Cenvat Credit of Service Tax Refund Rejected in GST Regime: Madras HC directs to allow Recredit [Read Order]

In a recent case, the Madras High Court directed to allow recredit Cenvat Credit of service tax refund rejected in In GST regime. The taxpayer couldnot avail the cenvat credit due to the introduction of GST as the Service Tax paid for the period 2016-17, which was payable under RCM, on 30.12.2017.

M/s.SRC Projects Private Limited, the petitioner challenged the Impugned Order. The Petitioner paid Service Tax for the period 2016-17, which was payable under RCM, on 30.12.2017.  But, due to introduction of GST, they cannot avail Cenvat Credit of the same and hence they claimed refund, which was rejected. 

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The Court while passing its Order dated 22.02.2022, considered the difficulties arising out of the implementation of the respective GST enactments and held / observed that “While reconsidering the said applications, the claim made by the petitioners need not be considered for the purpose of refund of the claim made by them. However, the said claim made by the petitioners can very well be considered for the purpose of permitting the petitioners to carry forward the accrued credit to the electronic credit ledger of the GST regime. “

The respondent has now passed the Impugned Order on 01.06.2022 whereby the request of the petitioner to allow re-credit of the amount of tax paid by the petitioner on reversed charged basis as recipient of royalty services from the Government has been rejected stating that Section 142(3) of the Central Goods and Sales Tax (CGST) Act, 2017 would not come to the rescue of the petitioner.

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In the first round, the Madras HC has held that the refund claim should be considered as a claim for credit in Electronic Credit Ledger, by applying, Doctrine of necessity and remanded the matter.

A single bench of Justice C. Saravanan found that it is evident that although the petitioner was not entitled to cash refund under Section 142(3) of the CGST Act, 2017, the petitioner is entitled to recredit.  While allowing the Writ Petition , the Court  directed the respondent  to allow the petitioner to take recredit of the amount paid by the petitioner on reverse charge basis belatedly on 30.12.2017 as the Input Tax Credit in its Electronic Credit Ledger.  

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