Tribunal grants appeal for CENVAT credit refund under GST regime

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 Reverse Charge Mechanism. The tribunal held that the denial of refund based solely on the payment of GST was erroneous and directed the Respondent-Department to refund the CENVAT credits with applicable interest. The tribunal affirmed its jurisdiction to decide the issue under the existing law and rejected objections raised regarding its competence. The order was pronounced in favor of the appellant, granting the refund of CENVAT credits on 05.05.2022.

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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.

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