Refund of Service Tax paid under RCM allowed post implementation of GST

In NSSL (P.) Ltd. v. Commissioner of Central Excise, CGST & CE, Nagpur [FINAL ORDER NOS. A/86639-86640/2021 dated August 03, 2021], NSSL (P.) Ltd. ("the Appellant) has filed the current appeal being aggrieved against Order-in-Appeal dated November 14, 2018("OIA") which rejected the refund applications made by the Appellant for claiming of refund of service tax paid under Reverse Charge Mechanism ("RCM"). The ground provided by the Service Tax Authorities for rejecting the refund application was that Input Tax Credit ("ITC") can only be claimed under Central Goods and Services Tax Act, 2017 ("the CGST Act").

The Appellant failing to pay its Service Tax Liability under RCM in a stipulated time but shown as liability in the Service tax Return under the Finance Act, 1994, which was repealed and was replaced by the Goods and Services Tax ("GST"). Accordingly, the Authorities rejected the refund application which was filed under Central Value Added Tax Credit Rules, 2004 ("CENVAT Credit Rules") on the ground that the credit can only be claimed under the CGST Act.

The Hon'ble CESTAT, Mumbai noted that the Commissioner (Appeals) in the OIA has relied upon Section 142(8)(a) of the CGST Act however, as per the observations of the Hon'ble CESTAT, the matter is to be governed under the provisions of Section 142(3) of the CGST Act which provides for Miscellaneous Transitional Provisions applicable in the current case.

Section 142(3) of the CGST Act, which mentions any claim filed by any person for refund of CENVAT Credit will be disposed of under the provisions of existing law i.e, Central Excise Act, 1944 ("the CE Act"). It implies that an assessee can file an application to claim refund of CENVAT credit and such application would be disposed of in accordance with the CE Act. The Hon'ble CESTAT relying on this provision noted that the "Authorities have not questioned the issue regarding the entitlement of the Appellant to the CENVAT Credit under the erstwhile CENVAT statute."

Further opined that the Appellants should be allowed the benefit of refund of service tax paid by it, thereby, setting aside the OIA and allowing the current appeal.