CESTAT allows Refund of Cenvat Credit as Transition of Refund Amount merely Inadvertent Error, same was made Goods by Reversing Credit into GSTR-3B [Read Order]

The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), Bangalore Bench allowed the refund of cenvat credit as the transition of refund amount merely inadvertent error, the same was made good by reversing credit into GSTR-3B.

The appellant, Convance Clinical Development Pvt. Ltd. is engaged in providing support services to its group companies located outside India and they are providing the services in the nature of Business Support Services and Business Auxiliary Services. During the course of its operation, the appellant received certain input services which were entirely used for providing taxable service exported in terms of Rule 6A of Service Tax Rules, 1994. Since the services provided by the appellant were exported outside India and there was no service tax liability on the output services provided, the cenvat credit availed by the appellant remained unutilized.

Appellant being an exporter was entitled to claim unutilized cenvat credit availed during the relevant period and appellant filed a claim for refund of cenvat credit availed during the period April 2016 to June 2016 under Rule 5 of Cenvat Credit Rules read with Notification No.27/2012-CE dt. 18.06.2012. Thereafter a show-cause notice was issued to the appellant proposing to reject the refund claim for the reason that the appellant had transitioned the credit for the said period into the GST regime and consequently the appellant has not complied with the conditions of the notification. After following the due process, the original authority rejected the refund claim. Aggrieved by the said order, the appellant filed an appeal before the Commissioner (Appeals).

Commissioner(Appeals) taking the ground that the Order-in-Original has traversed beyond the show-cause notice inasmuch as the ground for rejection did not form part of the show-cause notice and other grounds were also taken, but the Commissioner(Appeals) dismissed the appeal on the ground that the appellant has not adhered to the condition laid down in the Notification.

CA Sachin Agarwal, the counsel for the appellant contended that the impugned order is not sustainable in law as the same has been passed without properly appreciating the facts and the law and the documentary evidence submitted by the appellant in support of their claim. He further submitted that the respondent has rejected the refund application on the limited ground that the appellant has not debited the refund claim amount from the cenvat credit and the service tax return at the time of making the refund and such amount has been transferred through TRAN-1 into the GST regime.

The coram of Judicial Member, S.S.Garg found that appellant by sheer inadvertent mistake has transitioned the cenvat credit into TRAN-1 during the GST regime. As soon as, he realized his bonafide and unintentional mistake and the reversal was done in GSTR-3B returns in May 2018 itself.

The CESTAT further said that during the relevant period, the appellant has not utilized the cenvat credit and it was merely a procedural lapse which was rectified by the appellant on its own and was also informed by the Department regarding the subsequent reversal in GSTR-3B filed by the appellant in May 2018.

“In my view, since the appellant who is a 100% exporter of service and has reversed the credit wrongly taken through GSTR-3B is sufficient to hold that the amount of cenvat credit claimed as refund has not been utilized by the appellant in any manner and has been deemed to have been reversed by the appellant. Learned Commissioner(Appeals) should have taken a liberal view of a bona fide mistake committed by the appellant without any intention to claim an unjustified refund. I also find that the impugned order has also traveled beyond the show-cause notice because all the submissions made by the appellant during the adjudication proceedings were not considered by both the authorities below,” the CESTAT said while granting the consequential relief.

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