Custom, Excise & Service Tax Tribunal
Rspl Ltd vs Cgst & Ce Kanpur on 12 September, 2024
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
ALLAHABAD
REGIONAL BENCH - COURT NO.I
Service Tax Miscellaneous Application No.70183 of 2024
(On behalf of Appellant) In
Service Tax Appeal No.70717 of 2021
(Arising out of Order-in-Appeal No.306/ST/Alld/2021 dated 14.10.2021
passed by Commissioner (Appeals) Central Goods & CGST, Allahabad)
M/s RSPL Ltd., .....Appellant
(119-121 (Part), Kalpi Road, Fazalganj, Kanpur-208012)
VERSUS
Commissioner Central Excise &
CGST, Kanpur ....Respondent
(Commissionerate, Kanpur-208005)
APPEARANCE:
Shri Vijay Kumar Gupta, Consultant for the Appellant
Shri Santosh Kumar, Authorised Representative for the Respondent
CORAM: HON'BLE MR. SANJIV SRIVASTAVA, MEMBER (TECHNICAL)
FINAL ORDER NO.70581/2024
DATE OF HEARING : 28 May, 2024
DATE OF PRONOUNCEMENT : 12 September, 2024
SANJIV SRIVASTAVA:
This appeal is directed against Order-In-Appeal No. 306
/ST/Alld/2021 dated 14.10.2021 of the Commissioner (Appeal)
Central Goods and Service Tax and Central Excise, Allahabad. By
impugned order appeal filed by the appellant against the Order-
in-Original No. 46-CE/Refund/ACK-1/2020 dated 30.12.2020 of
the Assistant Commissioner, CGST & Central Excise, Division- I,
Kanpur rejecting the refund claim filed by appellant has been
dismissed.
2.1 The appellant is engaged in providing/ receiving services
under category of GTA Service, Management of Business
Consultant Service, Work Contract Service, IPR Service, Renting
of Immovable Property Service, Sponsorship Service, Legal
2 Service Tax Appeal No.70717 of 2021
Consultancy Service, Security Agency Service, Manpower
Recruitment & Supply Agency Service, Rent a Cab Service,
Advertising Agency Service taxable under the Finance Act, 1994
(hereinafter referred to as "the Act").
2.2 The appellant filed a refund claim of Rs.6,30,255/ -before
jurisdictional authorities, for refund of credit admissible on the
taxes paid in the month of February 2019 in respect of Directors
Sitting Fees, Legal Consultancy Service and Manpower
Recruitment Agency Service under Cenvat Credit Rules, 2004.
On preliminary scrutiny of the refund claim it appeared that the
refund, was not inadmissible in view of the Section 142 of the
CGST Act 2017.
2.3 A Show Cause Notice dated 26.05.2020 was issued,
proposing rejection of refund of Rs.6,30,255/- i.e. credit of
service tax paid on Directors Sitting Fees, Legal Consultancy
Service and Manpower Recruitment Agency Service under
Cenvat Credit Rules, 2004.
2.4 The jurisdictional Assistant Commissioner vide Order dated
30.12.2020 rejected the refund claim filed by the appellant..
2.5 Aggrieved appellant filed an appeal be fore the first
appellate authority which has been dismissed as per the
impugned order.
2.6 Aggrieved appellant has filed this appeal.
3.1 I have heard Shri Vijay Kumar Gupta, Consultant for the
appellant and Shri Santosh Kumar Authorized Representaive for
the revenue.
3.2 Arguing for the appellant and in the additional submissions
filed by the appellant counsel following is stated:
Amount claimed as refund has been deposited by the
appellant under reverse charge mechanism on suggestion
of audit, credit of the same is available under erstwhile
CENVAT Crredit rules, 2004, by virtue of saving provisions
contained in section 174 of CGST Act, 2017;
3 Service Tax Appeal No.70717 of 2021
Section 142 (8)(a) bars that credit which is recovered
under existing act or as an arrear of tax under CGST Act
and is in pursuance of assessment or adjudication
proceedings;
Recovery is governed by Section 87 of Finance Act, 1994
and section 78 & 79 of the CGST Act and no action has
been initiated under the said provisions;
Section 142 (3) has not been considered.
The benefit of such service tax could not be availed or
carried over to GST thus the refund could not have been
denied;
Denial o0f Cenvat Credit by invoking provisions of Rule 9
(1)(bb) of CENVAT Credit Rules, 2004 is not subject matter
of the show cause notice.
Reliance is placed on the following decisions:
o NSSL Pvt Ltd [2021-TIOL-469-CESTAT-MUM]
o Adfert Technologies Pvt. Limited [2019-TIOL-2519-
HC-P&H-GST]
o Terex India Pvt. Ltd [2021-TIOL- 696-CESTAT-
Madras]
o Kakalpana Industries India Ltd [2022-TIOL-984-
CESTAT-AHM]
o Ganges International Pvt Ltd. [2022-TIOL-325-HC-
MAD-GST]
o Jagannath Polymers Pvt Ltd Jaipur [2022- TIOL-66-
CESTAT-DEL]
o Circor Flow Technologies Pvt. Ltd [2021-TIOL-828-
CESTAT-MAD]
3.3 Learned authorized representative reiterated the findings
recorded in the impugned order.
4.1 I have considered the impugned order along with the
submissions made in appeal and during the course of arguments.
4.2 Impugned order records finding as follows:
4 Service Tax Appeal No.70717 of 2021
"4.1 have gone through the facts of the case, the averments
made at the time of personal hearing and all other
material/ documents available on records. The appellant
has contested that the adjudicating authority has not
considered the claim in the light of 2nd proviso to Rule 4(7)
of the CENVAT Credit Rules, 2004. I observe that the that
the 2nd proviso to Rule 4(7) provides that in case the
payment of the value of input service and the service tax
paid or payable as indicated in the invoice, bill or, as the
case may be, challan referred to in rule 9, is not made
within three months of the - date of the invoice, bill or, as
the case may be, challan, the manufacturer or the service
provider who has taken credit on such input service, shall
pay an amount equal to the CENVAT credit availed on such
input service and in case the said payment is made, the
manufacturer or output service provider, as the case may
be, shall be entitled to take the credit of the amount
equivalent to the CENVAT credit paid earlier subject to the
other provisions of these rules. In the instant case during
the course of audit it was noticed by the department that
the appellant has not paid service tax on Director Sitting
Fees, Legal Consultancy Services & Manpower Recruitment
Agency Service under reverse charge mechanism. On being
pointed out by the audit team the appellant has deposited
the service tax amounting to Rs. 6,30,255/- on the
aforementioned services under reverse charge mechanism
and filed refund of said amount in the guise of Section 142
of the CGST Act,2017 by claiming that amount deposited
by them is admissible as input service credit under CENVAT
Credit Rules,2004. I observe that the Rule 9(bb) of the
CENVAT Credit Rules,2004 provides that a supplementary
invoice, bill or challan issued by a provider of output
service, in terms of the provisions of Service Tax Rules,
1994 except where the additional amount of tax became
recoverable from the provider of service on account of non-
levy or non-payment or short-levy or short-payment by
reason of fraud or collusion or wilful mis-statement or
5 Service Tax Appeal No.70717 of 2021
suppression of facts or contravention of any of the
provisions of the Finance Act or of the rules made
thereunder with the intent to evade payment of service tax.
In the instant case, nonpayment of service tax on
aforementioned services could be detected only during audit
conducted by the Department. Thus, there is clear cut
suppression of facts on the part of the appellant Therefore,
as per legal provisions amount of service tax deposited by
the appellant after detection made at the time of audit is
not available as input tax credit in the light of provisions
made under Rule 9(bb) of the CENVAT Credit Rules,2004
that a supplementary invoice, bill or challan issued by a
provider of output service is valid documents for taking
credit except where the additional amount of tax became
recoverable from the provider of service on account of non-
levy or non-payment or short-levy or short-payment by
reason of fraud or collusion or wilful mis-statement or
suppression of facts or contravention of any of the
provisions of the Finance Act or of the rules made
thereunder with the intent to evade payment of service tax.
Therefore, I find no force in the contention of the appellant
that the claim is admissible in term of 2nd proviso to Rule
4(7) of the CENVAT Credit Rules,2004
4.2 The appellant has further contested that the
adjudicating authority surpassed the savings provisions
contained in Section 174 of the CGST Act, 2017 and
rejection order of adjudicating authority tantamount to
denial of fruits of miscellaneous transitional provisions of
Section 142 of the CGST Act'2017. I observe that the
appellant has filed refund claim in terms of Section 142 of
the CGST Act,2017. The adjudicating authority has clearly
mentioned miscellaneous transitional provisions as
contained under Sections 142(8) & 142(9) of the CGST
Act,2017 and observed that proceeding instituted on the
basis of audit conducted by the department comes within
the meaning of phrase used in Section 142(8) of the Act,
thus, the amount deposited in pursuance of audit
6 Service Tax Appeal No.70717 of 2021
observation is not admissible as input service credit to the
appellant. The adjudicating authority has further observed
that the Section 142(9) of the Act provides that if 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. As the
appellant has already admitted that short payment of
service tax was detected by the audit team which clearly
means that the return filed by the appellant needed
revision and the amount of short payment was recoverable
from the appellant Therefore, no input tax credit or cash
admissible on this account. I find no infirmity in the
observation made by the adjudicating authority in terms of
miscellaneous transitional provisions as contained under
Sections 142(8) & 142(9) of the CGST Act,2017.
4.3 The appellant has relied upon following case laws:
(i) Judgement of Hon'ble High Court of Uttrakhand in the
case of M/s R.V Manpower Solution Vs Commissioner
of Central Excise [2013(4) TMI-294-UK]
(ii) Judgement of Hon'ble Tribunal Chandigarh in the case
of M/s Great India Steel Fabricators Vs CCE
Panchkula [2019-TIOL-1484-CESTAT-Chd.]
(iii) Judgement of Hon'ble High Court of Gujarat in the
case of M/s Thermax Limited Vs U.O.I [2019-TIOL-
1952-HC-Ahm-CX)
4.3.1 I observe that in the case of M/s R.V Manpower
Solution Vs Commissioner of Central Excise the department
without deciding the matter finally and without calling for
any hearing has freezed all the Bank accounts of the
petitioner by invoking power under Section 87 clause (b) of
the Finance Act, 1994. The the Hon'ble High Court of
7 Service Tax Appeal No.70717 of 2021
Uttrakhand has held that order of freezing the Bank
accounts is not sustainable in the eye of law having been
passed without any jurisdiction ⁃ Such claim can be made
only when the final adjudication has been done after
quantifying the amount due and payable by the assessee.
However, the present case relates to refund of cenvat
credit in terms of Section 142 of the CGST Act which is
clearly distinguishable from the case relied upon by the
appellant, thus, not applicable in the present case
4.3.2 I observe that the case of M/s Great India Steel
Fabricators Vs CCE Panchkula relates to refund of CENVAT
credit under Rule 5 of the CENVAT Credit Rules,2004 on
account of goods. The Hon'ble Tribunal has held that the
appellant is entitled the refund claim in cash. However, in
the present case admissibility of input service credit is also
in question. Thus, the facts of both cases are clearly
different.
4.3.3 I observe that in the case of M/s Thermax Limited Vs
U.O.I, the adjudicating authority has sanctioned the refund
claim and credited the same in CENVAT account. The
Hon'ble High Court of Gujarat has directed the refund
sanctioning authority to refund the amount in cash to the
petitioner. Thus, the facts of both cases are clearly
different."
4.3 Order in original records the findings as follows:
"The issue in brief is that the party has submitted a refund
application for Rs. 6,30,255/- before the Assistant
Commissioner, Central GST & Central Excise Division-I,
Kanpur on 30.10.2019 in terms of Section 142 of the CGST
Act`2017 as the admissibility of credit of the taxes paid on
(i) Service tax on Directors' Sitting Fees (ii) Legal
Consultancy Service and (ii) Manpower Recruitment Agency
Service in the month of Feb`2019 under Cenvat Credit
Rules'2004. The department issued show cause notice for
rejection of claim
8 Service Tax Appeal No.70717 of 2021
I find that the allegation made in the SCN is that since the
tax has been deposited by them in pursuance of audit
objection, the refund is barred by the Section 142(8)(a) and
Section 142(9)(a) of the CGST Act, 2017. Party, on the
other hand has stated that Section 142(8)(a) of the CGST
ACT refers to the recovery of tax, interest, fine or penalty
under the existing law in pursuant to an ASSESSMENT or
ADJUDICATION proceedings and, therefore, not applicable
to this case because the service tax, the refund of which has
been claimed, was voluntarily paid (not recovered) in the
month of Feb. 2019 and pertain to period prior to appointed
date i.e. 01.07.2017.
They also contended that the service tax was paid on the
suggestions made by the departmental audit party for which
order of Assessment or Adjudication was never made. After
payment of escaped tax it was noticed that credit of such
input service was available but could not be claimed due to
introduction of CGST Act 2017 that was effective from
01.07.2017.Since, there was no alternative except to claim
refund of the same under Section 142 of CGST Act 2017,
they applied for refund which is admissible under sub
section 3 of Sec.142 of CGST Act 2017.
Firstly, I observe that party's claim that they have paid the
tax Voluntarily is not correct as it is a fact on record that
and admitted by the party in their letter dated 30.06.2020
that the officers of Audit Circle Group-1, Kanpur conducted
audit of the company for the period 04.12.2018 to
22.02.2019 and detected short payment of Tax which was
deposited by them in the month of Feb.,201 9
I also observe that party's contention is based on the fact
that they have deposited money on their own and there was
no assessment or adjudication or revision of return and
their case is not covered under Section 142 (8) or (9) as
alleged by the department.
I have gone through the provisions of Section 142 (8) and
142(9) which is re-produced below;
9 Service Tax Appeal No.70717 of 2021
Section 142 (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
lax, 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 the
Central Excise Act, 1944 and the amount rejected, if
any, shall not be admissible as input tax credit under
this Act.
Section 142(9):-
(a) The provisions contained in the Section 142 (9) (a) of
CGST Act'2017 states that "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 oftax under this Act and the amount so
recovered shall not be admissible as input tax credit
under this Act; "
(b) The provisions contained in the Section 142 (9) (b) of
CGST Act'2017 states that " where any return,
furnished under the existing law, is revised after the
appointed day but within the time limit specified for
10 Service Tax Appeal No.70717 of 2021
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 inadmissible to any
taxable person, the same to 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 Central
Excise Act'1944 (1 of 1944) and the amount rejected,
if any shall not be admissible as input tax credit under
this Act
On going through the provision contained in Section 142 (8)
of the Act, I observe that the phrase used is assessment or
adjudication proceedings instituted, for which party is
claiming in their defence that the dues has not been
deposited in consequence of assessment or Adjudication
I find that Section 2(11) of the CGST Act, 2017 defines the
term " Assessment" to mean determination of tax liability
under this Act and includes self-assessment, re-assessment
provisional assessment, summary assessment and best
judgment assessment. However, Self- Assessment, at
times may lead to in-appropriate interpretation of statues,
leading to depositing lesser taxes or claiming
irregular/incorrect input tax credits, refunds, thus paving
way for the revenue authorities to intervene. The
intervention may come by way of assessment or by the way
of Audit by the revenue officers. The term ' Assessment"
under the tax statue would generally mean determining the
tax liability and the procedure for collecting or recovering
the same and Section 2 (13) of the CGST Act, 2017 defines
the term 'Audit' to mean, the examination of records,
returns and other documents maintained or furnished by the
registered person under this Act or the rules made
thereunder or under any other law for the time being in
force to verify the correctness of tax paid or turnover
declared. Further, any discrepancy noticed in records by
method of scrutiny by the department i.e. Assessment or
11 Service Tax Appeal No.70717 of 2021
Audit will lead to issue of Show cause notice for recovery of
revenue not paid or short paid. This can also be inferred as
the CGST Act. 2017 envisages issuance of SCN under
Section 73/74 of the CGST Act. 2017 in cases involving
scrutiny of returns, summary assessment, audit by tax
authorities, special audit etc.
Therefore, I observe that party's contention holds no ground
and is liable to be rejected. Further, in my opinion the
phrase used in the section is "assessment or adjudication
proceedings instituted", where assessment /adjudication
has been succeeded by the word instituted which means it
is to be looked from the genesis of the adjudication.
Therefore, in my opinion Audit is well within he ambit of this
phrase and Credit of amount deposited in pursuance of
Audit objection is not admissible to them as refund
Also on going through the provision of Section 142(9) it is
found that if any return is revised after the appointed day
and if pursuant to such revision any amount is found to be
recoverable, the same shall be recovered as an arrear and
the amount so recovered shall not be admissible as input
tax credit under this Act (GST Act2017). As the party has
already accepted that the short payment of tax was
detected by the audit team which clearly means that the
return filed by the party needed revision and the amount of
short payment was recoverable from the party. Therefore
no input tax credit or cash refund is admissible on this
amount."
4.4 I find that issue involved in the present case is squarely
covered by the decision of Hon‟ble High Court of Jaharkhand in
case of Rungta Mines [2022-TIOL-252-HC-JHARKHAND-
GST] wherein following has been observed and held:
"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
12 Service Tax Appeal No.70717 of 2021
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:
"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
13 Service Tax Appeal No.70717 of 2021
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 to proceedings that
14 Service Tax Appeal No.70717 of 2021
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
15 Service Tax Appeal No.70717 of 2021
portions have already been quoted above. There can be no
doubt that the right to refund in the matter of taxation is a
statutory right which is neither a fundamental right nor a
constitutional right and there is no equity in taxation. The
right crystalizes only when the statute permits refund as per
law and prescribed procedure.
15. It has been submitted that in the case of Gammon India
Ltd. vs Chief Secretary (supra), it has been held that the
rights which are saved by saving provisions continues even
after repeal. Further in the judgment passed by the Hon'ble
Supreme Court in the case of Baraka Overseas Trader
(supra), it has been held that the accrued rights under old
law is to be continued under the new law. However, the
moot question in the instant case is as to whether there was
any existing right of availing CENVAT Credit or refund on
the date of coming into force of the CGST Act in favour of
the petitioner which can be said to have accrued or vested
and consequently saved by the repealing provision of CGST
Act. The finding in later part of this judgement holds that
the petitioner did not have any existing right of availing
CENVAT Credit or refund on the date of coming into force of
the CGST Act which can be said to have accrued or vested
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,
16 Service Tax Appeal No.70717 of 2021
only an existing right is saved thereby. The existing right of
a party has to be determined on the basis of the statute
which was applicable and not under the new one. If a new
Act confers a right, it does so with prospective effect when it
comes into force, unless expressly stated otherwise."
17. In the case of Glaxo Smith Kline PLC and Others
(supra), the Hon'ble Supreme Court has upheld the view of
the learned single judge of the High Court and held at Para-
17 as under: -
"17. The learned Single Judge's view that the provisions of
Section 78 of the Amendment Act have no application to the
proceedings which stood concluded before the appointed
day appears to be the correct view governing the issue.
Since Chapter IV-A in question was merely repealed, the
situation has to be dealt with in line with Section 6 of the
General Clauses Act. The provisions of Section 78 are
conditional provisions and are not intended to cover cases
where the application for EMR had been rejected with
reference to Section 21 of the amending enactment. As
noted above, Chapter IV-A was repealed. The effect of the
repeal has to be ascertained in the background of Section 6
of the General Clauses Act. That being so, the order of the
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
17 Service Tax Appeal No.70717 of 2021
falling under Headings Nos. 87.02 and 87.04 or chassis of
such tractors or such motor vehicles under Heading No.
87.06. However, credit taken on inputs which were lying in
the factory on 16-3-1995 either as parts or contained in
finished products lying in stock on 16-3-1995 was allowed.
Prior to the 1995-96 Budget, the Central excise/additional
duty of customs paid on inputs was allowed as credit for
payment of excise duty on the final products, in the
manufacture of which such inputs were used. The condition
required for the same was that the credit of duty paid on
inputs could have been used for discharge of duty/liability
only in respect of those final products in the manufacture of
which such inputs were used.
.............................
As pointed out by us that when on the strength of the Rules available, certain acts have been done by the parties concerned, incidents following thereto must take place in accordance with the Scheme under which the duty had been paid on the manufactured products and if such a situation is sought to be altered, necessarily it follows that the right, which had accrued to a party such as the availability of a scheme, is affected and, in particular, it loses sight of the fact that the provision for facility of credit is as good as tax 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.
18 Service Tax Appeal No.70717 of 2021
6. We may look at the matter from another angle. If on the inputs, the assessee had already paid the taxes on the basis that when the goods are utilised in the manufacture of further products as inputs thereto then the tax on these goods gets adjusted which are finished subsequently. Thus, a right accrued to the assessee on the date when they paid the tax on the raw materials or the inputs and that right would continue until the facility available thereto gets worked out or until those goods existed. Therefore, it becomes clear that Section 37 of the Act does not enable the authorities concerned to make a rule which is impugned herein and, therefore, we may have no hesitation to hold that the Rule cannot be applied to the goods manufactured prior to 16-3-1995 on which duty had been paid and credit facility thereto has been availed of for the purpose of manufacture of further goods."
19. The learned counsel has also referred to the judgment passed in the case of CCE vs Grasim Industries Ltd. (supra) to submit that excise duty/CENVAT is value added tax. There is no doubt about the aforesaid proposition, as it is not in dispute in the instant case that the petitioner was entitled to take credit of the service tax paid to the port authorities for the "port services" by way of CENVAT Credit as per the provisions of the rules.
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.
19 Service Tax Appeal No.70717 of 2021
21. So far as the judgment passed in the case of Kunal Kumar Tiwari vs State of Bihar (supra) is concerned, the same has been relied upon by the petitioner to submit that an interpretation which advances the purpose of object underlying the Act should be preferred. But the learned counsel for the petitioner has failed to show as to how the entitlements to CENVAT Credit on service tax paid on "port services" which the petitioner did not claim as per procedure prescribed by law can be construed to confer such a right to claim such credit under transitional provisions followed by cash refund and how such a position in law would advance the purpose and object of CGST Act. Rather, the aforesaid interpretation sought to be given by the petitioner is contrary to the very object and purpose of section 142(3) of CGST Act which has been discussed at a later part of the Judgement.
22. So far as the judgment passed in the case of M/s. DMR Constructions (supra) by Hon'ble Madras High Court is concerned, the same related to transition of accumulated tax deducted at source which existed on the date of coming into force of CGST Act and relief was granted to the 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 20 Service Tax Appeal No.70717 of 2021 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 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 21 Service Tax Appeal No.70717 of 2021 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 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.
22 Service Tax Appeal No.70717 of 2021
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:
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;
23 Service Tax Appeal No.70717 of 2021 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;
(iv) Section 142(3) of the CGST Act, 2017 provides for refund of CENVAT Credit in cash accruing to the assessee 24 Service Tax Appeal No.70717 of 2021 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 25 Service Tax Appeal No.70717 of 2021 entitled to refund under section 11B of Central Excise Act, 1944 read with Rule 5 of the CENVAT Credit Rules, 2004.
The Adjudicating Authority observed that the transitional provisions under the CGST Act specifically provide transition of credit through TRAN-1 and the petitioner had failed to declare its claim in proper return i.e. ER-1. Accordingly, the Adjudicating Authority, vide the Order-in-Original dated 25.01.2019, rejected the refund claim under the provisions of Section 11B of the Central Excise Act, 1944 made applicable to Service Tax vide Section 83 of the Finance act, 1994.
37. Aggrieved with the aforesaid Order in original the petitioner filed appeal reiterating the submissions made before the Adjudicating Authority. They made following main submissions before the appellate authority:
i. The services were received by them during 26.04.2017 to 29.04.2017 and payment, including service tax, was made in April, 2017. But they received the invoice on 20.09.2017 and they made provisional entry in their books of account.
They could not take credit in their last ER-1 return for June, 2017 which they filed on 30.07.2017 for the reason beyond their control. They could not have filed any return thereafter when Central Excise Act, 1944 and the rules made thereunder was repealed;
ii. They could not avail the benefit of Section 140(5) of the CGST Act, 2017 for the same reason that the original copy of the invoice was received in September, 2017. They were left with no option than to file refund Application vide their letter dated 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).
26 Service Tax Appeal No.70717 of 2021
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 27 Service Tax Appeal No.70717 of 2021 question of any refund. The language of the Rule 5 of the CENVAT Credit Rules, 2004 indicates that where any input or input service is used in the final product, which is cleared for export etc. or used in the intermediate product cleared for export or used for providing output service which is exported, then, the CENVAT Credit in respect of the input or input service so used, shall be allowed to be utilised by the manufacturer or provider of output service towards payment of duty of excise on any final product cleared for home consumption or for export , on payment of duty or service tax on output service. When for any reason, such adjustment is not possible, the manufacturer shall be allowed refund of such amount subject to such safeguards, conditions and limitation as may be specified by the Central Government by a notification.
f. The appellate authority referred to a judgement passed by the North Zonal Bench of the CESTAT in the case of Purvi Fabrics & Texturise (P) Ltd. vs Commissioner of Central Excise, Jaipur-II - 2004 (172) E.L.T. 321 (Tri.- Del.) = 2004-TIOL-615-CESTAT-DEL, wherein it was held that there is no legal provision existing for refund either by cash or cheque. The only exception carved out is that the refund in cash is granted as an incentive measure to the exporter. The provisions and particularly Section 11B of the Central Excise Act provides for payment of amount of refund to the applicant only in situations specified in proviso to sub- section (2) of Section 11B of the Central Excise Act, 1944. The appellate authority held that the petitioner has attempted to claim something which the law does not permit at all.
g. The appellate authority also held that the claim of refund is not a matter of right unless vested by law. The plea of injustice 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 28 Service Tax Appeal No.70717 of 2021 statute, nothing can be read into its provisions and rather should not be read, which is expressly not there. In other words, an implied meaning cannot be given. Para 20 of the judgement passed by the Hon'ble Supreme Court, Union of India and Ors. vs Ind-Swift Laboratories Limited - (2011) 4 SSC 635 = 2011-TIOL-21-SC-CX was referred as under: -
"20. A taxing statute must be interpreted in the light of what is clearly expressed. It is not permissible to import provisions in a taxing statute so as to supply any assumed deficiency. In support of the same we may refer to the decision of this Court in CST vs Modi Sugar Mills Ltd. wherein this Court at AIR para 11 has observed as follows:
"11. ......... In interpreting a taxing statute, equitable considerations are entirely out of place. Nor can taxing statutes be interpreted on any presumptions or assumptions. The court must look squarely at the words of the statute and interpret them. It must interpret a taxing statute in the light of what is clearly expressed: It cannot imply anything which is not expressed; it cannot import provisions in the statutes so as to supply any assumed deficiency."
h. The appellate authority recorded that the petitioner had received the invoice from the service provider on 20.09.2017 and by that time, they had already filed their last ER-1 return for the month of June, 2017. The appellate authority found nothing in Rule 5 permitting refund of unutilised credit. The appellate authority held that the present situation is not a case of a manufacturer or producer of final products seeking to claim CENVAT Credit of the duty paid on inputs lying in stock or in process when the manufactured or produced goods ceases to be exempted goods or any goods become excisable. The appellate authority also held that refund of CENVAT Credit is permissible where any input is used for final product which is cleared for export under bond or letter of undertaking, as 29 Service Tax Appeal No.70717 of 2021 the case may be, or used in the intermediate products cleared for export. Therefore, in the scheme of the rules, what is sought by the petitioner is not permissible. Thus, the attempt by the petitioner to claim refund of CENVAT Credit was held to be not allowable and the appeal was rejected.
Interpretation of section 142(3) read with section 140(1), 140(5) and section 174 of CGST Act vis-a vis the facts of this case.
39. The relevant portions of the aforesaid sections as relied upon by the learned counsel for the petitioner during the course of arguments are as under.
Section 140 (1) and (5) of the CGST, Act reads as under:-
140. (1) A registered person, other than a person opting to pay tax under section 10, shall be entitled to take, in his electronic credit ledger, the amount of CENVAT Credit of eligible duties carried forward in the return relating to the period ending with the day immediately preceding the appointed day, furnished by him under the existing law within such time and in such manner as may be prescribed:
PROVIDED that the registered person shall not be allowed to take credit in the following circumstances, namely: -
(i) where the said amount of credit is not admissible as input tax credit under this Act; or
(ii) where he has not furnished all the returns required under the existing law for the period of six months immediately preceding the appointed date; or
(iii) where the said amount of credit relates to goods manufactured and cleared under such exemption notifications as are notified by the Government.
30 Service Tax Appeal No.70717 of 2021 140 (5) A registered person shall be entitled to take, in his electronic credit ledger, credit of eligible duties and taxes in respect of inputs or input services received on or after the appointed day but the duty or tax in respect of which has been paid by the supplier under the existing law, within such time and in such manner as may be prescribed, subject to the condition that the invoice or any other duty or tax paying document of the same was recorded in the books of account of such person within a period of thirty days from the appointed day:
PROVIDED that the period of thirty days may, on sufficient cause being shown, be extended by the Commissioner for a further period not exceeding thirty days:
PROVIDED FURTHER that said registered person shall furnish a statement, in such manner as may be prescribed, in respect of credit that has been taken under this sub- section."
Section 142(3) of the CGST Act reads as under:-
"142(3) Every claim for refund filed by any person before, on or after the appointed day, for refund of any amount of CENVAT Credit, duty, tax, interest or any other amount paid under the existing law, shall be disposed of in accordance with the provisions of existing law and any amount eventually accruing to him shall be paid in cash, notwithstanding anything to the contrary contained under the provisions of existing law other than the provisions of 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 31 Service Tax Appeal No.70717 of 2021 amount as on the appointed day has been carried forward under this Act"
The Sections 173 and 174 of CGST Act are quoted as under
:-
"173. Amendment of Act 32 of 1994 Save as otherwise provided in this Act, Chapter V of the Finance Act, 1994 shall be omitted.
174. Repeal and saving (1) Save as otherwise provided in this Act, on and from the date of commencement of this Act, the Central Excise Act, 1944 (1 of 1944) (except as respects goods included in entry 84 of the Union List of the Seventh Schedule to the Constitution), the Medicinal and Toilet Preparations (Excise Duties) Act, 1955 (16 of 1955), the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957), the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978 (40 of 1978), and the Central Excise Tariff Act, 1985 (5 of 1986) (hereafter referred to as the repealed Acts) are hereby repealed.
(2) The repeal of the said Acts and the amendment of the Finance Act, 1994 (32 of 1994) (hereafter referred to as "such amendment" or "amended Act", as the case may be) to the extent mentioned in the sub-section (1) or section 173 shall not-
(a) revive anything not in force or existing at the time of such amendment or repeal; or
(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 32 Service Tax Appeal No.70717 of 2021 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.
(3) The mention of the particular matters referred to in sub-
sections (1) and (2) shall not be held to prejudice or affect 33 Service Tax Appeal No.70717 of 2021 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 34 Service Tax Appeal No.70717 of 2021 with the provisions of existing law and if any such amount accrues the same shall be paid in cash. Such right to refund in cash has been conferred notwithstanding anything to the contrary contained under the provisions of existing law other than the provisions of sub-section (2) of section 11-B of the Central Excise Act, 1944.
42. It is not in dispute that the refunds under the existing law of Service Tax as well as Central Excise Act, 1944 are governed by section 11B of the Central Excise Act, 1944 and subsection 2 of section 11 B also refers to application for refund made under section 11 B(1) of Central Excise Act, 1944. Further section 11B(3) of Central Excise Act, 1944 clearly provides that all kinds of refunds including those arising out of judgement , decree or orders of court or tribunal are to be dealt with in accordance with the provisions of section 11B (2) of Central Excise Act, 1944 . It is also important to note that section 11B(2) of Central Excise Act, 1944 deals with the manner in which applications for refund under section 11B (1) are to be dealt with as it uses the word "such application" which is clearly referrable to section 11B (1) of Central Excise Act, 1944. Further, the proviso to section 11B(2) deals with situations of rebate of duty; unspent advance deposits; principles of unjust enrichment in cases where duty of excise is paid by manufacturer or borne by buyer and who have not passed on the incidence of such duty to any other person; and also where duty of excise is borne by any other class of applicant as the central government 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 35 Service Tax Appeal No.70717 of 2021 Credit Rules provides for refund only when the inputs are used in relation to export, which is not the case here. These aspects of the matter have been rightly considered and decided against the petitioner while passing the impugned orders whose details have already been stated above.
44. Under the provisions of section 11B the right to claim refund was conferred not only to the assessee but also to such classes of applicants as notified by the central government and also covers situations arising out of judgements of courts and tribunals. On the appointed date there could be claims of refund of any amount of CENVAT Credit, duty, tax, interest or any other amount paid under the existing law in connection with which the applications for refunds were pending or time limit for claiming refund was yet to expire or may crystalize on account of any judgement of courts or tribunals in relation to pending litigations. These are some of the situations which would be covered by the miscellaneous transitional provisions as contained in section 142(3) of CGST, Act which would continue to be governed by section 11B(2) of Central Excise Act, 1944.
45. The provision of section 142(3) does not entitle a person to seek refund who has no such right under the existing law or where the right under the existing law has extinguished or where right under the new CGST regime with respect to such claim has not been exercised in terms of the provision of CGST, Act and the rules framed and notifications issued. Meaning thereby, section 142(3) does not confer a new right which never existed 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 36 Service Tax Appeal No.70717 of 2021 as per the existing law. It neither revive any right which stood extinguished in terms of the existing law nor does it create a new right by virtue of coming into force of CGST, Act.
46. Section 174 of the CGST Act read with section 6 of the General Clauses Act saves the right acquired, accrued or vested under the existing law and does not create any new right which never existed on the appointed day i.e on 01.07.2017 under the existing law.
47. The argument of the petitioner by referring to second proviso to section 142(3) of CGST Act that it indicates that section 142(3) would apply to the situations where the assessee has failed to take transitional credit under section 140(1), is also devoid of any merits. The second proviso only indicates that if the assessee has taken transitional credit he will not be entitled to refund. Certainly, an assessee cannot simultaneously claim transitional credit as well as refund of the same amount. The second proviso to section 143(2) cannot be said to be an eligibility condition to claim refund but is only a condition which governs refund as an assessee cannot be permitted to have transitional credit as well as refund of the same tax amount.
48. Section 140(5) applies under the circumstances where input services are received after the appointed day but the tax has been paid by the supplier under the existing law within the time and in the manner prescribed with a further condition that the invoice etc are recorded in the books of account of the such person within a period of 30 days from the appointed day. Section 140(5) also does not help the petitioner. Section 140 (5) has no applicability to the facts and circumstances of this case. 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.
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49. In the peculiar facts of this case, the petitioner did not claim transitional credit but claimed the impugned amount of service tax on "port services" as credit in their ST-3 return which they were admittedly not entitled as they were assessee under service tax only on reverse charge mechanism and admittedly the "port services" availed by the petitioner was not covered under reverse charge mechanism. Thus, the petitioner on the one hand illegally took credit of service tax on "port services" as credit in their ST-3 return and on the other hand filed application for refund of the same amount under section 142(3) of the CGST, Act which is certainly not permissible in law. The authorities have rightly considered these aspects of the matter also while rejecting the application for refund filed by the petitioner.
50. It is not in dispute that the petitioner has claimed the credit of service tax involved in the present case paid on "port services" as "input service" in ST-3 return filed on 22.09.2017, though they were not entitled to claim such a credit. It is further not in dispute that the petitioner did not include the impugned service tax paid on "port services" in its ER-1 return and accordingly was neither entitled to include nor included the same as transitional credit in TRAN- 1 under CGST Act. As per the notification (Annexure-5) extending the date of filing TRAN-1 to 31.10.2017, the same was in relation to certain service tax issues which were paid after 30.06.2017 under reverse charge basis to cover instances of bills raised on 30.06.2017 since credit is available only if the payment is made and the payment in such cases could be made only after 30.06.2017. However, in the instant case the bill was admittedly generated on 23.05.2017, services availed and bill amount including service tax was paid in April 2017 but the original bill did not reach the petitioner for unknown/undisclosed reasons.
51. It is apparent from the impugned orders that the specific case of the respondent is that the petitioner had 38 Service Tax Appeal No.70717 of 2021 claimed CENVAT Credit under ST-3 return thereby treating the services involved in the present case as their input services used for providing output service, whereas they are not output service provider and the same cannot be used for providing output services. Therefore, it cannot be their input services under Rule 2 (l) of CENVAT Credit Rules, 2004. I am also of the considered view that the petitioner could not have claimed the impugned service tax on port services in ST-3 return as they were registered for discharging their liability under the service tax only on reverse charge mechanism. Rather it is the case of the petitioner that they had included the impugned service tax in ST-3 Return under compelling circumstances of non- receipt of original invoice dated 23.05.2017 and this was done only attempting to save their credit which they had failed to claim through ER-1 return and then as transitional credit through TRAN-1 under section 140(1) of the CGST Act. Thus, the authority has rightly held that petitioner had wrongly claimed Credit of the impugned service tax under ST-3 return and omitted to claim the impugned service tax as CENVAT Credit in ER-1 Return.
52. Further case of the respondent is that the petitioner as a manufacturer was eligible to claim CENVAT Credit on impugned service i.e "port services" and should have claimed the credit in their ER-1 Return within the prescribed time and accordingly could have claimed transitional credit through TRAN-1 under section 140 of CGST, Act. Thus, late receipt of the original invoice which has been cited as the reason for failure to claim CENVAT Credit under the existing law and transitional credit under section 140(1) of the CGST, Act was wholly attributable to acts and omissions of the petitioner and its service provider of the "port services"
and the respondent authorities had no role to play. The petitioner had failed to avail the opportunity to claim CENVAT Credit of service tax on port services in terms of the existing law read with section 140 of CGST, Act and had 39 Service Tax Appeal No.70717 of 2021 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 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.
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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 CGST Act. The impugned orders are well reasoned orders calling for no interference. Accordingly, this writ petition is dismissed."
4.5 The decision of Hon‟ble High Court of Punjab and Haryana is not on the issue of refund, but in respect of allowing the credit to be carried forward by extending the date of filing Trans-1 and same do not apply to the present proceedings.
41 Service Tax Appeal No.70717 of 2021 4.6 Hon‟ble Madras High Court has in case of Ganges International referred by the appellant specifically held as follows:
"48. For all these reasons, this Court, having considered the peculiar facts and circumstances of the case, is inclined to dispose of these writ petitions with the following orders:
"(i) That the impugned orders in these writ petitions are liable to be set aside, accordingly are set aside. As a sequel, the matters are remitted back to the respondents for reconsideration. While reconsidering the same, the authority concerned, who has to deal with the applications of the petitioners, shall consider and dispose of these applications under Section 142(3) of the CGST Act, 2017.
(ii) While reconsidering the said applications, the claim made by the petitioners need not be considered for the purpose of refund of the claim made by them. However, the said claim made by the petitioners can very well be considered for the purpose of permitting the petitioners to carry forward the accrued credit to the electronic credit ledger of the GST regime.
(iii)After considering the said applications, as indicated above, the necessary order shall be passed by the respondents within a period of six weeks from the date of receipt of a copy of this order. It is made clear that, before passing the orders as indicated above, an opportunity of being heard shall be given to the petitioners, so that the petitioners can put forth their case by providing all necessary inputs to the satisfaction of the authorities to take a decision thereon.
In the above decision Hon‟ble madras High Court has not held in favour of allowing the cash refund of the amount so paid, but have directed for consideration of the claim made by the appellant to carry forward the amount so paid to „electronic credit ledger". As I am not dealing with the case whereby I can consider allowing the amount as credit in "electronic credit 42 Service Tax Appeal No.70717 of 2021 ledger" I do not find said observations to be applicable. Since Hon‟ble High Court has specifically observed with regards to non admissibility of refund in cash in terms of Section 142 (3) of the CGST Act, 2017, I find that impugned order cannot be faulted on this account.
4.7 All other decisions which have been referred by the appellant are those of tribunal and have been passed without taking note of the decisions of Hon‟ble Jharkhand High Court hand Hon‟ble Madras High Court. Since the law has been authoritatively laid down by these High Court I am not inclined to comment on these decisions of tribunal (benches).
4.8 I do not find any merits in this appeal.
5.1 Appeal is dismissed. Miscellaneous Application also gets disposed of.
(Order pronounced in open court on-12/09/2024) (SANJIV SRIVASTAVA) MEMBER (TECHNICAL) akp