Cash refund allowed under Section 142(3) CGST Act 2017 for Service Tax paid during GST regime

CESTAT Hyderabad allowed the appeal for cash refund under Section 142(3) of CGST Act 2017. The appellant had paid Service Tax during GST regime for services that should have been paid under RCM basis during previous Central Excise/Service Tax regime. The Adjudicating Authority rejected the refund claim stating no provision existed under Section 142(3) for cash refund. CESTAT held that since the Department did not raise jurisdictional issues during original proceedings and failed to appeal the original order, Revenue was precluded from contesting the matter. The impugned order was set aside and appeal was allowed.

---

---

Issues:
The issues involved in the judgment are the refund claim under Section 142(3) of the CGST Act 2017 for Service Tax paid on Reverse Charge Mechanism (RCM) basis, rejection of refund claim by the Adjudicating Authority, dismissal of appeal by the Commissioner (Appeals), and the appellant's appeal before the Tribunal.

Adjudicating Authority's Rejection of Refund Claim:
The appellant paid Service Tax on Reverse Charge Mechanism (RCM) basis for transactions prior to June 2017, and filed a refund claim under Section 142(3) of the CGST Act 2017. The Adjudicating Authority rejected the refund claim stating that the claimant cannot circumvent legal provisions through Section 142(3), as the transitional provisions do not cover refund for amounts not mentioned in returns preceding July 2017. The Authority emphasized that Cenvat Credit Rules do not mandate refund in such cases, and transitional provisions do not allow refund for unmentioned amounts.

Dismissal of Appeal by Commissioner (Appeals):
The Commissioner (Appeals) dismissed the appeal, stating that there is no provision for refund of Service Tax paid under RCM in Cenvat Credit Rules, Finance Act, or Central Excise Act. The Commissioner held that the appellant misconstrued Section 142(3) of the CGST Act 2017, as there is no existing law provision for refund in the present situation. The Commissioner rejected the argument that additional mechanisms in transitional provisions allow refund, emphasizing that the appellant misunderstood the statutory provisions.

Tribunal's Decision:
The Tribunal considered the appellant's argument citing relevant case laws where RCM payments were refunded under Section 142(3) of the CGST Act 2017. The Tribunal confirmed its jurisdiction to decide such cases based on a Larger Bench decision. The Tribunal clarified that refund claims for CENVAT credit can be made only under Section 142(3) and allowed the appeal with consequential relief. The Tribunal differentiated the present case from a previous case where the appellant failed to utilize revised return facility, which was not applicable here.

Conclusion:
The Tribunal allowed the appellant's appeal, relying on applicable case laws and the Larger Bench decision, setting aside the impugned order and granting consequential relief. The Tribunal emphasized the correct application of Section 142(3) of the CGST Act 2017 for refund claims related to CENVAT credit, ensuring compliance with statutory provisions and legal principles.

---