Refund claim cannot be rejected under the GST regime on the belated amount paid for the transactions made during CENVAT regime

By:

The Hon’ble CESTAT, Chennai in M/S. Circor Flow Technologies India Private Ltd. v. Principal Commissioner of GST & Central Excise, Coimbatore [Service Tax Appeal No. 40597 of 2020 dated December 16, 2021] set aside the order passed by the Revenue Department rejecting the refund claim of the assessee on the belated amount paid for the transactions made during CENVAT regime. Held that, though credit is not available as Input Tax Credit (“ITC”) under GST law but the credit under the erstwhile Cenvat Credit Rules, 2004 (“the CENVAT Rules”) is available to the Appellant and such credit has to be processed under Section 142(3) of the Central Goods and Services Tax Act, 2017 (“the CGST Act”) and refunded in cash to the assessee. Further held that, the rejection of refund claim cannot be justified.

Facts:

M/S. Circor Flow Technologies India Private Ltd. (“the Appellant”) is engaged in the manufacture of valves, who paid the service tax belatedly in March 2019 for the services received from the foreign service provider for the period January 2017 to June 2017. In terms of CENVAT Rules, the Appellant were eligible to avail credit of the service tax paid, but after introduction of GST as the Appellant could not avail CENVAT credit, they filed an application for refund of the amount of which they are eligible for credit.

This appeal has been filed against the order (“the Impugned Order“) passed and upheld by the Commissioner (Appeals) (“the Respondent”) rejecting the refund claim of the Appellant and holding that the tax has been voluntarily paid and that the credit is eligible not in the GST regime paid for the transactions during January 2017 to June 2017 involving import of software for which service tax was liable to be paid under Reverse Charge Mechanism (“RCM”).

Issue:

Whether the Appellant is eligible for the refund of the belated amount paid on transactions made during January 2017 to June 2017 under GST regime?

Held:

The Hon’ble CESTAT, Chennai in Service Tax Appeal No. 40597 of 2020 dated December 16, 2021 held as under:

  • Noted that, Section 142(3) of the CGST Act provides how to deal with claims of refund of service tax of tax and duty / credit under the erstwhile law and such claims have to be disposed in accordance with the provisions of existing law and any amount eventually accruing has to be paid in cash.
  • Observed that, there is no allegation that the credit is not eligible to the Appellant. It is merely stated that tax has been paid voluntarily and therefore credit is not available under the GST regime. Though credit is not available as ITC under GST law, the credit under the erstwhile CENVAT Credit Rules is available to the Appellant and such credit has to be processed under Section 142(3) of the CGST Act and refunded in cash to the Appellant.
  • Set aside the Impugned Order.
  • Held that, rejection of refund claim cannot be justified.

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