2024 (3) TMI 756 - AT - Service Tax

Ocean freight service tax refund allowed after audit payment under reverse charge mechanism

NICO EXTRUSIONS LTD Versus COMMISSIONER of C.E. & S.T. -DAMAN

CESTAT Ahmedabad allowed the appeal regarding service tax refund on ocean freight paid under reverse charge mechanism. The appellant paid service tax on ... Refund of service tax paid - entitlement for Cenvat credit of the service tax paid on the ocean freight on the reverse charge mechanism - rejection of refund on the ground that since the amount of service tax was paid on insistence of the audit party, there is suppression of fact and in terms of Rule 9 (1) (bb) of Cenvat Credit Rules, 2004, the appellant is neither entitled for the Cenvat credit nor for the refund of the said amount - HELD THAT:- It is found that the service tax on ocean freight was paid by the appellant only on insistence by the audit party whereas levy of service tax on the ocean freight was debatable and various litigation were going on and finally it was held that ocean freight is not liable to service tax, despite this the appellant have paid the service tax on the ocean freight alongwith interest. Moreover, the appellant was not issued any show cause notice invoking the extended period for demand of service tax, interest and equal amount of penalty, this itself shows that there is no suppression of fact on the part of the appellant in payment of service tax on the ocean freight - it is observed that unless until the issue of suppression of fact is adjudicated in a demand case, the allegation of suppression of fact is based on assumptions and presumptions only. Accordingly, it cannot be said that there is suppression of fact in payment of service tax on ocean freight in the present case. In view of the decision in PACIFIC HARISH INDUSTRIES LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE & ST, SURAT [2019 (10) TMI 626 - CESTAT AHMEDABAD], it is settled law that under the identical circumstances, suppression of fact cannot be alleged. Accordingly, the appellant was entitled for the Cenvat credit and therefore, they were also entitled for the consequential refund of the service tax along with interest paid on ocean freight. The appellant is entitled for the Cenvat credit and refund thereof along with interest paid on such service tax. Since with the present litigation there is delay in giving refund, appellant is also etitled for interest on refund amount in terms of Section 11BB of Central Excise Act, 1944 from three months of filing refund claim till the date of sanction of refund - the impugned order set aside - appeal allowed. Issues Involved:1. Entitlement to Cenvat credit and refund of service tax paid on ocean freight.2. Allegation of suppression of fact under Rule 9(1)(bb) of Cenvat Credit Rules, 2004.3. Applicability of Rule 9(e) of Cenvat Credit Rules, 2004 for availing credit.4. Entitlement to interest on the refund amount.Summary:Issue 1: Entitlement to Cenvat credit and refund of service tax paid on ocean freightThe appellant paid service tax on ocean freight for the period January 2017 to June 2017 on the insistence of the audit party. They claimed a refund under \u/s 142(3) of the CGST Act, 2017, which was rejected by the Adjudicating Authority and upheld by the Commissioner (Appeals). The appellant argued that there was no suppression of fact, and thus, the refund should not be denied.Issue 2: Allegation of suppression of fact under Rule 9(1)(bb) of Cenvat Credit Rules, 2004The lower authorities rejected the refund claim on the grounds of suppression of fact, invoking Rule 9(1)(bb) of Cenvat Credit Rules, 2004. However, it was found that the service tax was paid by the appellant due to the audit party's insistence amid ongoing litigation on the taxability of ocean freight. No show cause notice was issued for the extended period, indicating no suppression of fact.Issue 3: Applicability of Rule 9(e) of Cenvat Credit Rules, 2004 for availing creditThe Tribunal referenced the case of Pacific Harish Industries and other precedents, concluding that Rule 9(1)(bb) does not apply to payments made under reverse charge mechanism. Instead, Rule 9(e) is applicable, which allows for Cenvat credit based on bank challans as proof of payment. The Tribunal held that the appellant rightfully availed Cenvat credit under Rule 9(e).Issue 4: Entitlement to interest on the refund amountThe Tribunal ruled that the appellant is entitled to a refund of the service tax along with interest. Since there was a delay in processing the refund, the appellant is also entitled to interest on the refund amount in terms of \u/s 11BB of the Central Excise Act, 1944, from three months after filing the refund claim until the date of sanction, as upheld by the Supreme Court in Ranbaxy Laboratories Vs. Union of India.Conclusion:The Tribunal set aside the impugned order and allowed the appeal with consequential relief, including interest on the refund amount.