Custom, Excise & Service Tax Tribunal
Swati Menthol And Allied Chemicals Ltd vs Ce & Cgst Meerut-I on 20 February, 2024
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
ALLAHABAD
REGIONAL BENCH - COURT NO.I
Service Tax Appeal No.70265 of 2020
(Arising out of Order-in-Appeal No.MRT-EXCUS-000-APPL-MRT-262-2019-20
dated 13/12/2019 passed by Commissioner (Appeals) Central Goods &
Service Tax, Meerut)
M/s Swati Menthol & Allied Chemicals Ltd.,.....Appellant
(Opposite Radio Station Bareilly Road, Rampur)
VERSUS
Commissioner of Central Excise &
CGST, Meerut ....Respondent
(University Road, Mangal Pandey Nagar, Meerut)
APPEARANCE:
Shri M.B. Mathur, Advocate for the Appellant
Shri Manish Raj, Authorised Representative for the Respondent
CORAM: HON'BLE MR. SANJIV SRIVASTAVA, MEMBER (TECHNICAL)
FINAL ORDER NO.70084/2024
DATE OF HEARING : 20 December, 2023
DATE OF PRONOUNCEMENT : 20 February, 2024
SANJIV SRIVASTAVA:
This appeal is directed against order in appeal No
MRT/EXCUS/000/APPL-MRT/ 262/2019-20 dated 13.12.2019 of
Commissioner (Appeal) Central Goods and Service Tax Meerut.
By the impugned order Commissioner (Appeal) has upheld
order-in-original No. 66/DC/CEX/MBD dated 04.12.2018 holding
as follows:
"ORDER
I, hereby, reject the refund claim of Rs 653724/- (Six Lacs Fifty
Three Thousand Seven Hundred and Twenty Four Only) of M/s
2 Service Tax Appeal No.70265 of 2020
Swati Menthol & Allied Chemicals Itd. (Unit -I) Bareilly Road,
Rampur."
2.1 Appellant is engaged in manufacture of Menthol and allied
products classifiable under Chapter 29 and 33 of CETA, 1985.
They procure rwa material both domestically and by import.
2.2 During course of audit it was observed that appellant was
importing inputs for manufacture of finished goods on which he
was required to pay service tax, under reverse charge
mechanism (RCM), on the services of transportation of goods
provided by foreign shipping lines, in terms of Notification No
03/2017-ST dated 12.01.2017 read with Circular No
206/04/2017-ST dated 13.04.2017.
2.3 On being pointed appellant deposited an amount of Rs
6,53,724/- towards tax, interest of Rs 84,777/- and penalty of
Rs 98,059/- vide Challan No 037 dated 11.01.2018.
2.4 Appellant filed the refund claim for an amount of Rs
6,53,724/- claiming benefit of Notification No 10/2017-CE (NT)
dated 13.04.2017. A show cause notice dated 29.06.2018 was
issued to the appellant stating as follows:
"As per para 3 of Circular No 206/4/2017-ST dated 13.04.2017,
"Clarification has also been sought with regards to calculation of
service tax regarding service of transportation of goods by sea
provided by a foreign shipping line. In case of service of
transportation of goods by sea provided by a foreign shipping
line to foreign charterer w.r.t goods destined for India, an option
has been provided in the service tax rules to pay service tax @
1.4 of the value of imported goods as determined under section
14 of the Customs Act, 1962 and the rules made there under."
a. ....
b. ....
c. ...
d. As per point 2 (2) of the Notification No 10/2017-CE (NT)
dated 13.04.2017 ..... in rule 4, in subrule 7 of the Cenvat
3 Service Tax Appeal No.70265 of 2020
Credit Rules 2004, after the second proviso, following shall
be inserted namely,-""
e. As the appellant is belonging to a taxable territory he is
not liable for CENVAT Credit of the service tax paid under
the circular No 206/4/2017-ST dated 13.04.2017."
2.5 Show cause notice asked the appellant to show cause as
to why their refund claim should not be rejected for the reasons
as stated above.
2.6 The show cause notice was adjudicated as per the order in
original referred in para 1 above.
2.7 Aggrieved appellant filed the appeal which has been
dismissed as per the impugned order.
2.8 Aggrieved appellant have filed this appeal.
3.1 I have heard Shri M B Mathur, Advocate for the appellant
and Shri Manish raj, Authorized representative for the revenue.
While reerving the order on 20.12.2023 both the sides were
given the liberty to file a short synopsis in the matter within a
week.
3.2 Arguing for the appellant learned counsel submits that:
The issue involved was payment of Service Tax on Ocean
Freight as imposed vide notification 03/2017-ST dated
13.04.2017. Though the amount was originally claimed as
Cenvat was not admissible, however the levy itself was
held Ultra Vires by Hon'ble High Court of Gujrat in case of
Mohit Minerals (P) Ltd Vs Union of India 2020-TIOL-164-
HC-AHM-GST, therefore the refund was admissible even
otherwise.
The appeal filed by the revenue challenging the Gujrat
High Court order was dismissed by Hon'ble Supreme Court
of India in case of Union of India Vs Mohit Mineral (P) Ltd
2022-TIOL-49-GST-SC-LB. Revenue has decided not to file
any review in the matter.
In the present cause, thus, the since the tax was paid
which was not payable being held as ultra vires, refund
4 Service Tax Appeal No.70265 of 2020
becomes payable as department has no power to retain
the same.
Since the amount was paid in 2018 after introduction of
GST and was paid in lumpsum and never charged from the
buyer, unjust enrichment is also not applicable in the case
as has been held in case of Gokul Agro Resources Ltd
[2020-TIOL-691-HC-AHM-GST].
The SCN was issued on dispute on admissibility of Cenvat
as per Rule 9(1)(b) of Cenvat Credit Rules, 2004, however
both the original authority as well as Commissioner
(Appeal) did not deal with the issue as under the said rule
credit of only input and capital goods was denied and not
the credit of input service. Both the authorities decided the
issue by travelling beyond the issue raised in the notice
which is not permissible under law. Reliance placed on
o Tirupati Pipe & Allied Industries (P) Ltd [2008 (227)
ELT 147 (T)]
o Tilrode Chemicals (P) Ltd [2011 (264) ELT 306 (T)
affirmed by Hon'ble High Court of Karnataka as
reported at [2015 (317) ELT A-190 (Kar)]
The SCN was not maintainable as Rule 9(1)(b) of Cenvat
Credit Rules as restriction on credit of tax paid is limited on
input tax credit and credit of capital goods alone if paid by
reason of fraud, collusion or any wilful misstatement or
suppression of facts or contravention of any provisions of
the Excise Act, or of the Customs Act, 1962 (52 of 1962)
or the rules made there under with intent to evade
payment of duty whereas in the present case amount paid
relate to input service which was not barred and the above
allegations were never leveled against the Appellant.
3.3 Arguing for the revenue 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,
written submissions filed by the appellant.
5 Service Tax Appeal No.70265 of 2020
4.2 For dismissing the appeal filed impugned order observes as
follows:
"5. I have carefully gone through the facts and records of the
case as well as the submissions made by the appellant. I find
that the appellant had paid the subject amounts of service tax
after he had filed Tran-1 for the transfer of the Cenvat credit in
GST regime. The liability of service tax so paid by the appellant
has not been contested by him. It was, therefore, evident that
the appellant had paid the subject amounts torwards discharge
of his service tax liability In other wards the service tax so paid
was as per law which he paid after the due date along with
interest. I further find that the levy of service tax and
admissibility of Cenvat Credit are governed by distinct and
separate sets of provisions of law and are independent of each
other. The liability to pay tax is not extinguished due to the
reason that the tax so paid was available as Cenvat credit. I find
that the appellant has sought the refund of the service tax paid
by him as he was not in a position to take the Cenvat Credit of
the same as he had not paid the said tax in time and, therefore,
he could not include the same in his Tran-1 while migrating his
credit balance to the credit ledger under the provisions of the
CGST Act. I further find that the procedure of migration of
Cenvat credit in ITC under GST regime was laid down in Section
140 of the CGST Act read with Rule 117(1) and 117(2)(a) of the
Central GST Rules, 2017 which stipulated that "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 forwarded in
the return relating to the period ending with the day immediately
preceding the appointed day, furnished by him under the
existing law in such manner as may be prescribed
In light of the above facts, I find that the provisions of this
section allowed to carry forward eligible Cenvat Credit mentioned
in the Return of June,2017, in GST regime through Tran-1.
Further, the claimed loss of credit of duty does not make the
6 Service Tax Appeal No.70265 of 2020
appellant eligible for the refund of tax paid which the appellant
was required to pay as per law. In the case of WILLOWOOD
CHEMICALS PVT. LTD. Versus UNION OF INDIA [2018 (19)
G.S.T.L. 228 (Gujarat)] in which the Hon'ble High Court held
that:-
"In the present case, we have noted the statutory provisions, the
scale of operations and the possible repercussions; if such time
limit contained in Rule 117 is annihilated and a registered person
is allowed to make declarations of the left over residuary duty of
credit at the time of migration to the new tax structure. The time
limit provisions, we have already stated more than once, under
such circumstances, cannot be seen as merely technical in
nature.' [Para 40]".
5.1. I find that both the appellant as well as the adjudicating
authority have misconstrued the issue in question and have
based their arguments and findings whether or not the CENVAT
Credit of the tax paid by the appellant, under RCM, was
admissible, though the issue of eligibility or otherwise of the
CENVAT Credit of the tax paid was not before the adjudicating
authority. Similarly, it was not the case of the appellant that he
had paid the service tax which was not payable. He has sought
the refund of the tax paid by him, on the ground that he was not
able to take the CENVAT Credit of the same. The ground for
claiming the refund of the tax paid as per law is not tenable. I
therefore, find no force in the contentions of the appellant
regarding his claim of refund of tax paid. Accordingly, I find no
merits in the appeal filed by the appellant."
4.3 For rejecting the refund claim filed by the appellant
adjudicating authority has observed as follows:
"8. I find that the charge of the department is that the applicant
is belonging to a taxable territory hence he is not liable for
Cenvat Credit of the service tax paid under the circular
no.206/4/2017-ST dated 13.04.2017 on the ground that as per
point 2(2) of the Notification No.10/2017-CE (NT) dated
13.04.2017 in rule 4, in sub rule (7) of the Cenvat Credit Rules
7 Service Tax Appeal No.70265 of 2020
2004, after the second proviso, following shall be inserted
namely,-
"Provided also that in respect of services provided or agreed to
be provided by a person located in non-taxable territory to a
person located in non-taxable territory by way of transportation
of goods by vessel from a place outside India up to the Customs
station of clearances in India where service tax is paid by the
manufacturer or the provider of output service being importer of
goods as the person liable for paying service tax for the said
taxable services, credit of service tax paid by the person liable
for paying service tax shall be allowed after such service tax is
paid"
9. I find that Para 2(1) of the said Notification No.10/2017-CE
(NT) dated13.04.2017 includes the services "services provided
or agreed to be provided by a person located in non-taxable
territory to a person located in non-taxable territory by way of
transportation of goods by a vessel from a place outside India up
to the customs station of clearance in India where service tax is
paid by the manufacturer or the provider of output service being
importer of goods as the person liable for paying service tax for
the said taxable services and the said imported goods are his
inputs or capital goods" in the definition of "input service"
10. I also find that as per Para 2(2) of the said Notification
No.10/2017-CE (NT) dated13.04.2017 "... in respect of services
provided or agreed to be provided by a person located in non-
taxable territory to a person located in non-taxable territory by
way of transportation of goods by a vessel from a place outside
India up to the customs station of clearance in India where
service tax is paid by the manufacturer or the provider of output
service being importer of goods as the person liable for paying
service tax for the said taxable services, credit of service tax
paid by the person liable fo paying service tax shall be allowed
after such service tax is paid". As per clarification given in first
Para of CBEC Circular No.206/4/2017-Service Tax dated
13.04.2017 which reads as "Your kind attention is invited to
8 Service Tax Appeal No.70265 of 2020
notification No. 1/2017-S.T., dated 12th January, 2017, whereby
service tax exemption was withdrawn for services provided by a
person located in non-taxable territory to a person located in
non-taxable territory by way of transportation of goods by a
vessel from a place outside India up to the customs station of
clearance in India. Further, in relation to such services, the
person in India who complies with sections 29, 30 or 38 read
with section 148 of the Customs Act, 1962 (52 of 1962) with
respect to such goods, was notified as the person liable to pay
service tax vide notification No. 2/2017 and 3/2017-S.T. both
dated 12th January, 2017." 1 find that the party is liable to pay
service tax and is allowed the CENVAT credit for the same in
normal course of duty payment.
11. The situation has been clarified by the CBEC vide Para 2.4 of
the CBEC Circular No.206/4/2017-Service Tax dated 13.04.2017
wherein it has been mentioned that Vide notification No.
10/2017-C.E (N.T) dated 13th April, 2017, the importer of the
goods has been allowed to avail Cenvat credit on the basis of the
challan of payment of service tax by the said importer on the
services provided by a foreign shipping line to a foreign charterer
with respect to goods destined for India. This change shall come
into effect from 23rd April, 2017.
12. Accordingly I find that the party would be entitled to claim
CENVAT credit of Service Tax amounting to Rs 653724/- as
deposited by them vide Challan No. 0037 dated 11.01.2018 in
normal course of duty payment.
13. The draft order in original for the refund claim for the refund
of Rs.653724/-was forwarded to the Assistant Commissioner
(Audit) Central GST Commissionerate Meerut vide letter C. No. V
(30)Ref/Swati/MBD/52/ 2018 / 2428 dated 21.08.2018 for pre
audit. The Assistant Commissioner (Audit) Central GST, Meerut
vide his office letter No. V(1)Audit/Pre-audit/291/18/8802 dated
17.10.2018 submitted that the refund claim does not appear to
be admissible making observations, inter-alia, as under:-
9 Service Tax Appeal No.70265 of 2020
(i) That on the instance of the audit, the amount of Service Tax
payable of transportation of importer goods under RCM for
the period January'2017 to May'2017 not paid earlier
amounting to Rs.6,53,724/-was paid with interest
Rs.84,477/-and penalty Rs.98,059/- on 11.01.2018.
(ii) The Rule 9(b) of Cenvat credit Rules, 2004 provides that the
credit is not available in those cases where the additional
amount of tax becomes recoverable from the provider of
service tax on account of non-levy or nonpayment. Thus the
party was not entitled for cenvat Credit in this case under
the existing rules and have no refund arises at all."
14. However it was observed that as per Rule 9(1)(b) of Cenvat
Credit Rules,2004 the CENVAT credit shall be taken by the
manufacturer or the provider of output service or input service
distributor, as the case may be, on the basis of a supplementary
invoice, issued by a manufacture or importer of inputs or capital
goods in them of provision of Central Excise Rules,2002 from his
factory or depot from the premises of the consignment agent of
the said manufacture or. importer or from any other premise
from where the good are sold by or on behalf of the said
manufacturer or importer in case additional amount of Excise
duties or additional duties leviable under section 3 of Customs
Tariff Act, has been paid, except where the additional amount of
duty became recoverable from the manufacturer or importer of
input of capital goods on account of duty of any non levy or
short levy by reason of fraud collusion or any wilful
misstatement or suppression of the fact or contravention of any
provisions of the Excise Act or of Customs Act 1962(52 of 1962)
or the Rule made there under with intent to evade payment of
duty and that the charge that the duty has been non levied or
short levied by treason of fraud, collusion or any wilful mis-
statement or suppression of the fact or contravention of any
provision of the Excise act or of Customs Act , or the Rules made
there under with intent to evade payment of duty has not been
made in the F. A. R No. 71/ST/2017- 18 issued vide letter C. No.
V(1)audit/ Circle-3/Group-2/Swati/91/2017/422 dated
10 Service Tax Appeal No.70265 of 2020
20.02.2018 of the Assistant Commissioner , Circle -03, CGST
(Audit) Commissionerate Meerut in compliance of which the duty
has been paid by the party and that it appeared that the Rule
9(1) (b) of Cenvat Credit Rule2004 would not bar the availability
of Cenvat Credit to the party in this case. Accordingly the draft
order in original was re sent to the Assistant
Commissioner(Audit) Central GST, Meerut for re-examination of
the admissibility of the claim vide this office letter C. No.
V(30)Ref/Swati/MBD/52/2018/Pt./4616 dated 24.10.2018
15. The Assistant Commissioner (Audit) Central GST, Meerut
vide his letter V(1)Audit/Post- audit/291/18/9494 dated
29.11.2018 submitted the reply of the letter C. No. 4616 dated
24.10.2018 as under:-
"It was observed that the party were importing inputs intended
for use in manufacture of finished goods, thereby they were
supposed to pay service tax under RCM on service of
transportation of goods, provided by foreign shipping line, in
terms of Notification No.3/2017-ST dated 12.01.2017 read with
Board's Ccircular No.206/4/2017-service Tax dated 13.04.2017
issued under F No. 354/42/2016- TPU. As such, they are
required to pay service tax as per details below,"
Rule -9(1)(b) of the CCR, 2004 is ample clear that the credit is
not available in those cases where the additional amount of tax
becomes recoverable from the Service Tax provider on account
of non-levy or non-payment. Thus the party was not entitled for
Cenvat Credit in terms of Rules 9(1)(b) of the CCR, 2004 read
with Section 11B(3) of the Central Excise ACT, 1944."
16. In light of the above discussion I conclude that the party
were importing inputs intended for use in manufacture of
finished goods, thereby they were supposed to pay service tax
under RCM on service of transportation of goods, provided by
foreign shipping line, in terms of Notification No.3/2017-ST
dated 12.01.2017 read with Board's Circular No.206/4/2017-
service Tax dated 13.04.2017 issued under F No. 354/42/2016-
TPU. As such, they are required to pay service tax.
11 Service Tax Appeal No.70265 of 2020
Rule -9(1)(b) of the CCR, 2004 is ample clear that the credit is
not available in those cases where the additional amount of tax
becomes recoverable from the Service Tax provider on account
of non- levy or non-payment. Thus the party was not entitled for
Cenvat Credit in terms of Rules 9(1)(b) of the CCR, 2004 read
with Section 11B(3) of the Central Excise ACT, 1944. Hence the
question of refund of the same does not arise."
4.4 From the perusal of the refund application filed by the
appellant is reproduced below:
12 Service Tax Appeal No.70265 of 2020
13 Service Tax Appeal No.70265 of 2020
4.5 From perusal of the above application it is evident that
appellant has claimed that CENVAT credit of the amount of
service tax deposited by him i.e. Rs 6,53,724/- as per the audit
conducted at their factory is admissible to him as CENVAT credit
as per Notification No 10/2017-CE (NT) dated 13.04.2017. As he
14 Service Tax Appeal No.70265 of 2020
has deposited the said amount by Challan dated 11.01.2018
after introduction of the Good and Service Tax Law with effect
from 01.07.2017, he is not in position to claim the credit of the
said amount, he should be allowed the refund of the said amount
in cash as per section 142 (8) (b) of the Central Goods and
Service Tax Act, 2017. No other ground has been stated by the
appellant in the application made by the appellant.
4.6 By the show cause notice dated 29.06.2018, appellant's
claim to the CENVAT Credit has been challenged and thus he has
been asked to show cause why the refund claim filed by him
should not be rejected.
4.7 Adjudicating authority has by his order in original,
referred earlier has concluded that the party is not entitled to
CENVAT Credit of the said amount (para 16) and has rejected
the refund claim filed by the appellant. In para 12 of the
impugned order adjudicating authority first observes with the
regards to the admissibility of CENVAT Credit to Appellant.
Impugned order in very clear terms observes that, admissibility
of the Cenvat Credit, cannot be determining factor for
determining the refund claim filed by the appellant. Impugned
order clearly records that the ground taken for claiming this
refund is not tenable in law. The observations made by the
Commissioner (Appeal) are well in line with the decision of the
Hon'ble Jharkhand High Court in the case of Rungta Mines Ltd.
[2022-TIOL-252-HC-JHARKHAND-GST] wherein after examining
the provisions of CGST Act, 2017, Hon'ble Court observed as
follows:
"3. The present writ petition has been filed for following reliefs: -
a. For setting aside the order in Appeal dated 03.2.2020
(Annexure-1) passed by the appellate authority, i.e. the
Respondent No.2.
b. For setting aside the order in Original dated 25.1.2019
(Annexure-2) passed by the adjudicating authority i.e. the
Respondent No. 3.
15 Service Tax Appeal No.70265 of 2020
c. For setting aside the show-cause notice bearing dated
24.7.2018, issued by the adjudicating authority proposing
to reject the refund application of the petitioner of CENVAT
Credit of Rs. 10,88,328/-.
d. For a relief of refund of CENVAT Credit of the aforesaid
amount of input service credit in terms of transitional
provision under Section 142(3) of Central Goods and
Service Tax Act, 2017 read with Section 11-B of Central
Excise Act, 1944 and Rule 2(l) and Rule 3 of the CENVAT
Credit Rules, 2004.
4. The following are the foundational facts for filing of the
present writ petition:-
Date Events
period The petitioner was registered under Central Excise Act, 1944
26.04.2017 for manufacture of excisable goods in which the inputs Iron
to Ore, Coal, Dolomite etc. are used. The petitioner used to
29.04.2017 procure input i.e. coal, domestically as well as from outside the
territory of India and for importing coal, the petitioner availed
input services such as 'Port Services'.
period At the relevant point of time, the petitioner was also registered
26.04.2017 under Chapter V of the Finance Act, 1994 as a person liable to
to pay tax on receipt of taxable services under reverse charge
29.04.2017 mechanism as a recipient of "Goods Transport Agency
Services".
period The dispute relates to the period 26.04.2017 to 29.04.2017 ,
26.04.2017 when the petitioner imported 23000 MT of Coal from outside
to the territory of India through Haldia Port under Bill of Entry
29.04.2017 dated 27.04.2017 for using the same in or in relation to
manufacture of their final product i.e. Sponge Iron. For the
purposes of clearance/handing of the said coal from Haldia
Port, the petitioner received bundle of services under "Port
Services" from Kolkata Port Trust, Haldia. M/s Kolkata Port
Trust raised their Bill dated 23.05.2017 for value of Rs.
89,36,836/- including service tax component amounting to Rs.
10,88,328/-.
23.05.2017 Though the said services were availed by the petitioner during
the period 26.04.2017 to 29.04.2017 and payment of the
16 Service Tax Appeal No.70265 of 2020
same including service tax thereon was made by the petitioner
to M/s Kolkata Port Trust during April, 2017, the bills for
provision of services though raised on 23.05.2017 by M/s
Kolkata Port Trust, however the bill in original was not received
by them till 20.09.2017.
01.07.2017 The Central Excise Act, 1944 including CENVAT Credit Rules,
2004 as well as Chapter V of Finance Act, 1994 including Rules
framed thereunder have been omitted by Section 173 and
Section 174 of the Central Goods & Services Act, 2017 (CGST
Act) with effect from 01.07.2017, the appointed date. The
petitioner obtained registration under CGST Act with effect
from 01.07.2017.
June, 2017 The petitioner is totally silent about monthly return for the
month of May, 2017 which was to be filed by 10.06.2017 and
could be revised till 30.06.2017 as per Rule 12 of the Central
Excise Rules.
10.07.2017 The petitioner filed their monthly ER-1 return under Central
Excise Act for the month of June, 2017 on 10.07.2017 under
Rule 12 of Central Excise Rules, 2002 but the credit of
aforesaid amount of Rs. 10,88,328/- was not claimed as the
bill dated 23.05.2017 in original was not yet received by the
petitioner.
It has been stated that ER-1 return is required to be filed by
10th of the following month i.e. 10th of July for the month of
June, 2017 which could be revised by the end of the calendar
month i.e. 31.07.2017 as per the provisions of Clause- a of
sub-Rule (8) of Rule 12 of the Central Excise Rules, 2002.
30.07.2017 Monthly ER-1 return for the month of June, 2017 was revised
on 30.07.2017 claiming all the CENVAT Credit up to
30.06.2017 for which duty paying documents/bills were
already received by the petitioner except credit of aforesaid
amount of Rs. 10,88,328/- as the bill dated 23.05.2017 in
original was not yet received by the petitioner.
20.09.2017 The 'original' of the bill dated 23.05.2017 was delivered to the
petitioner only on 20.09.2017 and it is the specific case of the
petitioner that such delay was beyond their control.
22.09.2017 On 22.09.2017 the petitioner filed their ST-3 return for the
period April, 2017 to June, 2017 under Chapter V of the
17 Service Tax Appeal No.70265 of 2020
Finance Act, 1994 taking all service invoices where they were
liable to pay service tax under reverse charge basis. Further it
is the case of the petitioner that in the said ST-3 return the
petitioner disclosed the said Input Service Credit on "port
services" amounting to Rs. 10,88,328/- with a view to keep
the said transaction above the board so that their claim is not
lost.
31.10.2017 The time for filing TRAN-1 for claiming transitional credit was
extended till 31.10.2017 vide notification issued by Central
Board of Direct Taxes and Customs. However, the petitioner
did not claim the aforesaid service tax paid on "port services"
in TRAN-1 although by this time the original bill was received
as the said CENVAT Credit of the said transaction was not
included in ER-1 return which was already filed.
28.06.2018 On 28.06.2018, the petitioner submitted its refund application
in Form-R, praying for refund of the CENVAT Credit of Rs.
10,88,328/- being the service tax paid on "port services".
24.07.2018 The petitioner was served with a show-cause notice dated
24.07.2018 as to why the application for refund of CENVAT
Credit of Input Service amounting to Rs. 10,88,328/- be not
rejected.
13.09.2018 The petitioner filed its response to the show-cause notice vide
letter dated 13.09.2018 and also attended personal hearing.
25.01.2019 The respondent no. 3, by the impugned order in original dated
03.02.2020 25.01.2019, rejected the application of the petitioner for
Impugned refund. The said order dated 25.01.2019 was challenged
orders before the appellate authority vide memo of appeal dated
25.03.2019. Thereafter, the respondent no. 2, by the
impugned Order-in- Appeal dated 03.02.2020, rejected the
appeal and upheld the adjudication order dated 25.01.2019.
The petitioner has filed the present writ petition challenging
the show-cause, Order-in-Original and Order-in-Appeal and
has also sought a writ of mandamus upon the respondents to
refund the aforesaid amount of Rs. 10,88,328/- being the
service tax paid to the port authorities on "port services".
Findings.
Legal proposition on the point of refund: -
18 Service Tax Appeal No.70265 of 2020
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 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.
19 Service Tax Appeal No.70265 of 2020
Refund is always a matter of a statutory prescription and can be
regulated by the statute subject to conditions and limitations;
(iii) Even in the case of an illegal levy or a levy which is
unconstitutional, the decision of the nine judges Bench in
Mafatlal Industries Limited 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;
20 Service Tax Appeal No.70265 of 2020
(viii) Once a refund is construed as a form of exemption from
taxes, the provision has to attract strict interpretation;
(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.
93. Parliament engrafted a provision for refund Section 54(3). In
enacting such a provision, Parliament is entitled to make policy
21 Service Tax Appeal No.70265 of 2020
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, 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
22 Service Tax Appeal No.70265 of 2020
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 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: -
23 Service Tax Appeal No.70265 of 2020
"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 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
24 Service Tax Appeal No.70265 of 2020
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.
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
25 Service Tax Appeal No.70265 of 2020
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 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 interpreted 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
26 Service Tax Appeal No.70265 of 2020
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 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
27 Service Tax Appeal No.70265 of 2020
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 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 28 Service Tax Appeal No.70265 of 2020 is impugned herein and, therefore, we may have no hesitation to hold that the Rule cannot be applied to the goods manufactured prior to 16-3-1995 on which duty had been paid and credit facility thereto has been availed of for the purpose of manufacture of further goods."
19. The learned counsel has also referred to the judgment passed in the case of CCE vs Grasim Industries Ltd. (supra) to submit that excise duty/CENVAT is value added tax. There is no doubt about the aforesaid proposition, as it is not in dispute in the instant case that the petitioner was entitled to take credit of the service tax paid to the port authorities for the "port services"
by way of CENVAT Credit as per the provisions of the rules.
20. However, in the instant case the petitioner has failed to follow the prescribed procedure to avail such a credit and consequently having lost such a right, 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 29 Service Tax Appeal No.70265 of 2020 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 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 30 Service Tax Appeal No.70265 of 2020 a bundle of services from M/s Kolkata Port Trust during 26.04.2017 to 29.04.2017 in the nature of "port services" who issued Bill dated 23.05.2017 for Rs. 89,36,836/- which included service tax of Rs. 10,88,328/-. The petitioner claims to have paid the entire bill including service tax on port services in the month of 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 31 Service Tax Appeal No.70265 of 2020 transitional credit under CGST Act. Admittedly, the petitioner was not entitled 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.
32 Service Tax Appeal No.70265 of 2020
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 33 Service Tax Appeal No.70265 of 2020 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 Service tax only as a person liable to pay service tax under Reverse Charge Mechanism.
34 Service Tax Appeal No.70265 of 2020 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;
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 35 Service Tax Appeal No.70265 of 2020 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. 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.
36 Service Tax Appeal No.70265 of 2020 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 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 37 Service Tax Appeal No.70265 of 2020 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 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 38 Service Tax Appeal No.70265 of 2020 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: -
(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 39 Service Tax Appeal No.70265 of 2020 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 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
40 Service Tax Appeal No.70265 of 2020 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
(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,
41 Service Tax Appeal No.70265 of 2020 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 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.
42 Service Tax Appeal No.70265 of 2020 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.
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;
43 Service Tax Appeal No.70265 of 2020 and also where duty of excise is borne by any other class of applicant as the central government 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 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 44 Service Tax Appeal No.70265 of 2020 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 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.
45 Service Tax Appeal No.70265 of 2020 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.
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.
46 Service Tax Appeal No.70265 of 2020
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 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 47 Service Tax Appeal No.70265 of 2020 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 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 48 Service Tax Appeal No.70265 of 2020 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 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 From the above referred decision of Hon'ble high Court of Jharkhand, which has been rendered in identical situation it is evident that the refund claim filed by the appellant is not maintainable, and the impugned which rejects the refund claim cannot be faulted with.
4.9 Appellant has further submitted that the issue of levy of service tax on ocean freight was decided by the Hon'ble Gujarat High Court in the case of Mohit Minerals (P) Ltd [2020-TIOL-164- HC-AHM-GST]. Hon'ble Gujarat High Court in the said order has held that levy itself was ultra vires. This decision has been upheld by the Hon'ble Supreme Court as reported at 2022-TIOL- 49-GST-SC-LB. As the levy itself has been held to be ultra-vires the refund should be allowed to them. I am not in position to agree with the contentions raised by the appellant for simple reason that considering this ground would amount to consideration of entirely a new refund claim, which was never 49 Service Tax Appeal No.70265 of 2020 made before the original authority. Appellant if wish to claim the refund on this ground should file the appropriate refund claim with the original authorities on this ground provided the same is maintainable, in view of the observation made by the Hon'ble Supreme Court in case of Mafatlal Industries [1997 (89) ELT 247 (SC)] as follows:
"71. Re.: (III): For the purpose of this discussion, we take the situation arising from the declaration of invalidity of a provision of the Act under which duty has been paid or collected, as the basis, inasmuch as that is the only situation surviving in view of our holding on (I) and (II). In such cases, the claim for refund is maintainable by virtue of the declaration contained in Article 265 as also under Section 72 of the Contract Act as explained hereinbefore, subject to one exception : where a person approaches the High Court or Supreme Court challenging the constitutional validity of a provision but fails, he cannot take advantage of the declaration of unconstitutionality obtained by another person on another ground; this is for the reason that so far as he is concerned, the decision has become final and cannot be re-opened on the basis of a decision on another person's case; this is the ratio of the opinion of Hidayatullah, CJ. in Tilokchand Motichand and we respectfully agree with it. ....
99. The discussion in the judgment yields the following propositions. We may forewarn that these propositions are set out merely for the sake of convenient reference and are not supposed to be exhaustive. In case of any doubt or ambiguity in these propositions, reference must be had to the discussion and propositions in the body of the judgment:
(ii) Where, however, a refund is claimed on the ground that the provision of the Act under which it was levied is or has been held to be unconstitutional, such a claim,
50 Service Tax Appeal No.70265 of 2020 being a claim outside the purview of the enactment, can be made either by way of a suit or by way of a writ petition. This principle is, however, subject to an exception : where a person approaches the High Court or Supreme Court challenging the constitutional validity of a provision but fails, he cannot take advantage of the declaration of unconstitutionality obtained by another person on another ground; this is for the reason that so far as he is concerned, the decision has become final and cannot be re-opened on the basis of a decision on another person's case; this is the ratio of the opinion of Hidayatullah, CJ. in Tilokchand Motichand and we respectfully agree with it."
Appellant has never obtained any decision in his case and the assessment/ payment of duty by the appellant thus became final. In case of ITC Ltd. [2019-TIOL-418-SC-CUS-LB] Hon'ble Supreme Court has held as follows:
"39. In Collector of Central Excise, Kanpur v. Flock (India) Pvt. Ltd. 2000 (120) ELT 285 (SC)= (2000) 6 SCC 650 = 2002-TIOL-208-SC-CX, the question which came up for consideration before this Court was non-challenge of an appealable order where the adjudicating authority had passed an order which is appealable under the statute, and the party aggrieved did not choose to file an appeal. This Court held that it is not open to the party to question the correctness of the order of the adjudicating authority subsequently by filing a claim for refund on the ground that the adjudicating authority had committed an error in passing the order. The provisions of the Central Excise Act, 1944 came up for consideration. The Court has observed:
"10. Coming to the question that is raised, there is little scope for doubt that in a case where an adjudicating authority has passed an order which is appealable under the statute and the party aggrieved
51 Service Tax Appeal No.70265 of 2020 did not choose to exercise the statutory right of filing an appeal, it is not open to the party to question the correctness of the order of the adjudicating authority subsequently by filing a claim for refund on the ground that the adjudicating authority had committed an error in passing its order. If this position is accepted then the provisions for adjudication in the Act and the Rules, the provision for appeal in the Act and the Rules will lose their relevance and the entire exercise will be rendered redundant. This position, in our view, will run counter to the scheme of the Act and will introduce an element of uncertainty in the entire process of levy and collection of excise duty. Such a position cannot be countenanced. The view was taken by us also gains support from the provision in sub-rule (3) of Rule 11 wherein it is laid down that whereas a result of any order passed in appeal or revision under the Act, refund of any duty becomes due to any person, the proper officer may refund the amount to such person without his having to make any claim in that behalf. The provision indicates the importance attached to an order of the appellate or revisional authority under the Act. Therefore, if an order which is appealable under the Act is not challenged then the order is not liable to be questioned and the matter is not to be reopened in a proceeding for the refund which, if we may term it so, is in the nature of execution of a decree/order. In the case at hand, it was specifically mentioned in the order of the Assistant Collector that the assessee may file an appeal against the order before the Collector (Appeals) if so advised." (emphasis supplied)
40. In Priya Blue Industries Ltd. v. Commissioner of Customs (Preventive) 2004 (172) ELT 145 (SC)= (2005) 10 SCC 433 = 2004-TIOL-78-SC-CUS, the Court considered unamended provision of Section 27 of the Customs Act and a similar submission was raised which was rejected 52 Service Tax Appeal No.70265 of 2020 by this Court observing that so long as the order of assessment stands, the duty would be payable as per that order of assessment. This Court has observed thus:
"6. We are unable to accept this submission. Just such a contention has been negatived by this Court in Flock (India) case (2000) 6 SCC 650 = 2002-TIOL- 208-SC-CX. Once an order of assessment is passed the duty would be payable as per that order. Unless that order of assessment has been reviewed under Section 28 and/or modified in an appeal, that order stands. So long as the order of assessment stands the duty would be payable as per that order of assessment. A refund claim is not an appeal proceeding. The officer considering a refund claim cannot sit in appeal over an assessment made by a competent officer. The officer considering the refund claim cannot also review an assessment order.
7. We also see no substance in the contention that provision for a period of limitation indicates that a refund claim could be filed without filing an appeal. Even under Section 11 under the Excise Act, the claim for refund had to be filed within a period of six months. It was still held, in Flock (India)'s case (supra), that in the absence of an appeal having been filed no refund claim could be made.
8. The words "in pursuance of an order of assessment" only indicate the party/person who can make a claim for refund. In other words, they enable a person who has paid duty in pursuance of an order of assessment to claim the refund. These words do not lead to the conclusion that without the order of assessment having been modified in appeal or reviewed a claim for refund can be maintained."
(emphasis supplied) 53 Service Tax Appeal No.70265 of 2020
41. It is apparent from provisions of refund that it is more or less in the nature of execution proceedings. It is not open to the authority which processes the refund to make a fresh assessment on merits and to correct assessment on the basis of mistake or otherwise.
47. When we consider the overall effect of the provisions prior to amendment and post-amendment under Finance Act, 2011, we are of the opinion that the claim for refund cannot be entertained unless the order of assessment or self-assessment is modified in accordance with law by taking recourse to the appropriate proceedings and it would not be within the ken of Section 27 to set aside the order of self-assessment and reassess the duty for making refund; and in case any person is aggrieved by any order which would include self-assessment, he has to get the order modified under Section 128 or under other relevant provisions of the Act."
4.10 Section 35 C (1) of the Central Excise Act, 1944 reads as follows:
"35 C Orders of Appellate Tribunal -
(1) The Appellate Tribunal may, after giving the parties to the appeal an opportunity of being heard, pass such orders, thereon as it thinks fit, confirming, modifying, or annulling the decision or orders thereon as it thinks fit confirming, modifying or anunulling the decision or order appealed against or may refer the case back to the authority which [passed such decision or order with such directions as the Appellate Tribunal may think fit' for a fresh adjudication or decision, as the case may be, after taking additional evidence, if necessary."
From the perusal of the above Section it is quite evident that the appellate tribunal cannot allow any ground which would have amounted to a fresh refund claim while deciding the appeal. In the case of Life Insurance Corporation Of India [Order dated 54 Service Tax Appeal No.70265 of 2020 01.09.2022 in Civil Appeal No. 5909 OF 2022] Hon'ble Supreme Court observed as follows:
"25. The principles applicable to the amendments of the plaint are equally applicable to the amendments of the written statements. The courts are more generous in allowing the amendment of the written statement as question of prejudice is less likely to operate in that event. The defendant has a right to take alternative plea in defense which, however, is subject to an exception that by the proposed amendment other side should not be subjected to injustice and that any admission made in favor of the plaintiff is not withdrawn. All amendments of the pleadings should be allowed which are necessary for determination of the real controversies in the suit provided the proposed amendment does not alter or substitute a new cause of action on the basis of which the original lis was raised or defense taken. Inconsistent and contradictory allegations in negation to the admitted position of facts or mutually destructive allegations of facts should not be allowed to be incorporated by means of amendment to the pleadings. The proposed amendment should not cause such prejudice to the other side which cannot be compensated by costs. No amendment should be allowed which amounts to or relates in defeating a legal right accruing to the opposite party on account of lapse of time. The delay in filing the application for amendment of the pleadings should be properly compensated by costs and error or mistake which, if not fraudulent, should not be made a ground for rejecting the application for amendment of plaint or written statement. (See South Konkan Distilleries & Anr. v. Prabhakar Gajanan Naik & Ors., (2008) 14 SCC 632).
4.11 In the case of Miles India Limited [2002-TIOL-501-SC- CUS] Hon'ble Supreme Court has held as follows:
55 Service Tax Appeal No.70265 of 2020 "After the matter was heard for some time and it was indicated that the Customs Authorities, acting under the Act, were justified in disallowing the claim for refund as they were bound by the period of limitation provided therefor under Section 27(1) of the Customs Act, 1962, learned counsel for the Appellant sought leave to withdraw the appeal. We accord their leave to withdraw the appeal but make it clear that the order of the Customs, Excise & Gold (Control) Appellate Tribunal suffers from no infirmity.
If really the payment of the duty was under a mistake of law, the appellant may seek recourse to such alternative remedy as it may be advised. The appeal is accordingly dismissed as withdrawn."
4.12 In view of discussions as above, I do not find any infirmity in the impugned order.
5.1 Appeal is dismissed.
(Pronounced in open court on- 20 February, 2024) Sd/-
(SANJIV SRIVASTAVA) MEMBER (TECHNICAL) akp