The Mumbai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) consisting of Dr. Suvendu Kumar Pati (Judicial Member) allowed the refund of CENVAT credits against payment of Service Tax paid during the GST regime under the Reverse Charge Mechanism on the import of services.
The appellant/assessee was required to pay service tax under the Reverse Charge Mechanism in terms of the provisions of Section 68 (2) of the Finance Act, 1994 read with Notification No. 30/2012-ST dated 20.06.2012 as "receiver of service" from the date of debit in the books of account as "receiver of service" or from the date of making payment, whichever is earlier. Appellant-manufacturer made the final booking in terms of provision of Service Tax during the finalisation of its balance sheet on 30.11.2017 and 31.12.2017 for the periods ending on 31.03.2017 and June, 2017 against which Service Tax was paid respectively, along with interest in the months of November, 2017 and January, 2018.
The refund application was filed within the limitation period of one year in terms of Section 11B of the Central Excise Act, 1944, seeking a refund of service tax, as after the onset of the GST regime, it could not avail the credit and sought a cash refund by invoking protection granted under Section 174 and 142 of the CGST Act, 2017. The adjudicating authority rejected the refund application on the ground that GST was payable on the recorded transactions since final booking was made in the books of account on 30.11.2017 and 31.12.2017, though service had been rendered during the pre GST regime, i.e., prior to July, 2017.
The assessee submitted that the claim filed by the appellant merits consideration and the appellant was eligible to avail credit of Service Tax paid as input services were used for manufacturing activity. Since the carrying forward of CENVAT credit to the GST regime had expired on 27.12.2017 and there was no other alternative except to get the CENVAT credit in cash as contemplated under Section 142 (3) of the CGST Act, the Appellant found no other alternative except to invoke the jurisdiction of this Tribunal for an appropriate remedy.
The department, while supporting the reasoning and rationality of the order passed by the learned Commissioner (Appeals), also raised a strong objection to the jurisdiction of CESTAT in scrutinising the legality of the order passed by the Commissioner (Appeals) under Section 107 to 109 of the GST Act in the exercise of Section 142 of the said Act, since an appeal against such an order can only be maintainable under Section 112 of the CGST Act before the CGST Tribunal, which is yet to be constituted.
The CESTAT held that the appeal is maintainable before the CESTAT and that 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 the GST Act, recovery provisions are also available which can be resorted to by the competent authority instead of making a precondition 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.
Case Title: M/s Brose India Automotive Systems Pvt. Ltd. Versus Commissioner of CGST
Citation: Service Tax Appeal No. 85691 of 2019
Dated: Final Order No. A/85430/2022
Counsel For Petitioner: Advocate S. Narayanan
Counsel For Respondent: Assistant Commissioner Dilip M. Shinde