The Chennai Bench of the Customs, Excise And Service Tax Appellate Tribunal ( CESTAT ) recently rebuked the Revenue for illicitly invoking the provisions of Section 142(8) of the Central Goods and Services Tax Act, 2017 ( CGST Act ) to deny Central Value Added Tax ( CENVAT ) to Bosch Automotive.
The Service Tax Appeal was instituted before CESTAT by world-leading automotive engineering brand, Bosch Automotive against the denial of Input Service Credit (ISC) on the import of services like Royalty, Technical/Professional fees for the period from April 2015 to June 2017.
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The CENVAT denial was contested by the Appellant, claiming refund under Section 142(3) of the GST Act on the ground that service tax so paid after introduction of the Goods and Services Tax (GST) Regime is eligible to be refunded as CENVAT Credit under the Cenvat Credit Rules, 2004.
Aggrieved, the denial was appealed before the Commissioner of Central Excise (Appeals) who dismissed the matter citing provisions of Section 142(8) of the CGST Act to contend that ‘any amount payable prior to the implementation of GST from 01.07.2017 was recoverable only as arrears of tax which was not eligible for Input Tax Credit under the provisions of CGST’.
Counsel for the Appellant, Raghavan Ramabadran highlighted the irregularity in the issuance of Departmental Show-Cause Notice being purported under Section 142(3) of the CGST Act, 2017 while the impugned demand order dated 21.09.2019 relied on Section 142(8) of the Act, also claiming that the Appellant has been made a victim owing to a change in law, denying service tax under CENVAT Credit under the Reverse-Charge Mechanism (RCM) in the event that the same is not permissible under the CGST Act.
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Authorized Representative for the Department, O.M. Reena, reiterated that the tax was paid by the Appellant as a revenue arrear and therefore not entitled to refund in cash in terms of Section 142(7)/142(8) of CGST Act, 2017.
The CESTAT Bench presided over by Vasa Seshagiri Rao, Technical Member referred to the case of Terex India Pvt. Ltd. Vs. Commissioner of GST & C.E., Salem (2022) wherein the Chennai CESTAT held that Section 142(3), being a transitional provision for claim of refund after the introduction of the GST Regime requires refund claims of any amount paid under the erstwhile law to be disposed in cash according to the provisions of the erstwhile law.
In light of the judicial precedents, CESTAT observed that invocation of Section 142(8) of the GST Act is warranted only when amounts are recoverable from an Assessee in pursuance of an assessment or adjudication proceedings initiated before, on or after the appointed date.
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Owing to the lack of applicability of Section 142(8) in the present case, the CESTAT set aside the impugned order by the Commissioner of Central Excise (Appeals-II), dated 21.09.2019 and allowed the Appeal.
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