Relief to Appolo Tyres: CESTAT Restores Rs. 28.1 Lakh Service Tax Refund Claim due to GST Transition Hurdles [Read Order]

The Mumbai bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has restored Apollo Tyres' claim for a refund of Rs. 28.1 lakh in service tax, citing challenges arising from the transition to the Goods and Services Tax (GST) regime.

The Apollo Tyres had initially filed for a refund of the service tax amount, along with interest, arguing that the tax liability had been discharged under the authority of law as it existed at the time. The company contended that the payment enabled them to take credit under Rule 3 of the CENVAT Credit Rules, 2004. But, by the time the tax was paid, the CENVAT Credit Rules had ceased to exist, and the new GST regime had come into effect. This transition left the company unable to avail of the credit under the new tax scheme, leading to the refund claim.

The original authority had rejected the refund claim, noting that Section 11B of the Central Excise Act, 1944, which deals with the refund of taxes collected without the authority of law, did not provide for the monetization of credit.

The appellant who was aggrieved by the above order, approached CESTAT for relief.

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The appellant’s counsel argued that the rejection of the refund claim was erroneous. They pointed out that Section 142 of the Central Goods and Service Tax Act, 2017, specifically provided for the monetization of credit accumulated under the erstwhile tax scheme, which could be transitioned into the new GST regime.

The counsel further stated that the delay in tax payment was due to doubts about the taxability of the services, which were only clarified by the Gujarat High Court's decision. They contended that the lower authorities should have considered the entitlement to refund under Section 142 of the GST Act.

The Tribunal noted that the claim for refund was not based on the incorrectness of the tax liability but on the inability to transition the credit into the new GST regime due to the belated payment of tax. The Tribunal also referred to several precedents, including the Larger Bench decision in Bosch Electrical Drive India Private Ltd. v. Commissioner of Central Tax, Chennai, which affirmed the maintainability of such appeals. Additionally, the Tribunal cited the Bombay High Court's decision in Combitic Global Caplet Pvt Ltd. v. Union of India, in which the court held that Section 142(3) of the GST Act mandates the refund of any amount paid under the existing law, including CENVAT credit.

The CESTAT, comprising C.J. Mathew (technical member), set aside the impugned order and restored the refund application for fresh consideration.

To Read the full text of the Order CLICK HERE

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