Custom, Excise & Service Tax Tribunal
Divyansh Steel Pvt Ltd vs Commissioner Of Central Excise-Nagpur on 15 September, 2022
CUSTOMS, EXCISE & SERVICE TAX APPELLATE
TRIBUNAL, MUMBAI
REGIONAL BENCH
Single Member Bench
Service Tax Appeal No. 86404 of 2019
(Arising out of Order-in-Appeal No. NGP/EXCUS/000/APP/460/18-19 dated
31.01.2019 passed by the Commissioner of Central Excise (Appeals), Nagpur)
M/s. Divyansh Steel Pvt. Ltd. Appellant
Khasara No. 60 & 62/1,
Mouza Bhowari, 19 km Stone,
Bhandara Road, Tah-Kamptee,
Nagpur 441 104.
Vs.
Commissioner of Central Excise, Nagpur Respondent
P.O. Box 81, Telangkhedi Road,
Civil Lines, Nagpur 440 001.
Appearance:
None for the Appellant
Shri Nitin Ranjan, Deputy Commissioner, Authorised Representative
for the Respondent
CORAM:
HON'BLE MR. SANJIV SRIVASTAVA, MEMBER (TECHNICAL)
Date of Hearing: 15.09.2022
Date of Decision: 15.09.2022
FINAL ORDER NO. A/85980/2022
This appeal is directed against Order-in-Appeal No.
NGP/EXCUS/000/APP/460/18-19 dated 31.01.2019 passed by
the Commissioner of Central Excise (Appeals), Nagpur, holding
as follows:-
"ORDER
The appeal No. 313/2018 filed by the appellant is rejected and
the letter F.No. V(ST) 18-02/Ref/Div-Kal/2018/1667 dated
19.09.2018 issued by Assistant Commissioner, GST & Central
Excise, Divn-Kalmeshwar, Nagpur-II Commissionerate is held as
correct."
2.1 Appellant is engaged in manufacture of excisable goods
and was operating under Cenvat credit scheme. They were also
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registered for payment of service tax under reverse charge
mechanism.
2.2 Appellant pays service tax regularly under reverse charge
mechanism. However, during the course of audit for the period
April 2016 to June 2017 on 16.02.2018, it was observed that the
appellant had short paid service tax on manpower
recruitment/supply agency services amounting to Rs.1,90,394/-.
Accordingly the auditors directed the appellant to pay the service
tax along with interest and penalty. Appellant paid the service
tax so pointed out along with interest and penalty vide challan
dated 17.03.2018.
2.3 Appellant had paid service tax after 1st July 2017 when
Central Excise Act and Rules made thereunder were not in
existence. Hence appellant filed a refund claim with the
jurisdictional Assistant Commissioner for refund of cenvat credit
of service tax paid on eligible input services after 01.07.2017 for
the period April 2016 to March 2017 stating that they were
entitled for cenvat credit of service tax paid under reverse
charge mechanism. However, due to implementation of GST,
they were unable to claim the cenvat credit.
2.4 The refund claim was returned to the appellant in original
stating the reason that there is no provision in GST Act, 2017 to
take credit of service tax amount paid under reverse charge
mechanism. Aggrieved appellant filed appeal before the
Commissioner (Appeals) which has been rejected as per the
impugned order.
3.1 This appeal was listed for hearing on 01.02.2022. Counsel
appearing for the appellant sought adjournment and the matter
was adjourned to 21.03.2022. On 21.03.2022 appellant sought
adjournment through email which was accepted and the matter
was adjourned to 26.04.2022. On 26.04.2022 as there was no
court, the matter was adjourned to 21.06.2022. On 21.06.2022,
again the appellant sought adjournment through email which
was agreed to and the matter has been listed for hearing on
15.09.2022. Today again counsel sought adjournment via email
stating as follows:-
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"I the counsel from Nagpur hereby wish to inform you that, due
to heavy rains in Nagpur, the counsel is unable to attend the
hearing at Mumbai in the aforesaid matter.
Therefore, humbly requested this Hon'ble Court to kindly adjourn
the matter and next date may please be given."
4.1 The proviso to Section 35C(1A) of the Central Excise Act,
1944 provides as under:
"(1A)The Appellate Tribunal may, if sufficient cause is shown, at
any stage of hearing of an appeal, grant time, from time to time,
to the parties or any of them and adjourn the hearing of the
appeal for reasons to be recorded in writing :
Provided that no such adjournment shall be granted more
than three times to a party during hearing of the appeal."
4.2 Accordingly the Tribunal being a creature of statute cannot
adjourn any matter on the request of party for more than three
times.
4.3 Hon'ble Apex Court has in the case of Ishwarlal Mali
Rathod vs Gopal & Others vide order dated 20.09.2021 [in
Special Leave Petition (Civil) Nos.14117-14118 of 2021],
condemning the practice of seeking repeated adjournments and
courts granting the same mechanically has observed as follows:
"5.5 Today the judiciary and the justice delivery
system is facing acute problem of delay which ultimately
affects the right of the litigant to access to justice and the
speedy trial. Arrears are mounting because of such
delay and dilatory tactics and asking repeated
adjournments by the advocates and mechanically and
in routine manner granted by the courts. It cannot be disputed
that due to delay in access to justice and not getting the timely
justice it may shaken the trust and confidence of the litigants in
the justice delivery system. Many a times, the task of
adjournments is used to kill Justice. Repeated
adjournments break the back of the litigants. The courts are
enjoying upon to perform their duties with the object of
strengthening the confidence of common man in the institution
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entrusted with the administration of the justice. Any effort
which weakens the system and shake the faith of the common
man in the justice dispensation has to be discouraged.
Therefore the courts shall not grant the
adjournments in routine manner and mechanically and shall not
be a party to cause for delay in dispensing the justice. The
courts have to be diligence and take timely action in order to
usher in efficient justice dispensation system and maintain faith
in rule of law. We are also aware that whenever the trial courts
refused to grant unnecessary adjournments many a times they
are accused of being strict and they may face displeasure of the
Bar. However, the judicial officers shall not worry about that if
his conscience is clear and the judicial officer has to bear in mind
his duties to the litigants who are before the courts and who
have come for justice and for whom Courts are meant and all
efforts shall be made by the courts to provide timely justice to
the litigants. Take an example of the present case.
Suit was for eviction. Many a times the suits are filed for
eviction on the ground of bonafide requirements of the landlord.
If plaintiff who seeks eviction decree on the ground of personal
bonafide requirement is not getting the timely justice and he
ultimately gets the decree after 10 to 15 years, at times cause
for getting the eviction decree on the ground of personal
bonafide requirement may be defeated. The resultant effect
would be that such a litigant would lose confidence in the justice
delivery system and instead of filing civil suit and following the
law he may adopt the other mode which has no backing of law
and ultimately it affects the rule of law. Therefore, the court
shall be very slow in granting adjournments and as observed
hereinabove they shall not grant repeated adjournments in
routine manner. Time has now come to change the work
culture and get out of the adjournment culture so that
confidence and trust put by the litigants in the Justice delivery
system is not shaken and Rule of Law is maintained.
5.6 In view of the above and for the reasons
stated above and considering the fact that in the present case
ten times adjournments were given between 2015 to 2019 and
twice the orders were passed granting time for cross
examination as a last chance and that too at one point of time
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even a cost was also imposed and even thereafter also when
lastly the High Court passed an order with extending the time it
was specifically mentioned that no further time shall
be extended and/or granted still the petitioner - defendant never
availed of the liberty and the grace shown. In fact it can be said
that the petitioner - defendant misused the liberty and the grace
shown by the court. It is reported that as such now even the
main suit has been disposed of. In view of the circumstances,
the present SLPs deserve to be dismissed and are accordingly
dismissed."
4.4 Rule 20 of the CESTAT Procedure Rule, 1982 reads as
under:
RULE 20. Action on appeal for appellant's default. -- Where
on the day fixed for the hearing of the appeal or on any other
day to which such hearing may be adjourned, the appellant does
not appear when the appeal is called on for hearing, the Tribunal
may, in its discretion, either dismiss the appeal for default or
hear and decide it on merits :
Provided that where an appeal has been dismissed for default
and the appellant appears afterwards and satisfies the Tribunal
that there was sufficient cause for his non-appearance when the
appeal was called on for hearing, the Tribunal shall make an
order setting aside the dismissal and restore the appeal."
4.5 However, I find that the jurisdictional High Court has held
that Rule 20 does not allow for dismissal of appeal for non-
prosecution but should be dismissed on merits. Accordingly the
matter has been taken up for consideration after hearing learned
AR.
4.6 I find that the issue is in a very narrow compass.
4.7 Arguing for the Revenue, learned AR submits that the
appellant had short paid service tax payable on reverse charge
mechanism basis on input service received by them. They
admitted their liability and accordingly paid not only the service
tax but also paid interest and penalty equal to 15% of service
tax in view of the 2nd proviso to section 78 of the Finance Act,
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1994. The service tax liability had arisen due to wrong self
assessment by the appellant in ST-3 returns. Since the
assessment includes self assessment, hence the said service tax
amount paid in pursuance of assessment (self assessment) by
the appellant himself, after the appointed day shall not be
admissible as input tax credit under CGST Act 2017. The
Commissioner (Appeals) had rightly rejected their appeal in
terms of provisions of section 142(8)(a) of CGST Act.
5.1 I have considered the impugned order along with the
submissions made in appeal and during the course of argument.
5.2 The facts of the case are that the appellant has paid
certain amounts of service tax which was due from them on
17.03.2018. They have filed a refund claim in respect of the
service tax so paid under reverse charge mechanism on
17.03.2018.
5.3 Section 140, 142 and 174 of the Central Goods and
Service Tax Act, 2017, read as follows:-
"140. Transitional arrangements for input tax credit.
(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 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 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.
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(2) A registered person, other than a person opting to pay tax
under section 10, shall be entitled to take, in his electronic credit
ledger, credit of the unavailed CENVAT credit in respect of capital
goods, not carried forward in a return, furnished under the
existing law by him, for the period ending with the day
immediately preceding the appointed day in such manner as
may be prescribed:
Provided that the registered person shall not be allowed to take
credit unless the said credit was admissible as CENVAT credit
under the existing law and is also admissible as input tax credit
under this Act.
Explanation.--For the purposes of this sub-section, the
expression "unavailed CENVAT credit" means the amount that
remains after subtracting the amount of CENVAT credit already
availed in respect of capital goods by the taxable person under
the existing law from the aggregate amount of CENVAT credit to
which the said person was entitled in respect of the said capital
goods under the existing law.
(3) A registered person, who was not liable to be registered
under the existing law, or who was engaged in the manufacture
of exempted goods or provision of exempted services, or who
was providing works contract service and was availing of the
benefit of notification No. 26/2012--Service Tax, dated the 20th
June, 2012 or a first stage dealer or a second stage dealer or a
registered importer or a depot of a manufacturer, shall be
entitled to take, in his electronic credit ledger, credit of eligible
duties in respect of inputs held in stock and inputs contained in
semi-finished or finished goods held in stock on the appointed
day subject to the following conditions, namely:--
(i) such inputs or goods are used or intended to be used for
making taxable supplies under this Act;
(ii) the said registered person is eligible for input tax credit on
such inputs under this Act;
(iii) the said registered person is in possession of invoice or
other prescribed documents evidencing payment of duty under
the existing law in respect of such inputs;
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(iv) such invoices or other prescribed documents were issued not
earlier than twelve months immediately preceding the appointed
day; and
(v) the supplier of services is not eligible for any abatement
under this Act:
Provided that where a registered person, other than a
manufacturer or a supplier of services, is not in possession of an
invoice or any other documents evidencing payment of duty in
respect of inputs, then, such registered person shall, subject to
such conditions, limitations and safeguards as may be
prescribed, including that the said taxable person shall pass on
the benefit of such credit by way of reduced prices to the
recipient, be allowed to take credit at such rate and in such
manner as may be prescribed.
(4) A registered person, who was engaged in the manufacture of
taxable as well as exempted goods under the Central Excise Act,
1944 or provision of taxable as well as exempted services under
Chapter V of the Finance Act, 1994, but which are liable to tax
under this Act, shall be entitled to take, in his electronic credit
ledger,--
(a) the amount of CENVAT credit carried forward in a return
furnished under the existing law by him in accordance with the
provisions of sub-section (1); and
(b) the amount of CENVAT credit of eligible duties in respect of
inputs held in stock and inputs contained in semi-finished or
finished goods held in stock on the appointed day, relating to
such exempted goods or services, in accordance with the
provisions of sub-section (3).
(5) A registered person shall be entitled to take, in his electronic
credit ledger, credit of eligible duties and taxes in respect of
inputs or input services received on or after the appointed day
but the duty or tax in respect of which has been paid by the
supplier under the existing law, 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:
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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.
(6) A registered person, who was either paying tax at a fixed
rate or paying a fixed
amount in lieu of the tax payable under the existing law shall be
entitled to take, in his electronic credit ledger, credit of eligible
duties in respect of inputs held in stock and inputs contained in
semi-finished or finished goods held in stock on the appointed
day subject to the following conditions, namely:--
(i) such inputs or goods are used or intended to be used for
making taxable supplies under this Act;
(ii) the said registered person is not paying tax under section 10;
(iii) the said registered person is eligible for input tax credit on
such inputs under this Act;
(iv) the said registered person is in possession of invoice or
other prescribed documents evidencing payment of duty under
the existing law in respect of inputs; and
(v) such invoices or other prescribed documents were issued not
earlier than twelve months immediately preceding the appointed
day.
(7) Notwithstanding anything to the contrary contained in this
Act, the input tax credit on account of any services received prior
to the appointed day by an Input Service Distributor shall be
eligible for distribution as credit under this Act even if the
invoices relating to such services are received on or after the
appointed day.
(8) Where a registered person having centralised registration
under the existing law has obtained a registration under this Act,
such person shall be allowed to take, in his electronic credit
ledger, credit of the amount of CENVAT credit carried forward in
a return, furnished under the existing law by him, in respect of
the period ending with the day immediately preceding the
appointed day in such manner as may be prescribed:
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Provided that if the registered person furnishes his return for the
period ending with the day immediately preceding the appointed
day within three months of the appointed day, such credit shall
be allowed subject to the condition that the said return is either
an original return or a revised return where the credit has been
reduced from that claimed earlier:
Provided further that the registered person shall not be allowed
to take credit unless the said amount is admissible as input tax
credit under this Act:
Provided also that such credit may be transferred to any of the
registered persons having the same Permanent Account Number
for which the centralised registration was obtained under the
existing law.
(9) Where any CENVAT credit availed for the input services
provided under the existing law has been reversed due to non-
payment of the consideration within a period of three months,
such credit can be reclaimed subject to the condition that the
registered person has made the payment of the consideration for
that supply of services within a period of three months from the
appointed day.
(10) The amount of credit under sub-sections (3), (4) and (6)
shall be calculated in such manner as may be prescribed.
Explanation 1.--For the purposes of sub-sections (3), (4) and
(6), the expression "eligible duties" means--
.......
Explanation 2.--For the purposes of sub-section (5), the expression "eligible duties and taxes" means--
......
SECTION 142. Miscellaneous transitional provisions
142. (1) Where any goods on which duty, if any, had been paid under the existing law at the time of removal thereof, not being earlier than six months prior to the appointed day, are returned to any place of business on or after the appointed day, the registered person shall be eligible for refund of the duty paid under the existing law where such goods are returned by a person, other than a registered person, to the said place of business within a period of six months from the appointed day 11 ST/86404/2019 and such goods are identifiable to the satisfaction of the proper officer:
Provided that if the said goods are returned by a registered person, the return of such goods shall be deemed to be a supply.
(2) (a) where, in pursuance of a contract entered into prior to the appointed day, the price of any goods or services or both is revised upwards on or after the appointed day, the registered person who had removed or provided such goods or services or both shall issue to the recipient a supplementary invoice or debit note, containing such particulars as may be prescribed, within thirty days of such price revision and for the purposes of this Act such supplementary invoice or debit note shall be deemed to have been issued in respect of an outward supply made under this Act;
(b) where, in pursuance of a contract entered into prior to the appointed day, the price of any goods or services or both is revised downwards on or after the appointed day, the registered person who had removed or provided such goods or services or both may issue to the recipient a credit note, containing such particulars as may be prescribed, within thirty days of such price revision and for the purposes of this Act such credit note shall be deemed to have been issued in respect of an outward supply made under this Act:
Provided that the registered person shall be allowed to reduce his tax liability on account of issue of the credit note only if the recipient of the credit note has reduced his input tax credit corresponding to such reduction of tax liability.
(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:
Provided that where any claim for refund of CENVAT credit is fully or partially rejected, the amount so rejected shall lapse:
12 ST/86404/2019 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.
(4) Every claim for refund filed after the appointed day for refund of any duty or tax paid under existing law in respect of the goods or services exported before or after the appointed day, shall be disposed of in accordance with the provisions of the existing law:
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.
(5) Every claim filed by a person after the appointed day for refund of tax paid under the existing law in respect of services not provided 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.
(6) (a) every proceeding of appeal, review or reference relating to a claim for CENVAT credit initiated whether before, on or after the appointed day under the existing law shall be disposed of in accordance with the provisions of existing law, and any amount of credit found to be admissible to the claimant shall be refunded to him 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 and the amount rejected, if any, shall not be admissible as input tax credit under this Act: Provided that no refund shall be allowed of any amount of CENVAT credit where the balance of the said amount as on the appointed day has been carried forward under this Act;
(b) every proceeding of appeal, review or reference relating to recovery of CENVAT credit initiated whether before, on or after the appointed day under the existing law shall be disposed of in accordance with the provisions of existing law and if any amount
13 ST/86404/2019 of credit becomes recoverable as a result of such appeal, review or reference, the same shall, unless recovered under the existing law, be recovered as an arrear of tax under this Act and the amount so recovered shall not be admissible as input tax credit under this Act.
(7) (a) every proceeding of appeal, review or reference relating to any output duty or tax liability initiated whether before, on or after the appointed day under the existing law, shall be disposed of in accordance with the provisions of the existing law, and if any amount becomes recoverable as a result of such appeal, review or reference, the same shall, unless recovered under the existing law, be recovered as an arrear of duty or tax under this Act and the amount so recovered shall not be admissible as input tax credit under this Act.
(b) every proceeding of appeal, review or reference relating to any output duty or tax liability initiated whether before, on or after the appointed day under the existing law, shall be disposed of in accordance with the provisions of the existing law, and any amount found to be admissible to the claimant shall be refunded to him 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 and the amount rejected, if any, shall not be admissible as input tax credit under this Act.
(8) (a) where in pursuance of an assessment or adjudication proceedings instituted, whether before, on or after the appointed day, under the existing law, any amount of tax, interest, fine or penalty becomes recoverable from the person, the same shall, unless recovered under the existing law, be recovered as an arrear of tax under this Act and the amount so recovered shall not be admissible as input tax credit under this Act;
(b) where in pursuance of an assessment or adjudication proceedings instituted, whether before, on or after the appointed day, under the existing law, any amount of tax, interest, fine or penalty becomes refundable to the taxable person, the same shall be refunded to him in cash under the said law, notwithstanding anything to the contrary contained in the said law other than the provisions of sub-section (2) of section 11B of 14 ST/86404/2019 the Central Excise Act, 1944 and the amount rejected, if any, shall not be admissible as input tax credit under this Act.
(9) (a) where any return, furnished under the existing law, is revised after the appointed day and if, pursuant to such revision, any amount is found to be recoverable or any amount of CENVAT credit is found to be inadmissible, the same shall, unless recovered under the existing law, be recovered as an arrear of tax under this Act and the amount so recovered shall not be admissible as input tax credit under this Act;
(b) where any return, furnished under the existing law, is revised after the appointed day but within the time limit specified for such revision under the existing law and if, pursuant to such revision, any amount is found to be refundable or CENVAT credit is found to be admissible to any taxable person, the same shall be refunded to him in cash under the existing law, notwithstanding anything to the contrary contained in the said law other than the provisions of sub-section (2) of section 11B of the Central Excise Act, 1944 and the amount rejected, if any, shall not be admissible as input tax credit under this Act.
(10) Save as otherwise provided in this Chapter, the goods or services or both supplied on or after the appointed day in pursuance of a contract entered into prior to the appointed day shall be liable to tax under the provisions of this Act.
(11) (a) notwithstanding anything contained in section 12, no tax shall be payable on goods under this Act to the extent the tax was leviable on the said goods under the Value Added Tax Act of the State;
(b) notwithstanding anything contained in section 13, no tax shall be payable on services under this Act to the extent the tax was leviable on the said services under Chapter V of the Finance Act, 1994;
(c) where tax was paid on any supply both under the Value Added Tax Act and under Chapter V of the Finance Act, 1994, tax shall be leviable under this Act and the taxable person shall be entitled to take credit of value added tax or service tax paid under the existing law to the extent of supplies made after the appointed day and such credit shall be calculated in such manner as may be prescribed.
15 ST/86404/2019 (12) Where any goods sent on approval basis, not earlier than six months before the appointed day, are rejected or not approved by the buyer and returned to the seller on or after the appointed day, no tax shall be payable thereon if such goods are returned within six months from the appointed day:
Provided that the said period of six months may, on sufficient cause being shown, be extended by the Commissioner for a further period not exceeding two months:
Provided further that the tax shall be payable by the person returning the goods if such goods are liable to tax under this Act, and are returned after a period specified in this sub-section:
Provided also that tax shall be payable by the person who has sent the goods on approval basis if such goods are liable to tax under this Act, and are not returned within a period specified in this sub-section.
(13) Where a supplier has made any sale of goods in respect of which tax was required to be deducted at source under any law of a State or Union territory relating to Value Added Tax and has also issued an invoice for the same before the appointed day, no deduction of tax at source under section 51 shall be made by the deductor under the said section where payment to the said supplier is made on or after the appointed day.
Explanation.--For the purposes of this Chapter, the expressions "capital goods", "Central Value Added Tax (CENVAT) credit", "first stage dealer", "second stage dealer", or "manufacture" shall have the same meaning as respectively assigned to them in the Central Excise Act, 1944 or the rules made thereunder.
Section 174 Repeal and Saving
174. (1) Save as otherwise provided in this Act, on and from the date of commencement of this Act, the Central Excise Act, 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, the Additional Duties of Excise (Goods of Special Importance) Act, 1957, the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978, and the Central Excise Tariff Act, 1985 (hereafter referred to as the repealed Acts) are hereby repealed.
16 ST/86404/2019 (2) The repeal of the said Acts and the amendment of the Finance Act, 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, 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
17 ST/86404/2019 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 10 of 1897. Act, 1897 with regard to the effect of repeal.
5.4 The Commissioner (Appeals) has in his order referred to Section 142(8)(a) of the CGST Act, 2017 for rejecting the claim of refund made by the Appellant. Appellant in his appeal relies on the Section 142 (3) in his favour.
5.5 The Commissioner (Appeals) has further observed as follows:-
"17. I find the provisions of Section 142 (8)(a) of the CGST Act, 2017 squarely applicable in the instant case because, the amount of service tax was paid by the appellants after the appointed date i.e. 01.07.2017, and it was the liability which had arisen due to assessment in the ST-3 returns, ST-3 returns were self-assessed by the appellants/assesses. The said service tax was not paid by the appellants, therefore the same was recoverable as arrears of tax under the CGST Act, 2017 and as per provisions of the section 142(8)(a), the amount paid/recovered is not admissible as input tax credit. Therefore the refund claim filed by the appellants is wrong in terms of the provisions of the said section."
5.6 Cenvat credit scheme was part of the erstwhile Central Excise Act,1944/ Chapter V of the Finance Act,1 994 and the rules made thereunder. The said scheme got terminated on introduction/implementation of the CGST Act, 2017 with effect from 01.07.2017. As such on the date of payment of tax there is no Cenvat credit scheme available in terms of which this credit could be claimed. Even when the scheme was in existence, cenvat credit could have been claimed only in respect of the tax paid. As of 01.07.2017 the appellant has not paid/deposited this amount as service tax under any of the provisions of the law.
18 ST/86404/2019 Further, cenvat credit could be claimed only on the returns - ER- 1/ST-3 returns, filed by the appellant. Appellant cannot show that the amount in respect of which they are claiming the refund is not reflected in any of the returns filed by them. In absence of any such credit available in book of accounts, the appellant cannot claim the benefit of Section 142(3) to claim the refund of any tax paid by them or which becomes recoverable from them for the reason that the tax was required to be paid by them during the operation of the existing law, i.e. Section 73 of Chapter V of Finance Act, 1994.
5.6 A three Judges bench of Hon'ble Supreme Court Eicher Motors Ltd. [1999 (106) E.L.T. 3 (S.C.)] observed as follows:
3.There are three assessees before us seeking for quashing of the said rule. The grounds in support of the challenge to the validity of the said rule are as follows :
1. Modvat credit lying in balance with the assessee as on 16-
3-1995 represents a vested right accrued or acquired by the assessee under the existing law and such right is sought to be taken away by impugned Rule 57F(4A) and the Central Government has no powers under Section 37 of the Central Excise Act, 1944 [hereinafter referred to as 'the Act'] or any other provision thereof to frame such a rule.
2. The impugned rule is arbitrary and unreasonable as the same has been framed without due application of mind to the relevant facts and it has been exercised on the basis of non- existent facts or which are patently erroneous.
3. Section 37 of the Act does not enable the Central Government to frame a rule enabling the lapsing of the balance in Modvat account and is therefore ultra vires the rule making power.
4. The rule is vitiated on the grounds of promissory estoppel and/or the doctrine of legitimate expectation.
5. Rule 57F(4A) was introduced into the Rules pursuant to 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 Heading No. 87.02 and 87.04 or chassis of such tractors or such motor 19 ST/86404/2019 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 1995-96 Budget, central excise/additional duty of customs paid on inputs was allowed as credit for payment of excise duty on the final products, in the manufacture of which such inputs were used. The condition required for the same was that the credit of duty paid on inputs could have been used for discharge of duty/liability only in respect of those final products in the manufacture of which such inputs were used. Thus it was claimed that there was a nexus between the inputs and the final products. In 1995-96 Budget Modvat scheme was liberalised/ simplified and the credit earned on any input was allowed to be utilised for payment of duty on any final product manufactured within the same factory irrespective of whether such inputs were used in its manufacture or not. The experience showed that credit accrued on inputs is less than the duty liable to be paid on the final products and thus the credit of duty earned on inputs gets fully utilised and some amount has to be paid by the manufacturer by way of cash. Prior to 1995-96 Budget, the excise duty on inputs used in the manufacture of tractors, commercial vehicles varied from 15% to 25%, whereas the final products were attracted excise duty of 10% or 15% only. The value addition was also not of such a magnitude that the excise duty required to be paid on final products could have exceeded the total input credit allowed. Since the excess credit could not have been utilised for payment of the excise duty on any other product, the unutilised credit was getting accumulated. The stand of the assessees is that they have utilised the facility of paying excise duty on the inputs and carried the credit towards excise duty payable on the finished products. For the purpose of utilisation of the credit all vestitive facts or necessary incidents thereto have taken place prior to 16- 3-1995 or utilisation of the finished products prior to 16-3-1995. Thus the assessees became entitled to take the credit of the input instantaneously once the input is received in the factory on the basis of the existing scheme. Now by application of Rule 57F(4A) credit attributable to inputs already used in the manufacture of the final products and the final products which 20 ST/86404/2019 have already been cleared from the factory alone is sought to be lapsed, that is, the amount that is sought to be lapsed relates to the inputs already used in the manufacture of the final products but the final products have already been cleared from the factory before 16-3-1995. Thus the right to the credit has become absolute at any rate when the input is used in the manufacture of the final product. The basic postulate, that the scheme is merely being altered and, therefore, does not have any retrospective or retro-active effect, submitted on behalf of the State, does not appeal to us. 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 right, which had accrued to a party such as availability of a scheme, is affected and, in particular, it loses sight of the fact that 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 the taxes have to be adjusted and payment made complete. Any manner or mode of application of the said rule would result in affecting the rights of the assessees.
6.We may look at the matter from another angle. If on the inputs the assessee had already paid the taxes on the basis that when the goods are utilised in the manufacture of further products as inputs thereto then the tax on these goods gets adjusted which are finished subsequently. Thus a right accrued to the assessee on the date when they paid the tax on the raw materials or the inputs and that right would continue until the facility available thereto gets worked out or until those goods existed. Therefore, it becomes clear that Section 37 of the Act does not enable the authorities concerned to make a rule which is impugned herein and, therefore, we may have no hesitation to 21 ST/86404/2019 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.
5.7 In case of Raghuvar (India ) Ltd. [2000 (118) E.L.T. 311 (S.C.)], Hon'ble Apex Court observed:
13. Any law or stipulation prescribing a period of limitation to do or not to do a thing after the expiry of period so stipulated has the consequence of creation and destruction of rights and, therefore, must be specifically enacted and prescribed therefor.
It is not for the Courts to import any specific period of limitation by implication, where there is really none, though Courts may always hold when any such exercise of power had the effect of disturbing rights of a citizen that it should be exercised within a reasonable period. Section 11A is not an omnibus provision which provides any period of limitation for all or any and every kind of action to be taken under the Act or the Rules but will be attracted only to cases where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded. The section also provides for an extended period on certain contingencies and situations. The situation on hand and the one which has to be dealt with under Rule 57-I, as it stood unamended, does not fall under any one of those contingencies provided for in Section 11A of the Act. Part AA of the Rules in which Rule 57-I is found included provides a special scheme for earning credit and adjustment of duty paid on excisable goods used as inputs in the manufacture of what is referred to as 'final product', and thereby enable the manufacturer to utilize the credit so allowed towards payment of duty of excise leviable on the final products, in the manner and subject to the terms and conditions stipulated therein. The manufacturer, in this case while removing the final product manufactured has adjusted against payment of excise duty on such final product a part or portion of the credit earned by him under the special scheme and what is sought to be really and in substance done is to inform the manufacturer that the adjustment he purported to have made was with an amount not legitimately or factually earned by or due to him. For this purpose, the irregularity and impropriety committed by the 22 ST/86404/2019 manufacturer in maintaining the accounts and the error in the calculation of the credit said to have been earned by him is pointed out, and the manufacturer is only directed to reverse the credit so wrongly and undeservedly made by readjustment and if need be, to recover the amount equivalent to such credit wrongly availed of and disallowed by the proper officer. The recovery of credit availed of and utilized in utter breach of the faith and mutual trust and confidence which is the raison d'etre for the proper and successful working of the Modvat scheme and that too in gross violation of the mandatory requirements necessarily to be fulfilled before ever claiming or availing of such benefits cannot be said to be the same as the demand for payment to be made under Section 11A of the Act of any excise duty not levied or paid or has been short-levied or short-paid. They fall into two distinct and different categories altogether with basic as well as substantial differences to distinguish them from each other. As a matter of fact, Rule 57-I envisages disallowance of the credit and consequential adjustment in the credit account or the amount-current maintained by the manufacturer and if only any such adjustments are not possible proceed to recover the amount equivalent to the credit illegally availed of. Consequently, the situation postulated to be dealt with under Rule 57-I cannot be said to involve a case of manufacture and removal of excisable goods without subjecting such goods to levy or payment of the various nature and category enumerated in Section 11A of the Act on its own terms will have no application or operation to cases covered under Rule 57-I of the Rules.
5.8 In the case of Tungabhadra Indus. Ltd.[2000 (118) E.L.T. 545 (S.C.)], Hon'ble Apex Court observed:
8. The question whether the benefits of both the notifications can be availed of simultaneously was not a subject matter of consideration before the Gujarat High Court and in fact the credit accumulated under the subsequent notification of 11th October, 1989 was not a matter for consideration at all. That apart, Clause (iii) of both the notifications, clearly provides that the amount of credit utilised for payment of duty shall not exceed rupees one thousand per tonne of vegetable products on any individual clearance. When the credits get accumulated in 23 ST/86404/2019 accordance with the rates indicated in the notification itself then the same can be utilised also in accordance with the terms and conditions contained in that notification and, therefore, it is not permissible to construe the judgment of Gujarat High Court that it has been held therein that the manufacturer could avail of the credits accumulated under both the notifications simultaneously.
To the said effect also is the judgment of the Andhra Pradesh High Court on which Mr. Dave placed reliance. The only thing what both the High Courts have held is that the rights acquired or money credit accumulated, is not taken away by rescinding of the notification in question. In fact the decision of the Karnataka High Court in the case of Union of India v. Modern Mills Ltd., 1994 (72) E.L.T. 246 (Kar.) considers and approves the aforesaid decision of the Gujarat High Court and Andhra Pradesh High Court and holds that the accumulated credit would not be ceased with the rescinding of the notification and on the other hand, could be utilised by the assessee towards excise duty payable on its final products thereafter. But it has been further held that the said accumulated credit could be utilised only subject to the conditions to the notification and consequently, it is not open to the manufacturer to insist on clearing his finished products, without paying any amount of excise duty by merely effecting two debit entries of the accumulated credits. In other words, what has been held by the Karnataka High Court in the aforesaid decision is that though the manufacturer would be entitled to utilise the accumulated credits under the rescinded notification and can also accumulate further credits on the basis of the fresh notification of the year 1989, but is not entitled to claim adjustment on the basis of both the accumulated credits simultaneously. We approve the views taken by the Karnataka High Court and we further hold that neither in the decision of the Gujarat High Court not in the decision of the Andhra Pradesh High Court, anything contrary has been said, so far as the question of utilisation of the credit for payment of duty on the manufactured goods are concerned. In this view of the matter, the Excise Authorities have rightly dealt with the matter of utilisation of the accumulated credit in favour of the appellant- manufacturer and we see no infirmity in the same.
24 ST/86404/2019 5.9 In the case of Hindustan Zinc Ltd [2012 (276) E.L.T. 393 (Tri. - Del)}, following was observed "7 ......It is undisputed fact that the duty amount was not paid on the due date in relation to the period for which the authority had found short-payment essentially because there was subsequent payment of the said amount, that cannot ipso facto result in revenue neutrality, merely because the appellants are entitled to avail credit in respect of the duty paid. Right to claim arises only after payment of duty and not prior thereto. ......"
5.10 It is thus settled principle that the CENVAT Credit becomes the vested right of the assessee, only on fulfillment of the following conditions during the period of the continuance of the CENVAT Credit Scheme.
Input, Input Services or Capital Goods are received by the assessee, and Input, Input Services or Capital Goods are received by the assessee on the payment of duty along with the documents as prescribed under Rule 9 of the CENVAT Credit Rules, 2004 evidencing the payment of duty, and Assessee files the prescribed ER-1/ ST-3 return claiming the credit of the duty/ tax paide on input, input services or the capital goods in the maneer as prescribed. The finished goods cleared or the output services provided on the payment of due duty/ tax.
If all the above conditions are satisfied then the right to credit becomes absolute and cannot be altered or modified subsequently as has been held by the Hon'ble Apex Court in the case Eicher Motor Ltd., and Tungbhadra Indus Ltd., supra. This right cannot be taken away by any subsequent amendment or repeal. For this reason sub section (1) and (2) to section 142 of Central Goods and Service Tax Act, 2017 provided as follows:
5.11 It is settled principle in law that nobody can claim the benefit on his own errors or misdoings. The service tax under reverse charge mechanism as required for the period April 2016 to June 2017 was to be deposited by the appellant while filing the monthly returns for that period. Appellant has not paid the 25 ST/86404/2019 said amounts which were due on reverse charge mechanism and has thus assessed the tax liability. They do not dispute the said short payment and have subsequently, on being pointed out by the auditors, paid the same and have also filed claim for cash refund of the same. Law does not provide for refund of any tax legally required to be paid by cash payment. If the appellant had paid this and carried it as admissible cenvat credit in their returns and book of accounts as on 01.07.2017, the same would have been transferred to the GST ITC account under the transitional provision as provided in CGST Act, 2017. Having not done so and if the cash refund is allowed, it will be contrary to the well settled principle as stated above.
5.12 Secondly, it is also settled law that when the statute provides for nothing to be done in a particular manner, the same should be done in that manner only and not in any other manner. If such refund claim is entertained and allowed, then it would be contrary to the above principle because the law provided for taking Cenvat credit of the tax paid prior to 01.07.2017 and any Cenvat credit if admissible for any taxes after 01.07.2017. Accordingly if Cenvat credit itself is not admissible, there cannot be a question for refund of the tax paid without violating the above settled principle.
5.13 I am aware of certain decisions of tribunal whereby the Tribunal has granted the refund of tax subsequently paid after 01.07.2017 by treating it as a refund of Cenvat credit admissible to the appellant. In my view when there was no such scheme as Cenvat credit scheme at the time when the person was claiming the Cenvat credit, the benefit could not have been allowed. The order as such is per incuriam and cannot set a binding precedent in any manner.
5.13 In case of Rungta Mines Ltd [2022 - TIOL - 252 - HC-
Jharkhand - GST], the very same issue has been considered by division bench of Hon'ble High Court of Jaharkhand and following has been held while rejecting the refund claim made:
"Legal proposition on the point of refund: -
26 ST/86404/2019
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.
Refund is always a matter of a statutory prescription and can be regulated by the statute subject to conditions and limitations;
27 ST/86404/2019
(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;
28 ST/86404/2019
(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 29 ST/86404/2019 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 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 30 ST/86404/2019 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: -
"71. Section 30 of the amending Act bears the heading "Transitional provisions". Explaining the role of transitional provisions in a statute, Bennion has stated:
31 ST/86404/2019 "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 the application of legislation to the circumstances which exist at the time when the legislation comes into force and are applicable 32 ST/86404/2019 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 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 33 ST/86404/2019 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 interpretated by holding that the said provision inter-alia saves a right accrued, but it does not create a right. Paragraph-14 of the aforesaid judgment is quoted hereinbelow for ready reference: -
"14. ................. Section 6 of the General Clauses Act, therefore, inter alia, saves a right accrued and/or a liability incurred. It does not create a right. When Section 6 applies, only an existing right is saved thereby. The existing right of a party has to be determined on the basis of the statute which was applicable and not under the new one. If a new Act confers a right, it does so with prospective effect when it comes into force, unless expressly stated otherwise."
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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 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 35 ST/86404/2019 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 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."
36 ST/86404/2019
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 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 37 ST/86404/2019 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 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 38 ST/86404/2019 that the CENVAT Credit was not taken as the original bill/invoice was not received though generated on 23.05.2017. Admittedly, the petitioner did not claim the service tax paid on "port services" involved in this case as CENVAT Credit in their relevant ER-1 return.
27. On account of non-inclusion of the service tax paid on port services in ER-1 Return, the petitioner could not have claimed the transition of the said CENVAT Credit as permissible transitional credit referrable to section 140 of CGST Act through TRAN-1 and could not utilise the same under CGST Regime. Admittedly, the time for filing TRAN-1 was extended till 31.10.2017 but still the impugned service tax on "port services"
could not be included (although by this time the original bill/invoice was received on 20.09.2017) as this Service Tax as CENVAT Credit was not included in ER-1 return and the time for filing ER-1 return for the period in question had expired. Further the petitioner had claimed this amount in Service Tax return ST- 3 filed on 22.09.2017.
28. Thus, the petitioner missed to exercise their rights to avail of transitional credit of the service tax paid on "port services"
through the mechanism prescribed under the CGST Act (Section
140) read with the existing provisions of CENVAT Credit Rules, 2002. It is also important to note that the existing provision did not permit CENVAT Credit of service tax paid on "port services"
without its inclusion in ER-1 Return and in absence of such inclusion within the prescribed time line the claim of credit stood completely lost and could not be claimed in TRAN - 1 as transitional credit under CGST Act. Admittedly, the petitioner was not entitled 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 39 ST/86404/2019 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.
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:
40 ST/86404/2019 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 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;
41 ST/86404/2019
(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.
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 42 ST/86404/2019 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 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).
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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.
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 44 ST/86404/2019 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 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: -
45 ST/86404/2019 "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 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.
46 ST/86404/2019
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 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:
47 ST/86404/2019 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 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.
48 ST/86404/2019 (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, 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.
49 ST/86404/2019 (3) The mention of the particular matters referred to in sub- sections (1) and (2) shall not be held to prejudice or affect the general application of section 6 of the General Clauses Act, 1897 (10 of 1897) with regard to the effect of repeal."
40. Section 142 of the CGST Act, 2017 provide for Miscellaneous Transitional Provisions. The following are the pre-conditions of refund in cash under section 142(3) : -
a. Sub Section-(3) deals with claim for refund filed before, on or after the appointed day. Thus it, interalia, deals with applications for refund filed before the appointed date and pending on the appointed date apart from the refund applications filed on or after the appointed date.
b. Further the refund application should be for refund of any amount of CENVAT Credit, duty, tax, interest or any other amount paid under the existing law.
c. Such application filed before, on or after the appointed day is to be disposed of in accordance with the provisions of existing law.
d. If any amount eventually accrues the same is to be refunded in cash, notwithstanding anything to the contrary contained under the provisions of existing law other than the provisions of sub-section (2) of section 11-B of the Central Excise Act, 1944.
e. It also provides that where any claim for refund of CENVAT Credit is fully or even partially rejected, the amount so rejected shall lapse.
f. The second proviso provides that no refund shall be allowed of any amount of CENVAT Credit where the balance of the said amount as on the appointed day has been carried forward under the CGST Act.
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 50 ST/86404/2019 the provisions of existing law and if any such amount accrues the same shall be paid in cash. Such right to refund in cash has been conferred notwithstanding anything to the contrary contained under the provisions of existing law other than the provisions of sub-section (2) of section 11-B of the Central Excise Act, 1944.
42. It is not in dispute that the refunds under the existing law of Service Tax as well as Central Excise Act, 1944 are governed by section 11B of the Central Excise Act, 1944 and subsection 2 of section 11 B also refers to application for refund made under section 11 B(1) of Central Excise Act, 1944. Further section 11B(3) of Central Excise Act, 1944 clearly provides that all kinds of refunds including those arising out of judgement , decree or orders of court or tribunal are to be dealt with in accordance with the provisions of section 11B (2) of Central Excise Act, 1944 . It is also important to note that section 11B(2) of Central Excise Act, 1944 deals with the manner in which applications for refund under section 11B (1) are to be dealt with as it uses the word "such application" which is clearly referrable to section 11B (1) of Central Excise Act, 1944. Further, the proviso to section 11B(2) deals with situations of rebate of duty; unspent advance deposits; principles of unjust enrichment in cases where duty of excise is paid by manufacturer or borne by buyer and who have not passed on the incidence of such duty to any other person; and also where duty of excise is borne by any other class of applicant as the central government 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.
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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 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.
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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. 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.
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50. It is not in dispute that the petitioner has claimed the credit of service tax involved in the present case paid on "port services" as "input service" in ST-3 return filed on 22.09.2017, though they were not entitled to claim such a credit. It is further not in dispute that the petitioner did not include the impugned service tax paid on "port services" in its ER-1 return and accordingly was neither entitled to include nor included the same as transitional credit in TRAN-1 under CGST Act. As per the notification (Annexure-5) extending the date of filing TRAN-1 to 31.10.2017, the same was in relation to certain service tax issues which were paid after 30.06.2017 under reverse charge basis to cover instances of bills raised on 30.06.2017 since credit is available only if the payment is made and the payment in such cases could be made only after 30.06.2017. However, in the instant case the bill was admittedly generated on 23.05.2017, services availed and bill amount including service tax was paid in April 2017 but the original bill did not reach the petitioner for unknown/undisclosed reasons.
51. It is apparent from the impugned orders that the specific case of the respondent is that the petitioner had claimed CENVAT Credit under ST-3 return thereby treating the services involved in the present case as their input services used for providing output service, whereas they are not output service provider and the same cannot be used for providing output services. Therefore, it cannot be their input services under Rule 2 (l) of CENVAT Credit Rules, 2004. I am also of the considered view that the petitioner could not have claimed the impugned service tax on port services in ST-3 return as they were registered for discharging their liability under the service tax only on reverse charge mechanism. Rather it is the case of the 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 54 ST/86404/2019 omitted to claim the impugned service tax as CENVAT Credit in ER-1 Return.
52. Further case of the respondent is that the petitioner as a manufacturer was eligible to claim CENVAT Credit on impugned service i.e "port services" and should have claimed the credit in their ER-1 Return within the prescribed time and accordingly could have claimed transitional credit through TRAN-1 under section 140 of CGST, Act. Thus, late receipt of the original invoice which has been cited as the reason for failure to claim CENVAT Credit under the existing law and transitional credit under section 140(1) of the CGST, Act was wholly attributable to acts and omissions of the petitioner and its service provider of the "port services" and the respondent authorities had no role to play. The petitioner had failed to avail the opportunity to claim CENVAT Credit of service tax on port services in terms of the existing law read with section 140 of CGST, Act and had no existing right of refund on the date of coming into force of CGST, Act. The petitioner having not used the port services for export was not entitled to claim refund under the existing law. The petitioner was also not entitled to refund on account of the fact that the petitioner had already taken credit of the service tax paid on port services in ST-3 Return of service tax although admittedly the petitioner was not entitled to take such credit in ST-3 Return. On account of aforesaid three distinct reasons the petitioner was rightly 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 55 ST/86404/2019 port authorities were made by the petitioner in the month of April 2017, the invoice was generated by the port authorities in the month of May 2017 but the original invoice was received by the petitioner only on 20.09.2017 i.e after coming into force of CGST Act. The late receipt of the invoice is essentially between the petitioner and the port authorities and the tax collecting authorities had nothing to do in the matter. Certainly, the delay in receipt of original invoice is not attributable to the respondent authorities under the existing law or under the new law.
54. The authorities have held in the impugned orders that in the instance case, the timeline for claiming CENVAT Credit qua the service tax paid on port services was not followed by the petitioner, although the services were availed, the entire payment was made and the bill was also generated in the month of April/May, 2017. Further, it has also been held in the impugned orders that the petitioner not only failed to claim the CENVAT Credit as per law, but illegally 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).
55. In view of the aforesaid findings, I do not find any reason to interfere with the findings and reasons assigned by the adjudicating authority as well as the appellate authority rejecting the application for refund filed by the petitioner under section 11B of Central Excise Act read with Section 142(3) and 174 of 56 ST/86404/2019 CGST Act. The impugned orders are well reasoned orders calling for no interference. Accordingly, this writ petition is dismissed."
5.14 Since the issue is on the fours covered by the decision of the Hon'ble High Court referred above analyzing all the provisions of the law, I do not find any merits in this appeal and uphold the impugned order.
6.1 Appeal is accordingly dismissed both on merits and under Rule 20 of the CESTAT (Procedure) Rules, 1982.
(Order pronounced in the open court) (Sanjiv Srivastava) Member (Technical) tvu