If Assessee has to pay Service Tax even after introduction of GST, their Right to avail ITC cannot be denied: CESTAT [Read Order]

The Chennai Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that if assessee has to pay service tax even after introduction of GST, their right to avail ITC cannot be denied.

The appellants, M/s.Circor Flow Technologies India Private Ltd. are engaged in the manufacture of valves and were holding registration under Central Excise and Service Tax Commissionerates during the pre-GST regime. They entered into transactions during January 2017 to June 2017 involving import of software for which service tax was liable to be paid under reverse charge mechanism. They paid the service tax belatedly in March 2019. The said tax was for the services received by them from the foreign service provider for the period January 2017 to June 2017 and the tax was paid under reverse charge mechanism. In terms of Cenvat Credit Rules,2004 as it stood during the relevant period, the appellants were eligible to avail credit of the service tax paid by them. After introduction of GST with effect from 1.7.2017, as appellants could not avail cenvat credit, they filed an application for refund of the amount of which they are eligible for credit. The refund claim was rejected by the adjudicating authority stating that the tax has been voluntarily paid and that no credit is eligible in the GST regime. On appeal filed before the Commissioner (Appeals), the said view was upheld.

The coram of Judicial Member Sulekha Beevi C.S. held that the liability, if any, under the erstwhile law of Finance Act, 1994 to pay service tax would continue even after the introduction of GST. Conversely, the right accrued under the said Act in the nature of credit available under CCR 2004 also is protected. If the assessee has to pay service tax even after the introduction of GST, their right to avail the credit on the same cannot be denied.

The court noted that there was no allegation that the credit is not eligible to the appellant. It was merely stated that tax has been paid voluntarily and therefore credit is not available under the GST regime. Though credit is not available as Input Tax Credit under GST law, the credit under the erstwhile Cenvat Credit Rules is eligible to the appellant. Such credit has to be processed under Section 142 (3) of GST Act, 2017 and refunded in cash to the assessee.

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