2022 (5) TMI 480 - AT - Service Tax

Tribunal grants appeal for CENVAT credit refund under GST regime

M/s Brose India Automotive Systems Pvt. Ltd. Versus Commissioner of CGST & Central Excise, Pune-I

The tribunal allowed the appeal filed by a manufacturing company regarding the denial of CENVAT credit on Service Tax paid during the GST regime under ... Refund of CENVAT Credit - Rejection on the ground that GST liability was not discharged - input services - import of services by the Appellant manufacturing company - reverse charge mechanism - point of taxation Rules - associated enterprises - HELD THAT:- It is noteworthy to mention here that Section 142(3) clearly stipulated that refund of any amount of CENVAT credit, duty etc. paid under the existing law (means the law prevailing then i.e. Central Excise Act) shall be dealt in accordance with the provisions of existing law and any amount eventually accruing to him shall be paid in cash. The issue before this Tribunal is to scrutinise as to if only existing law would govern the refund or else the procedure available under existing law for ultimate redressal /disposal of the refund application would extend to the Appellate stage available in the existing law too. The Circular No. 132/2/2020-GST dated 18.03.2020 by CBEC clarified that the Central Goods and Service Tax (ninth removal of difficulties) order 2019 dated 03.12.2019 provides that within 3 months of the President of GST Tribunal entering office, appeals can be filed when no such Tribunal is firmed and in case of existence of such GST Tribunal it is to be filed within 3 months of communication of the order. Be that as it may, the concern is to scrutinise the jurisdictional issue and the suggestions offered by the learned Counsel for the appellant that when the Tribunal had given divergent views, the matter should be referred to the President for constitution of a Larger Bench to settle the issue. This appeal is maintainable before the CESTAT and this Bench is competent to decide the issue of refund of CENVAT credit as such an order has been passed in accordance with the existing law and not under the GST Act. Its rejection by the Commissioner (Appeals) solely on the ground that GST was payable and no evidence of payment of GST was available is also not tenable and is erroneous to the extent that under GST Act recovery provisions are also available which can be resorted to by the competent authority instead of making a pre-condition of payment of GST to facilitate the refund process that was instituted under the erstwhile Central Excise Act in borrowing force from the new GST Act itself. Appeal allowed. Issues:Denial of CENVAT credit on Service Tax paid during GST regime under Reverse Charge Mechanism by manufacturing company; Confirmation of denial by Commissioner of Central Tax (Appeals-I); Jurisdiction of CESTAT to review legality of Commissioner's order under Section 142 of CGST Act.Analysis:1. The case involved the denial of CENVAT credit on Service Tax paid during the GST regime by a manufacturing company, which was required to pay service tax under Reverse Charge Mechanism. The Commissioner of Central Tax (Appeals-I) confirmed the denial, leading to the appeal before the tribunal.2. The appellant, covered under Rule 7 of Point of Taxation Rules, 2011, filed a refund application within the limitation period seeking refund of Service Tax paid post-GST regime onset. The rejection of the refund application was based on the ground that GST was payable on recorded transactions, despite the services being rendered prior to the GST regime.3. During the appeal hearing, the appellant's counsel cited relevant provisions of the CGST Act and judicial decisions by various Tribunal benches to support the claim for CENVAT credit. The counsel argued that the appellant was eligible for the credit as input services were used for manufacturing activities, and the expiration of carrying forward CENVAT credit to the GST regime necessitated cash refund under Section 142(3) of the CGST Act.4. The Respondent-Department's Authorized Representative supported the Commissioner's order and objected to CESTAT's jurisdiction to review the legality of the order under Section 142 of the CGST Act. Referring to a previous CESTAT order, the representative argued that appeals against such decisions should be made to the GST Appellate Tribunal once constituted.5. The tribunal analyzed the provisions of Section 142(3) and Section 174 of the CGST Act regarding the refund of CENVAT credit paid under the existing law. The tribunal deliberated on the jurisdictional issue and the conflicting views presented by the appellant's counsel and the Respondent-Department's representative. The tribunal concluded that the appeal was maintainable before CESTAT as the order was passed under the existing law and not the GST Act.6. The tribunal highlighted the saving Clause 2(f) of Section 174, emphasizing that proceedings, including appeals, initiated under the repealed Act would continue as if the GST Act had not come into force. The tribunal held that the denial of refund solely based on the payment of GST was erroneous, as recovery provisions under the GST Act could be utilized instead of imposing a pre-condition of GST payment for refund under the Central Excise Act.7. Consequently, the tribunal allowed the appeal, setting aside the Commissioner's order and directing the Respondent-Department to refund the CENVAT credits with applicable interest. The tribunal affirmed its competence to decide the issue and rejected the objections raised regarding its jurisdiction.8. The order was pronounced in favor of the appellant on 05.05.2022, granting the refund of CENVAT credits and emphasizing the tribunal's authority to adjudicate on the matter.