Refund of Service Tax paid after GST Introduction: Dept Rejects Claim in Violation of Binding Precedent of Madras HC [Read Order]

The Assistant Commissioner of GST has passed an order wherein a refund claim of the service tax paid after the introduction of the GST was denied to the assessee.

Recently, the Madras High Court has issued a set of directions in Ganges International & Others case in order to consider the refund claim filed for ST paid under RCM after 01.07.2017 as a claim under Section 142 (3) of the CGST Act and consider allowing re-credit of the same.

M/s. SRC Projects Private Limited, Salem, filed a Refund Claim for Rs.26,88,460/- in Form R under Rule 173-S of Central Excise Rules, 1944 along with documents evidencing payment of Service Tax. However, the said refund claim was rejected by the Assistant Commissioner of GST & Central Excise vide Order-in-Original No.19/2018 dated 24.09.2018. The taxpayer approached the High Court directly under Article 226 of the Constitution, instead of approaching the next appellate authority viz. The Commissioner (Appeals), Salem. The High Court remanded the case vide their judgment dated 22.02.2022 with certain conditions and this was received in this office on 21.04.2022.

M/s. SRC Projects Private Limited, Salem had paid the service tax on the royalty paid to the government of Tamil Nadu for the lease of quarries for the period April 2016 to July 2017 amounting to Rs 26,88,460/- as per the audit objection conducted by CERA on 30.12.2017 and the amount of service tax paid could not be taken as Tran-1 credit after the introduction of GST on 01/07/2017. They could not take this amount as Cenvat credit in their cenvat account by filing the ST3 return by which time, the time limit for filing a revised ST3 return had also expired.

An order passed by the Assistant Commissioner of GST held that “as they could not claim the credit of the input service tax in ST3 return and consequently as they had not filed TRAN-1 declaration showing the amount lying unutilized in their credit account taking advantage of the High Court decision in the above-cited case they had filed the manual declaration of TRAN-1 by blatantly mis-declaring the above service tax paid as if lying in balance unutilized as cenvat credit carried forward in the ST3 return last filed by them.”

“Provided that where any claim for refund of CENVAT credit is fully or partially rejected, the amount so rejected shall lapse: Provided further that no refund shall be allowed of any amount of CEAIVAT credit where the balance of the said amount as on the appointed day has been carried forward under this Act," the order said.

After perusing the relevant provisions of the GST Acts, the Commissioner held that “the above Section clearly revels that the refund filed on or after the appointed day has to be considered as per the existing law either under Central Excise or under Service Tax". In the instant case the taxpayer is claiming the re credit of the amount which was paid by him towards Service Tax consequent to raising of CERA objection but was paid in GST regime after the introduction of GST on 30.12.2017.”

It was further held that the second proviso to Section 142(3) cannot be said to be an eligibility condition to claim refund but is only a condition which governs refund as an assessee cannot be permitted to have transitional credit as well as refund of the same tax amount.

Concluding the order, it was said that “It is evident from the above that the taxpayer cannot get into the shoes of section 142(3) of CGST Act, 2017 now in order to claim re-credit of the Service Tax paid by him which he could not took it as TRAN-1 credit due to non-filing of TRAN-1 declaration electronically. Further, the section 142(8)(a) of CGST Act, 2017 clearly specify that due to "an assessment or adjudication proceedings instituted, whether before, on or after the appointed day, under the existing law, any amount of tax, interest or fine or penalty becomes recoverable from the person, the same shall unless recovered under the existing law, be recovered as an arrear of tax under this Act and the amount so recovered shall not be admissible as input tax credit under this Act. So, it is clear that in the instant case the amount was paid by the taxpayer due to raising of audit objection by CERA becomes automatically ineligible for input tax credit amount as per this section consequently.”

To Read the full text of the Order CLICK HERE

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