claimed only under subsection (3) of section 142 of the CGST Act and against this order an appeal will lie to the Tribunal.
9. From this finding of the Larger Bench it gets clarified that the only way to claim the refund is under Section 142(3) of CGST Act 2017. From the case laws cited by the Learned Consultant, it is seen that the Hyderabad and Chennai Benches have taken the similar view and have granted the refunds. Since the view of the Larger Bench has become clear after the Interim Order dated 21.12.2023, the earlier Order of the Mumbai Bench in the case of East West Seeds Pvt Ltd., canvassed by the Revenue cannot be applied. Apart from this, I notice two important differences in that case. First of all, in East West case, the Bench was not privy to the present view of the Larger Bench decision of M/s Bosch Electrical Drive India Pvt Ltd. Secondly, in that case factually the issue was different. The appellant had paid certain Service Tax and later on claimed that he had paid excess Service Tax which was being claimed by them as refund during the present GST regime. It has been noted by the Tribunal that the assessee should have used the facility provided towards revised Returns in terms of Rule 7B of the Service Tax Rules, which they failed to do. This also was instrumented in this decision arrived at by the Tribunal. On the other hand, the issue in the present case is squarely covered by the issues in the case law cited by the Learned Consultant.
10. The Learned AR argued that even in this case, the appellant should have filed the revised return since the window for revision was open much (7) Appeal No. ST/30033/2022 beyond 2020 as per the various circulars issued by the CBIC from time to time. However, on going through the Show Cause Notice, OIO and OIA, it is seen that this issue was not raised by the Department at any point of time while rejecting the refund claim. The Adjudicating Authority has rejected the claim purely on the ground that there was no provision under Section 142(3) of CGST Act 2017 to grant the cash refund. Therefore, when no appeal was filed by the Department against the OIO passed, the Revenue is precluded from raising such an issue purely to contest a squarely covered case.
11. Relying on the applicable case laws cited by the Learned Consultant, read with the Larger Bench decision in the case of Bosch Electrical Drive India Pvt Ltd., I set aside the impugned Order and allow the appeal with consequential relief, as per law.
(Order dictated and pronouncedin open court) (R. MURALIDHAR) MEMBER (JUDICIAL) jaya