Bajaj Carpet Industries Ltd. Vs Commissioner of Central Excise (CESTAT Allahabad)

CESTAT Allahabad held that claim of cash refund of service tax paid under RCM not admissible since CENVAT Credit was never claimed and transitional provisions under GST was not complied.

Facts- The Appellant is engaged in the manufacture of carpets and receives several inputs, input services and capital goods for this purpose. During June 2017, the Appellant received Manpower supply agency services Goods transport agency services, Works contract services and Legal consultancy services on which service tax amounting to Rs. 4,53,986/- was paid by it under RCM on 29.09.2017.

Due to payment of service tax under RCM on 29.09.2017, the Appellant could not reflect the Cenvat credit amounting to Rs.4,53,986/- in its ST-3 return filed for the period April to June 2017.

Since the Appellant was otherwise eligible to avail Cenvat credit on the above service tax paid by it under RCM and the same could not be carried forward due to introduction of GST regime w.e.f. 01.07.2017, the Appellant filed an application dated 03.05.2018 claiming the refund of amount of Rs. 4,53,986/- in cash u/s. 11B of Central Excise Act, 1944 read with Section 142(3) of the Central Goods and Services Tax Act, 2017.

The Assistant Commissioner rejected the refund claim. The Assistant Commissioner specifically stated that the CENVAT Credit for the previous period can be carried forward under the provision of the GST Act and Rules in the form of TRAN – 1 and that the Rules allowed the transfer of CENVAT Credit amount which they received prior to the roll out of GST in the prescribed manner, and therefore, the claim of the appellant for refund cannot be allowed or extended and there is no provision under the erstwhile law which governs the refund of service tax paid under RCM.

The appeal filed by the Appellant was dismissed by the impugned Order. Being aggrieved, the present appeal is filed.

Conclusion- Held that it is not provided in law that the all the amounts paid undr RCM should be admissible as refund to the appellant. The scheme of CENVAT Credit as per CENVAT Credit Rules, 2004 had extinguished on 30.06.2017, and the amounts of CENVAT Cedit available as balance with the manufacturer/ service providers was allowed to be transited into newly introduce GST Regime in the manner as provide under Section 140 of the CGST Act, 2017. The phrase “CENVAT Credit” also got erased from the law from that date and the claim made by the appellant that this amount was available as CENVAT Credit cannot have any sanctity in law on the date when the appellant paid these amounts claimed as refund under the name of un-utilized CENVAT Credit. The credit which was never taken in the book of accounts or was not due during the prevalence of the said scheme could not be claimed as the credit earned. I do not find any merits in the submissions made by the appellant on this account.

FULL TEXT OF THE CESTAT ALLAHABAD ORDER

This appeal is directed against Order-in-Appeal No. NOI-EXCUS-002-APP-562 -20-21 dated: 9.0.2020 of the Commissioner, CGST (Appeals), Noida. By the impugned order the order in original No. 438-R/AC/D-I/GBN/19-20 dated 14/02/2020, in which the Assistant Commissioner rejected the refund claim of Rs. 4,53,986/- filed by the appellant.

2.1 The Appellant is engaged in the manufacture of carpets and receives several . inputs, input services and capital goods for this purpose

2.2 During June 2017, the Appellant received Manpower supply agency services Goods transport agency services, Works contract services and Legal consultancy services on which service tax amounting to Rs. 4,53,986/- was paid by it under RCM on 29.09.2017

2.3 The Appellant filed ST-3 return for the period April to June 2017 on 13.08.2017 and the last date to revise the said return was 27.09.2017. Due to payment of service tax under RCM on 29.09.2017, the Appellant could not reflect the Cenvat credit amounting to Rs.4,53,986/- in its ST-3 return filed for the period April to June 2017.

2.4 Since the Appellant was otherwise eligible to avail Cenvat credit on the above service tax paid by it under RCM and the same could not be carried forward due to introduction of GST regime w.e.f. 01.07.2017, the Appellant filed an application dated 03.05.2018 claiming the refund of amount of Rs. 4,53,986/- in cash under Section 11B of Central Excise Act, 1944 read with Section 142(3) of the Central Goods and Services Tax Act, 2017.

2.5 SCN dated 12.07.2018 was issued to the Appellant proposing to reject the refund claim basis the allegation that there was no provision which allowed refund of service tax paid under RCM.

2.6 The show cause notice was adjudicated by the Assistant Commissioner vide order in original referred in para 1 above whereby, the refund claim was rejected. The Assistant Commissioner specifically stated that the CENVAT Credit for the previous period can be carried forward under the provision of the GST Act and Rules in the form of TRAN – 1 and that the Rules allowed the transfer of CENVAT Credit amount which they received prior to the roll out of GST in the prescribed manner, and therefore, the claim of the appellant for refund cannot be allowed or extended and there is no provision under the erstwhile law which governs the refund of service tax paid under RCM.

2.7 The appeal filed by the Appellant was dismissed by the impugned Order referred in para 1 above.

2.8 Aggrieved Appellant has filed this appeal.

3.1 I have heard Ms Priyanka Singla, Advocate for the appellant and Shri Santosh Kumar, Authorized Representative for the revenue.

3.2 Arguing for the Appellant learned counsel submits:

> Cenvat Credit is a substantive right of the appellant as have been held by Hon‟ble Supreme Court in case of Eicher Motors [1999-VI-04-SC-CE];

> The appellant is entitled to claim the refund in cash or service tax paid by it under RCM as has been held by various authoritative pronouncements as follows:

• • Bharat Heavy Electrical Ltd. [2021-VIL-715-CESTAT-CHI-CE]
  • Srichakra Poly Plast India Pvt. Ltd. [2024-VIL-141-CESTAT-HYD-CE]
  • Aculife Healthcare Pvt. Ltd. [2024-VIL-474-CESTAT-AHM-CE]
  • Terex India Pvt. Ltd. [2021-VIL-522-CESTAT-CHE-ST]
  • Brose India Automotive Sysetm Pvt. Ltd. [2022-VIL-328-CESTAT-MUM-ST]
  • Circor Flow Technologies India Pvt. Ltd. [2022-VIL-15-CESTAT-CHE-ST]
  • Monochem Graphics Pvt. Ltd. [2022-VIL-760-CESTAT-DEL-CE]
  • ITCO Industries Ltd. [2022-VIL-456-CESTAT-CHE-CE]
  • Hindustan Equipments Pvt. Ltd. [2024-VIL-598-CESTAT-AHM-CE]
  • Ashima Ltd. [2024-VIL-365-CESTAT-AHM-CE]
  • Combitic Global Caplet Pvt. Ltd. [2024-VIL-570-BOM]
  • Simbhaoli Sugar Ltd [2024-VIL-490-CESTAT-ALH-CE]

> Decision of Hon’ble Bombay High Court in the case of Gauri Plasticulture referred in the impugned order is not applicable to their case as at the time when said decision was rendered there was no enabling provision like Section 142(3) of the CGST Act, 2017.

> In case of ATV Projects Ltd [2023-VIL-876-CESTAT-MUM-CE], it has been held that the decision of Hon’ble Supreme Court was not placed before the larger bench of Hon’ble Bombay High Court in case of Gauri Plasticulture

> Article 265 of the Constitution of India states the government cannot levy tax without authority of law. Hence retention of service tax paid by the appellant under RCM is against the provisions of Section 11B read with Section 142 (3) of the CGST Act, 2017

> Appellant is entitled to interest on delayed payment of refund in cash.

3.3 Learned authorized representative reiterated the findings recorded in the impugned order

4.1 I have considered the impugned order along with the submissions made in appeal and during the course of arguments.

4.2 Impugned order records the findings as follows for dismissing the appeal-

“3. I have carefully gone through the submissions of the appellant and also the contention of the Authorised Representatives of the appellant during the course of personal hearing and find that the amount of Service Tax was actually deposited by them under RCM in the month of September 2017 which was pertaining to an earlier period. But the credit was never earned by them prior to 30/06/2017 which was the date line for taking the Transition Credit in the TRAN – 1 under the CGST Act or Rules. It is on record that the amount paid by them under RCM for the erstwhile Service Tax cannot be transferred to the new system as it was not provided for the law, and in the absence of a law governing such a situation where the credit was earned by them subsequently it cannot be made good by the statutory functionaries. Therefore, the question of allowing Transition Credit to the new GST system is totally ruled out, and cannot be allowed unless there is a provision in the law for the purpose. In fact, the action of the appellant in taking such CENVAT Credit after the introduction of GST from 1^st July 2017 in not authorized by Law as the time period for earning such CENVAT Credit was already over. If the appellant had taken such credit in their books of accounts, it would tantamount to an empty formality without any substance.

4. The contention that refund claim of CENVAT Credit under Section 142 of the CGST Act is permissible is also not factually correct Section 142 of the GST Act, 2017 allows refund of the amount that was already accrued to person or persons under the erstwhile Central Excise Law or the Service Tax Law, as the case may be. But in this case, the refund was never earned by the appellant, nor was it permissible under the law. The provision of Section 11B of Central Excise Act, 1944 is very clear as Clause (C) of Sub Section 2 clearly provided for refund of credit of duty paid on excisable goods which may be made in accordance with the rules made, or any notification issued under the Act. It is not the case of the appellant that there was any rule made for the refund of such credit under the erstwhile Central Excise Rules and also no authorization existed for the refund of such credit under the Rules. There was also no notification issued under the Central Excise Act for refund of such credit, and therefore, the contention of the appellant is not supported by law.

5. The case laws relied upon by the appellant as indicated above pertains to cash refund of CENVAT Credit on surrender of registration certificate or on the issue of export refund by way of rebate, and therefore, the decision is not squarely applicable to the facts and circumstances of the present case

6. On the contrary, I find that the issue of refund of accumulated CENVAT Credit was placed before the Larger Bench of the Hon’ble Bombay High Court in the case of Gauri Plasticulture Private Ltd. Versed CCE reported in 2019 (30 GSTL 224) and the Larger Bench after considering the provision of Section 11(B) carefully, came to the conclusion that there is no provision for refund of accumulated CENVAT Credit, as there was no rule framed for the purpose, nor was there a notification issued for the purpose. The only provision under Section 11B governing such refunds is rebate of duties of excise on excisable goods exported out of India and as such does not include the simple accumulation of credit which cannot be utilized for whatever reasons. The Hon’ble Bombay High Court in the said judgement also examined the applicability of Rule 5 of the CENVAT Credit Rules, 2002 pertaining to refund of CENVAT Credit and came to the definite conclusion that Rule 5 does not pertain to mere accumulation of credit etc. but was actually the accumulation of credit on account of exports and nothing else. In view of the decision of the Larger Bench of the Hon’ble Bombay High Court on the issue, I find that the contention of the appellant regarding admissibility of refund on account of accumulation of CENVAT Credit is contrary to the law laid down by the Hon’ble Bombay High Court, and therefore, such contention cannot be accepted.”

4.3 In the present case appellant was required to pay the service tax under RCM in respect of services received by them in month of June 2017 which they paid on 29.09.2017 deliberately. They were aware of their liability to pay this service tax at the time of filing the ST-3 return for April 2017 to June 2017 on 13.08.2017. They could have revised the return till 27.09.2017.

Proviso inserted in Rule 7 (2) of the Service Tax Rules, 1994 by Notification No 18/2017-ST dated 22.06.2017 read as follows:

Provided also that the return for the period from the 1st day of April, 2017, to the 30th day of June, 2017, shall be submitted by the 15th day of August, 2017, in Form ‘ST-3′ or ‘ST-3C‟, as the case may be.

And the proviso inserted in Rule 7B(1) read as follows:

Provided that the revised return for the period from the 1st day of April, 2017, to the 30th day of June, 2017, shall be submitted within a period of forty five days from the date of submission of the return under rule 7.

However they chose deliberately not to pay the same till that date and reflect in the ST-3 return or by filing the revised return. They paid the service tax subsequently. They filed the refund claim of the amount so paid on 03.05.2018.

4.4 It is not provided in law that the all the amounts paid undr RCM should be admissible as refund to the appellant. The scheme of CENVAT Credit as per CENVAT Credit Rules, 2004 had extinguished on 30.06.2017, and the amounts of CENVAT Cedit available as balance with the manufacturer/ service providers was allowed to be transited into newly introduce GST Regime in the manner as provide under Section 140 of the CGST Act, 2017. The phrase “CENVAT Credit” also got erased from the law from that date and the claim made by the appellant that this amount was available as CENVAT Credit cannot have any sanctity in law on the date when the appellant paid these amounts claimed as refund under the name of un-utilized CENVAT Credit. The credit which was never taken in the book of accounts or was not due during the prevalence of the said scheme could not be claimed as the credit earned. I do not find any merits in the submissions made by the appellant on this account.

4.5 Appellant have relied upon series of decision of tribunal to support their case. However I do not find any relevance of the decisions of tribunal in the matter as the issue has been authoritatively considered by Hon‟ble High Court of Jharkhand in the case of Rungta Mines [2022-TIOL-252-HC-JHARKHAND-GST] and following has been held:

“Legal proposition on the point of refund: –

7. In a recent judgement of the Hon’ble Supreme Court, in the case of “Union of India and Others vs VKC Footsteps India Private Ltd.” reported in 2021 SCC online SC 706 = 2021-TIOL-237-SC-GST, the Hon’ble Supreme Court dealt with the provision of refund of tax under Section 54 of the CGST Act and has extensively dealt with the principles of refund in the matter of taxation. In the said case, the Hon’ble Supreme Court was dealing with the conflicting view of Hon’ble Gujarat High Court and Hon’ble Madras High Court on the point of validity of Rule 89 (5) which provided a formula for a refund of ITC and the case of refund on account of inverted duty structure under sub-Section 3 and Section 54 inter alia dealing with credit accumulation on account of rate of tax on inputs being higher than the rate of tax on output supplies. The Hon’ble Supreme Court ultimately upheld the view of the Hon’ble Madras High Court which held that refund is statutory right and the extension of the benefit of refund only to the unutilised credit that accumulates on account of rate of tax on input goods being higher than the rate of tax on output supplies, by excluding unutilised input tax credit that accumulated on account of input services, is a valid classification and a valid exercise of legislative power. The Hon’ble Supreme Court accepted the submission of Mr. N. Venkataraman, learned ASG on the legal proposition on the point of refund. The submissions of Mr. N. Venkataraman, learned ASG on the point of legal proposition have been recorded in para-D.1.3 Part (III), as under: –

“(i) Article 265 of the Constitution provides that no tax shall be levied or collected except by authority of law. There being no challenge either to the levy or collection of taxes in these cases, taxes paid into the coffers of the Union Government or the States become the property of the Union/States;

(ii) The refund of taxes is neither a fundamental right nor a constitutional right. The Constitution only guarantees that the levy should be legal and that the collection should be in accordance with law. There is no constitutional right to refund. Refund is always a matter of a statutory prescription and can be regulated by the statute subject to conditions and limitations;

(iii) Even in the case of an illegal levy or a levy which is unconstitutional, the decision of the nine judges Bench in Mafatlal Industries Limited vs Union of India held that the right of refund is not automatic. The burden of proof lies on the claimant to establish that it would not cause unjust enrichment;

(iv) Though tax enactments are subject to Articles 14 and 19(1)(g) of the Constitution, this is subject to two well-settled principles:

(a) Discriminatory treatment under tax laws is not per se invalid. It is invalid only when equals are treated unequally or unequals are treated equally. Both under the Constitution and the CGST Act, goods, services, input (goods) and input services are not one and the same. These are distinct species, though covered by a common code; and

(b) The legislature is entitled to the widest latitude when it identifies categories of classification and unless things constituting the same class are treated differently without a rationale, the provision cannot be declared as unconstitutional;

(v) The doctrine of reading down is employed to narrow down the scope of a proviso under challenge, when it may otherwise be unconstitutional. The doctrine cannot result in expansion of a statutory provision for refund which would amount to rewriting the legislation;

(vi) Accepting the submission of the assessees that goods and services must be treated at par can lead to drastic consequences in terms of:

(a) rates of taxes;

(b) concessions, benefits and exemptions;

(c) intervention in the areas of political, economic and legislative policies;

(vii) Refund of taxes is one form of granting exemption;

(viii) Once a refund is construed as a form of exemption from taxes, the provision has to attract strict interpretation;

(ix) Exemptions, concessions and exceptions have to be treated at par and must be strictly construed;

(x) ITC is not a matter of right and the burden of proof is on the assessee to establish a claim for a concession or benefit;

(xi) The manner in which a proviso can be construed has been elucidated in the precedents of this Court. A proviso may not be only an exception but may constitute a restriction on the operation of the main statutory provision; and

(xii) A legislative amendment which reflects a policy choice is not subject to judicial review.”

8. The Hon’ble Supreme Court crystalised and laid down the law in connection with refund under Taxation and some of the paragraphs of the judgement are quoted as under:

“87. We must be cognizant of the fact that no constitutional right is being asserted to claim a refund, as there cannot be. Refund is a matter of a statutory prescription. Parliament was within its legislative authority in determining whether refunds should be allowed of unutilised ITC tracing its origin both to input goods and input services or, as it has legislated, input goods alone. By its clear stipulation that a refund would be admissible only where the unutilised ITC has accumulated on account of the rate of tax on inputs being higher than the rate of tax on output supplies, Parliament has confined the refund in the manner which we have described above. While recognising an entitlement to refund, it is open to the legislature to define the circumstances in which a refund can be claimed. The proviso to Section 54(3) is not a condition of eligibility (as the assessees’ Counsel submitted) but a restriction which must govern the grant of refund under Section 54(3). We therefore, accept the submission which has been urged by Mr. N Venkataraman, learned ASG.

93. Parliament engrafted a provision for refund Section 54(3). In enacting such a provision, Parliament is entitled to make policy choices and adopt appropriate classifications, given the latitude which our constitutional jurisprudence allows it in matters involving tax legislation and to provide for exemptions, concessions and benefits on terms, as it considers appropriate. The consistent line of precedent of this Court emphasises certain basic precepts which govern both judicial review and judicial interpretation of tax legislation. These precepts are….

94. The principles governing a benefit, by way of a refund of tax paid, may well be construed on an analogous frame with an exemption from the payment of tax or a reduction in liability [Assistant Commissioner of Commercial Tax (Asst.) vs Dharmendra Trading Company reported in (1988) 3 SCC 570] = 2002-TIOL-1803-SC-CT.

98. Parliament while enacting the provisions of Section 54(3), legislated within the fold of the GST regime to prescribe a refund. While doing so, it has confined the grant of refund in terms of the first proviso to Section 54(3) to the two categories which are governed by clauses (i) and (ii). A claim to refund is governed by statute. There is no constitutional entitlement to seek a refund. Parliament has in clause (i) of the first proviso allowed a refund of the unutilized ITC in the case of zero-rated supplies made without payment of tax. Under clause (ii) of the first proviso, Parliament has envisaged a refund of unutilized ITC, where the credit has accumulated on account of the rate of tax on inputs being higher than the rate of tax on output supplies. When there is neither a constitutional guarantee nor a statutory entitlement to refund, the submission that goods and services must necessarily be treated at par on a matter of a refund of unutilized ITC cannot be accepted. Such an interpretation, if carried to its logical conclusion would involve unforeseen consequences, circumscribing the legislative discretion of Parliament to fashion the rate of tax, concessions and exemptions. If the judiciary were to do so, it would run the risk of encroaching upon legislative choices, and on policy decisions which are the prerogative of the executive. Many of the considerations which underlie these choices are based on complex balances drawn between political, economic and social needs and aspirations and are a result of careful analysis of the data and information regarding the levy of taxes and their collection. That is precisely the reason why courts are averse to entering the area of policy matters on fiscal issues. We are therefore unable to accept the challenge to the constitutional validity of Section 54(3).”

9. Though in the instant case we are not dealing with section 54 of CGST Act but are concerned with transitional provisions dealing with “refund” under section 142(3) of the CGST Act “in cash” under certain circumstances in connection with taxes suffered under the previous regime. However, the fundamental concepts and the interpretation of law relating to refund would still be the same and what is to be seen is whether the petitioner qualifies for entitlement of refund under section 142(3) of CGST Act in the light of the facts and circumstances of this case.

Legal proposition on the point of interpretation of transitional provisions, vested rights etc with reference to the judgements relied upon by the learned counsel of the petitioner.

10. The learned counsel for the petitioner has also referred to the judgment passed in the case of Union of India vs Filip Tiago De Gama of Vedam De Gama (supra) on the point that the transitional provisions are to be purposefully construed and the paramount object in statutory interpretation is to discover what the legislature intended and this intention is primarily to be ascertained from the text of the enactment in question. This principle of statutory interpretation is well settled.

11. So far as the case of K. S. Paripoornan (supra) is concerned, the Hon’ble Supreme Court has considered the role of “Transitional Provision” and the learned counsel for the petitioner has referred to Para-71 of the said judgment, which is quoted as under: –

“71. Section 30 of the amending Act bears the heading “Transitional provisions”. Explaining the role of transitional provisions in a statute, Bennion has stated:

“Where an Act contains substantive, amending or repealing enactments, it commonly also includes transitional provisions which regulate the coming into operation of those enactments and modify their effect during the period of transition. Where an Act fails to include such provisions expressly, the court is required to draw inferences as to the intended transitional arrangements as, in the light of the interpretative criteria, it considers Parliament to have intended.”

(Francis Bennion : Statutory Interpretation, 2nd Edn., p. 213)

The learned author has further pointed out:

“Transitional provisions in an Act or other instrument are provisions which spell out precisely when and how the operative parts of the instrument are to take effect. It is important for the interpreter to realise, and bear constantly in mind, that what appears to be the plain meaning of a substantive enactment is often modified by transitional provisions located elsewhere in the Act.” (p. 213)

Similarly Thornton in his treatise on Legislative Drafting has stated:

“The function of a transitional provision is to make special provision for the application of legislation to the circumstances which exist at the time when that legislation comes into force.”

For the purpose of ascertaining whether and, if so, to what extent the provisions of sub-section (1-A) introduced in Section 23 by the amending Act are applicable to proceedings that were pending on the date of the commencement of the amending Act it is necessary to read Section 23(1- A) along with the transitional provisions contained in sub-section (1) of Section 30 of the amending Act.”

12. There is no doubt about the aforesaid proposition that the transitional provisions are made to make special provision for the application of legislation to the circumstances which exist at the time when the legislation comes into force and are applicable to proceedings that were pending on the date of the commencement of the amending Act.

13. So far as the judgment in the case of J. K. Cotton Spinning and Weaving Mills Co. Ltd. (supra) is concerned, the petitioner has referred to paragraphs-10 of the said judgment, which is quoted as under: –

“10. Applying this rule of construction that in cases of conflict between a specific provision and a general provision the specific provision prevails over the general provision and the general provision applies only to such cases which are not covered by the specific provision, we must hold that Cl. 5(a) has no application in a case where the special provisions of Cl. 23 are applicable.”

The aforesaid judgment does not help the petitioner in any manner in view of the fact that there is no conflict amongst the various provisions of CGST Act referred to by the learned counsel for the petitioner during the course of argument, particularly with reference to Sections 140, 142 and 174 of the CGST Act. The provisions have been interpreted in later portion of this judgement.

14. The learned counsel has further referred to the judgment in the case of CIT vs J. H. Gotla reported in (1985) 4 SCC 343 = 2002-TIOL-131-SC-IT-LB to submit that even in taxation, if strict literal construction leads to absurdity, construction which results in equity rather than injustice, should be preferred. However, during the course of argument, the learned counsel has failed to demonstrate as to how any of the provisions of CGST Act which have been referred to by the petitioner has led to any absurdity. The interpretation of the provisions of CGST Act particularly with reference to refund as contemplated in the Act itself is required to be seen in the light of the principles as has been laid down by the Hon’ble Supreme Court in the case of Union of India vs VKC Footsteps (supra), whose relevant portions have already been quoted above. There can be no doubt that the right to refund in the matter of taxation is a statutory right which is neither a fundamental right nor a constitutional right and there is no equity in taxation. The right crystalizes only when the statute permits refund as per law and prescribed procedure.

15. It has been submitted that in the case of Gammon India Ltd. vs Chief Secretary (supra), it has been held that the rights which are saved by saving provisions continues even after repeal. Further in the judgment passed by the Hon’ble Supreme Court in the case of Baraka Overseas Trader (supra), it has been held that the accrued rights under old law is to be continued under the new law. However, the moot question in the instant case is as to whether there was any existing right of availing CENVAT Credit or refund on the date of coming into force of the CGST Act in favour of the petitioner which can be said to have accrued or vested and consequently saved by the repealing provision of CGST Act. The finding in later part of this judgement holds that the petitioner did not have any existing right of availing CENVAT Credit or refund on the date of coming into force of the CGST Act which can be said to have accrued or vested and consequently saved by Section 174 (repeal and saving) read with Section 6 of General Clause Act.

16. The learned counsel has themselves relied upon a judgment passed by the Hon’ble Supreme Court in the case of State of Punjab and Ors. vs Bhajan Kaur and Ors. (supra), wherein Section 6 of General Clauses Act has been interrelated by holding that the said provision inter-alia saves a right accrued, but it does not create a right. Paragraph-14 of the aforesaid judgment is quoted hereinbelow for ready reference: –

“14. …………………..  Section 6 of the General Clauses Act, therefore, inter alia, saves a right accrued and/or a liability incurred. It does not create a right. When Section 6 applies, only an existing right is saved thereby. The existing right of a party has to be determined on the basis of the statute which was applicable and not under the new one. If a new Act confers a right, it does so with prospective effect when it comes into force, unless expressly stated otherwise.”

17. In the case of Glaxo Smith Kline PLC and Others (supra), the Hon’ble Supreme Court has upheld the view of the learned single judge of the High Court and held at Para-17 as under: –

“17. The learned Single Judge’s view that the provisions of Section 78 of the Amendment Act have no application to the proceedings which stood concluded before the appointed day appears to be the correct view governing the issue. Since Chapter IV-A in question was merely repealed, the situation has to be dealt with in line with Section 6 of the General Clauses Act. The provisions of Section 78 are conditional provisions and are not intended to cover cases where the application for EMR had been rejected with reference to Section 21 of the amending enactment. As noted above, Chapter IV-A was repealed. The effect of the repeal has to be ascertained in the background of Section 6 of the General Clauses Act. That being so, the order of the Division Bench cannot be sustained and that of the learned Single Judge has to operate. The appeal is allowed but in the circumstances without any order as to costs.”

18. In the case of Eicher Motors Ltd. vs Union of India (supra), it has been held that the rights of credit facilities accrued under existing law are not to be altered. Paragraphs-5 and 6 of the aforesaid judgment are quoted as under: –

“5. Rule 57-F(4-A) was introduced into the Rules pursuant to the Budget for 1995-96 providing for lapsing of credit lying unutilised on 16-3-1995 with a manufacturer of tractors falling under Heading No. 87.01 or motor vehicles falling under Headings Nos. 87.02 and 87.04 or chassis of such tractors or such motor vehicles under Heading No. 87.06. However, credit taken on inputs which were lying in the factory on 16-3-1995 either as parts or contained in finished products lying in stock on 16-3-1995 was allowed. Prior to the 1995-96 Budget, the Central excise/additional duty of customs paid on inputs was allowed as credit for payment of excise duty on the final products, in the manufacture of which such inputs were used. The condition required for the same was that the credit of duty paid on inputs could have been used for discharge of duty/liability only in respect of those final products in the manufacture of which such inputs were used.

As pointed out by us that when on the strength of the Rules available, certain acts have been done by the parties concerned, incidents following thereto must take place in accordance with the Scheme under which the duty had been paid on the manufactured products and if such a situation is sought to be altered, necessarily it follows that the right, which had accrued to a party such as the availability of a scheme, is affected and, in particular, it loses sight of the fact that the provision for facility of credit is as good as tax paid till tax is adjusted on future goods on the basis of the several commitments which would have been made by the assessees concerned. Therefore, the Scheme sought to be introduced cannot be made applicable to the goods which had already come into existence in respect of which the earlier Scheme was applied under which the assessees had availed of the credit facility for payment of taxes. It is on the basis of the earlier Scheme necessarily that the taxes have to be adjusted and payment made complete. Any manner or mode of application of the said Rule would result in affecting the rights of the assessees.

6. We may look at the matter from another angle. If on the inputs, the assessee had already paid the taxes on the basis that when the goods are utilised in the manufacture of further products as inputs thereto then the tax on these goods gets adjusted which are finished subsequently. Thus, a right accrued to the assessee on the date when they paid the tax on the raw materials or the inputs and that right would continue until the facility available thereto gets worked out or until those goods existed. Therefore, it becomes clear that Section 37 of the Act does not enable the authorities concerned to make a rule which is impugned herein and, therefore, we may have no hesitation to hold that the Rule cannot be applied to the goods manufactured prior to 16-3-1995 on which duty had been paid and credit facility thereto has been availed of for the purpose of manufacture of further goods.”

19. The learned counsel has also referred to the judgment passed in the case of CCE vs Grasim Industries Ltd. (supra) to submit that excise duty/CENVAT is value added tax. There is no doubt about the aforesaid proposition, as it is not in dispute in the instant case that the petitioner was entitled to take credit of the service tax paid to the port authorities for the “port services” by way of CENVAT Credit as per the provisions of the rules.

20. However, in the instant case the petitioner has failed to follow the prescribed procedure to avail such a credit and consequently having lost such a right, he cannot claim revival of such a right and claim refund of the same by virtue of transitional provisions under Section 140(3) of the CGST Act. The facts involved in the present case would demonstrate that the petitioner had no existing right on the date of coming into force of CGST Act to avail credit of the service tax paid on “port services” as CENVAT Credit and accordingly, the provision of Section 140(3) of the CGST Act cannot be construed to have conferred such a right which never existed on the date of coming into force of CGST Act.

21. So far as the judgment passed in the case of Kunal Kumar Tiwari vs State of Bihar (supra) is concerned, the same has been relied upon by the petitioner to submit that an interpretation which advances the purpose of object underlying the Act should be preferred. But the learned counsel for the petitioner has failed to show as to how the entitlements to CENVAT Credit on service tax paid on “port services” which the petitioner did not claim as per procedure prescribed by law can be construed to confer such a right to claim such credit under transitional provisions followed by cash refund and how such a position in law would advance the purpose and object of CGST Act. Rather, the aforesaid interpretation sought to be given by the petitioner is contrary to the very object and purpose of section 142(3) of CGST Act which has been discussed at a later part of the Judgement.

22. So far as the judgment passed in the case of M/s. DMR Constructions (supra) by Hon’ble Madras High Court is concerned, the same related to transition of accumulated tax deducted at source which existed on the date of coming into force of CGST Act and relief was granted to the petitioner in terms of transitional credit under section 140(1) of CGST Act.

23. However, in the instant case, the petitioner failed to claim transitional credit in terms of section 140(1) of the CGST, Act and wrongly took credit of the impugned service tax in ST-3 return and thereafter claimed refund of the same by referring to section 142(3) of CGST, Act. Accordingly, the said judgement does not apply to the facts and circumstances of this case.

The sequence of facts; case of the parties and the contents of the impugned orders

24. The petitioner was having Central Excise Registration for manufacture of sponge iron, billet and TMT Bar. The petitioner was also registered under Service tax only as a person liable to pay service tax under Reverse Charge Mechanism. Admittedly, the “port services” involved in this case is not covered under Reverse Charge Mechanism and therefore the same was not includable in the service tax return filed by the petitioner under ST-3. Accordingly, the petitioner was not entitled to avail credit of the impugned service tax paid on the “port services” in its service tax ST-3 return.

25. It is not in dispute that the petitioner was entitled to claim CENVAT Credit on the service tax paid on “port services” if used in the manufacturing activity for which the petitioner was registered under the Central Excise Act, 1944.

26. The petitioner had imported coal through Bill of entry dated 27.04.2017 for using the same in or in relation to manufacture of dutiable final products. In course of the import, they received a bundle of services from M/s Kolkata Port Trust during 26.04.2017 to 29.04.2017 in the nature of “port services” who issued Bill dated 23.05.2017 for Rs. 89,36,836/- which included service tax of Rs. 10,88,328/-. The petitioner claims to have paid the entire bill including service tax on port services in the month of April itself. The petitioner was entitled to claim the service tax paid on “port services” as CENVAT Credit in their ER-1 return as per the provisions of existing law. The petitioner has submitted that the CENVAT Credit was not taken as the original bill/invoice was not received though generated on 23.05.2017. Admittedly, the petitioner did not claim the service tax paid on “port services” involved in this case as CENVAT Credit in their relevant ER-1 return.

27. On account of non-inclusion of the service tax paid on port services in ER-1 Return, the petitioner could not have claimed the transition of the said CENVAT Credit as permissible transitional credit referrable to section 140 of CGST Act through TRAN-1 and could not utilise the same under CGST Regime. Admittedly, the time for filing TRAN-1 was extended till 31.10.2017 but still the impugned service tax on “port services” could not be included (although by this time the original bill/invoice was received on 20.09.2017) as this Service Tax as CENVAT Credit was not included in ER-1 return and the time for filing ER-1 return for the period in question had expired. Further the petitioner had claimed this amount in Service Tax return ST-3 filed on 22.09.2017.

28. Thus, the petitioner missed to exercise their rights to avail of transitional credit of the service tax paid on “port services” through the mechanism prescribed under the CGST Act (Section 140) read with the existing provisions of CENVAT Credit Rules, 2002. It is also important to note that the existing provision did not permit CENVAT Credit of service tax paid on “port services” without its inclusion in ER-1 Return and in absence of such inclusion within the prescribed time line the claim of credit stood completely lost and could not be claimed in TRAN – 1 as transitional credit under CGST Act. Admittedly, the petitioner was not entitled to claim the service tax paid on “port services” in their service tax return ST-3 as the petitioner was not an output service provider and was liable to file service tax return and pay service tax only under reverse charge mechanism. Admittedly, “port services” were not under reverse charge mechanism.

29. Further, Rule 5 of CENVAT Credit Rules, 2004 permits refund only when the services are used to export goods or services, which is not the case in the present case. It is not the case of the petitioner that the impugned services were used for export of goods or services. Thus, under the existing law the claim of refund of service tax paid by the petitioner on port services was not admissible.

30. The case of the petitioner is that since they received the original copy of the Bill dated 23.05.2017 as late as on 20.09.2017, they could not take CENVAT Credit in their last ER-1 return for June, 2017 filed on 30.07.2017. However, the petitioner took the credit of Rs. 10,88,328/- in their ST-3 return for April-June, 2017 filed on 22.09.2017 with a view to keep the said transaction above board so that their claim was not lost. It is also not in dispute that the last date for filing TRAN-1 was extended up to 31.10.2017.

31. From the entire records of the case this court does not find any explanation from the side of the petitioner as to under what circumstances the Bill dated 23.05.2017 was received by them as late as on 20.09.2017 (although as per the petitioner the port services were availed and the payment including service tax was made to the port authorities in the month of April 2017), except the statement that delayed receipt of the bill was beyond their control.

32. It is the case of the petitioner that they filed a refund claim for aforesaid amount of service tax paid to the port authority as they could not carry forward the aforesaid credit to their GST TRAN-1.

33. On 28.06.2018 the petitioner filed application for refund in Form – R for refund of service tax paid on “port services” to the port authorities by referring to provisions of Section 11B of Central Excise Act read with Section 142(3) of the C.G.S.T. Act, 2017.

34. Notice dated 24.07.2018 was issued to the petitioner asking them to show cause as to why the refund claim should not be rejected on following ground:

i. The petitioner had misled the Deptt By claiming refund since they had erred by not incorporating said CENVAT Credit in their ER-1 returns in time and claim the credit through TRAN-1 returns;

ii. The petitioner had erroneously taken CENVAT Credit of input service in their ST-3 return since the impugned service is not an input service for them as they are not engaged in provision of any output service;

iii. The petitioner had not submitted original copy of the service invoice and the refund application had not been pre-receipted with revenue stamp on the original copy.

35. In their reply to show -cause notice, the petitioner admitted that they had taken CENVAT Credit of input service in their ST-3 return filed under Service Tax. The petitioner tried to justify and explain their act as under: –

(i) The reason behind disclosure of CENVAT Credit claimed on input services in the ST-3 return was not for showing use of the said services for providing output services but there was no scope for them to disclose the same in ER-1 returns which was already filed before receipt of the duty paying document. The substantive benefit of CENVAT Credit should not be denied for technical breaches and that the legislation for granting input tax credit is beneficial piece of legislation and should be construed liberally;

(ii) The said services are used for procurement of inputs are amply covered in the definition of “input service” in terms of Rule 2(l) of CCR, 2004 and disclosure or non-disclosure of said credit in ST-3 and/or ER-1 are irrelevant.

(iii) Ultimate eligibility of the credit of the impugned services is not in dispute and the benefit of CENVAT Credit eventually accrues to them which is the heart and soul of Section 142(3) of the CGST Act, 2017 and under Section 142(3) there is no statutory precondition that in order to claim the transitional credit, the claim must be disclosed in the ER-1 return;

(iv) Section 142(3) of the CGST Act, 2017 provides for refund of CENVAT Credit in cash accruing to the assessee under CENVAT Credit Rules, 2004. Section 142 is a residuary provision which deals with cases/contingencies which are not specifically covered or contemplated under Section 140 or 141. Since, in the instant case the provision of Section 140(5) or any other sub-Section does not cover the contingencies as in the present case, it would be covered by the residuary provision of Section 142(3);

(v) Section 142(3) specifically saves Section 11B(2)(c) of Central Excise Act which deals with refund of CENVAT Credit which remained un-utilized for one or another reason;

(vi) Referring to the second proviso to Section 142(3) of the CGST Act, 2017 which provides that if carry forward of the transitional credit is claimed (under Section 140), then refund of such CENVAT Credit would not be admissible. Therefore, from a plain reading of section 142(3) it is crystal clear that CENVAT Credit lawfully admissible/earned under the CENVAT Credit Rules, 2004 shall be allowed to be carried forward in the Electronic Credit Ledger (as per ER-1) or shall be allowed to be refunded in cash where it is not possible to carry forward in Electronic Credit Ledger.

36. The Adjudicating Authority, after considering the submissions of the petitioner observed that the petitioner is a manufacturer of dutiable goods and is registered under Service tax only as a person liable to pay service tax under Reverse Charge Mechanism.

The petitioner is not an output service provider and, hence, the claim filed as refund is not maintainable.

The petitioner had erroneously taken credit in ST-3 return since the impugned service is not an output service.

The refund of CENVAT Credit is eligible only to export cases as per rule 5 of CENVAT Credit Rules, 2004 and the present case being not falling under rule 5, the petitioner is not entitled to refund under section 11B of Central Excise Act, 1944 read with Rule 5 of the CENVAT Credit Rules, 2004.

The Adjudicating Authority observed that the transitional provisions under the CGST Act specifically provide transition of credit through TRAN-1 and the petitioner had failed to declare its claim in proper return i.e. ER-1. Accordingly, the Adjudicating Authority, vide the Order-in-Original dated 25.01.2019, rejected the refund claim under the provisions of Section 11B of the Central Excise Act, 1944 made applicable to Service Tax vide Section 83 of the Finance act, 1994.

37. Aggrieved with the aforesaid Order in original the petitioner filed appeal reiterating the submissions made before the Adjudicating Authority. They made following main submissions before the appellate authority:

i. The services were received by them during 26.04.2017 to 29.04.2017 and payment, including service tax, was made in April, 2017. But they received the invoice on 20.09.2017 and they made provisional entry in their books of account. They could not take credit in their last ER-1 return for June, 2017 which they filed on 30.07.2017 for the reason beyond their control. They could not have filed any return thereafter when Central Excise Act, 1944 and the rules made thereunder was repealed;

ii. They could not avail the benefit of Section 140(5) of the CGST Act, 2017 for the same reason that the original copy of the invoice was received in September, 2017. They were left with no option than to file refund Application vide their letter dated 29.06.2018 under residuary provision of Section 142(3) read with Section 174(2)(c) of the CGST Act and Section 11B(2)(c) of the Central Excise Act, 1944;

iii. There is no requirement under Section 142(3) of the CGST Act of disclosure of the CENVAT Credit in the ER-1 return like Section 140(5) and unlike Section 140(1).

38. The appellate authority rejected the appeal with the following findings:

a. The transitional provisions contained in Section 140 of the CGST Act, 2017 provide for carrying forward of closing balance of the amount lying in CENVAT Credit account as reflected in the statutory returns for the period immediately preceding the appointed day i.e. 01.07.2017.

b. The Appellant could not carry forward the credit of Rs. 10,88,328/- of service tax, paid to Kolkata Port Trust for procurement of a raw material used in manufacture of excisable goods, is not under dispute nor is the eligibility of CENVAT Credit under “input service” under dispute.

c. The transitional provisions under the CGST Act, 2017 provides specifically transition of credit through TRAN-1. The appellant has failed to declare the same in time in ER-1 return and also in TRAN- 1 after enactment CGST Act. Section 140 of the CGST Act, 2017, which is a transitional provision, essentially preserves all taxes paid or suffered by a taxpayer. Credit thereof is to be given in electronic credit register under the provisions of CGST Act, 2017.

d. Further, the Board vide Circular No. 207/5/2017-ST clarified the issue related to payment of service tax after 30.06.2017, wherein it was clarified that the assessee can file TRAN-1 upto 30.10.2017 and same can also be revised. There could be parties who had billed on 30.06.2017 and not taken credit in electronic credit register and not transferred the same to GST regime.

e. In the present case the authority was considering a claim of refund of CENVAT Credit which was taken on ‘input services”. Section 11B (1) clearly says that a person claiming refund has to make an application for refund of such duty before the expiry of the period prescribed and, in such form, and manner. If the excisable goods are not used as inputs in accordance with the rules made, there is no question of any refund. The language of the Rule 5 of the CENVAT Credit Rules, 2004 indicates that where any input or input service is used in the final product, which is cleared for export etc. or used in the intermediate product cleared for export or used for providing output service which is exported, then, the CENVAT Credit in respect of the input or input service so used, shall be allowed to be utilised by the manufacturer or provider of output service towards payment of duty of excise on any final product cleared for home consumption or for export , on payment of duty or service tax on output service. When for any reason, such adjustment is not possible, the manufacturer shall be allowed refund of such amount subject to such safeguards, conditions and limitation as may be specified by the Central Government by a notification.

f. The appellate authority referred to a judgement passed by the North Zonal Bench of the CESTAT in the case of Purvi Fabrics & Texturise (P) Ltd. vs Commissioner of Central Excise, Jaipur-II – 2004 (172) E.L.T. 321 (Tri.- Del.) = 2004-TIOL-615-CESTAT-DEL, wherein it was held that there is no legal provision existing for refund either by cash or cheque. The only exception carved out is that the refund in cash is granted as an incentive measure to the exporter. The provisions and particularly Section 11B of the Central Excise Act provides for payment of amount of refund to the applicant only in situations specified in proviso to sub­section (2) of Section 11B of the Central Excise Act, 1944. The appellate authority held that the petitioner has attempted to claim something which the law does not permit at all.

g. The appellate authority also held that the claim of refund is not a matter of right unless vested by law. The plea of injustice or hardship cannot be raised to claim refund in the absence of statutory mandate. In this regard, a reference was made to the judgment of the Hon’ble Supreme Court setting out the fundamental legal principles that in a fiscal statute, nothing can be read into its provisions and rather should not be read, which is expressly not there. In other words, an implied meaning cannot be given. Para 20 of the judgement passed by the Hon’ble Supreme Court, Union of India and Ors. vs Ind-Swift Laboratories Limited – (2011) 4 SSC 635 = 2011-TIOL-21-SC-CX was referred as under: –

“20. A taxing statute must be interpreted in the light of what is clearly expressed. It is not permissible to import provisions in a taxing statute so as to supply any assumed deficiency. In support of the same we may refer to the decision of this Court in CST vs Modi Sugar Mills Ltd. wherein this Court at AIR para 11 has observed as follows:

“11. ……………..  In interpreting a taxing statute, equitable considerations are entirely out of place. Nor can taxing statutes be interpreted on any presumptions or assumptions. The court must look squarely at the words of the statute and interpret them. It must interpret a taxing statute in the light of what is clearly expressed: It cannot imply anything which is not expressed; it cannot import provisions in the statutes so as to supply any assumed deficiency.”

20. The appellate authority recorded that the petitioner had received the invoice from the service provider on 20.09.2017 and by that time, they had already filed their last ER-1 return for the month of June, 2017. The appellate authority found nothing in Rule 5 permitting refund of unutilised credit. The appellate authority held that the present situation is not a case of a manufacturer or producer of final products seeking to claim CENVAT Credit of the duty paid on inputs lying in stock or in process when the manufactured or produced goods ceases to be exempted goods or any goods become excisable. The appellate authority also held that refund of CENVAT Credit is permissible where any input is used for final product which is cleared for export under bond or letter of undertaking, as the case may be, or used in the intermediate products cleared for export. Therefore, in the scheme of the rules, what is sought by the petitioner is not permissible. Thus, the attempt by the petitioner to claim refund of CENVAT Credit was held to be not allowable and the appeal was rejected.

Interpretation of section 142(3) read with section 140(1), 140(5) and section 174 of CGST Act vis-a vis the facts of this case.

39. The relevant portions of the aforesaid sections as relied upon by the learned counsel for the petitioner during the course of arguments are as under.

Section 140 (1) and (5) of the CGST, Act reads as under:-

140. (1) A registered person, other than a person opting to pay tax under section 10, shall be entitled to take, in his electronic credit ledger, the amount of CENVAT Credit of eligible duties carried forward in the return relating to the period ending with the day immediately preceding the appointed day, furnished by him under the existing law within such time and in such manner as may be prescribed:

PROVIDED that the registered person shall not be allowed to take credit in the following circumstances, namely: –

(i) where the said amount of credit is not admissible as input tax credit under this Act; or

(ii) where he has not furnished all the returns required under the existing law for the period of six months immediately preceding the appointed date; or

(iii) where the said amount of credit relates to goods manufactured and cleared under such exemption notifications as are notified by the Government.

140 (5) A registered person shall be entitled to take, in his electronic credit ledger, credit of eligible duties and taxes in respect of inputs or input services received on or after the appointed day but the duty or tax in respect of which has been paid by the supplier under the existing law, within such time and in such manner as may be prescribed, subject to the condition that the invoice or any other duty or tax paying document of the same was recorded in the books of account of such person within a period of thirty days from the appointed day:

PROVIDED that the period of thirty days may, on sufficient cause being shown, be extended by the Commissioner for a further period not exceeding thirty days:

PROVIDED FURTHER that said registered person shall furnish a statement, in such manner as may be prescribed, in respect of credit that has been taken under this sub­section.”

Section 142(3) of the CGST Act reads as under:-

“142(3) Every claim for refund filed by any person before, on or after the appointed day, for refund of any amount of CENVAT Credit, duty, tax, interest or any other amount paid under the existing law, shall be disposed of in accordance with the provisions of existing law and any amount eventually accruing to him shall be paid in cash, notwithstanding anything to the contrary contained under the provisions of existing law other than the provisions of sub-section (2) of section 11B of the Central Excise Act, 1944 (1 of 1944):

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 CENVAT Credit where the balance of the said amount as on the appointed day has been carried forward under this Act”

The Sections 173 and 174 of CGST Act are quoted as under :-

“173. Amendment of Act 32 of 1994

Save as otherwise provided in this Act, Chapter V of the Finance Act, 1994 shall be omitted.

174. Repeal and saving

(1) Save as otherwise provided in this Act, on and from the date of commencement of this Act, the Central Excise Act, 1944 (1 of 1944) (except as respects goods included in entry 84 of the Union List of the Seventh Schedule to the Constitution), the Medicinal and Toilet Preparations (Excise Duties) Act, 1955 (16 of 1955), the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957), the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978 (40 of 1978), and the Central Excise Tariff Act, 1985 (5 of 1986) (hereafter referred to as the repealed Acts) are hereby repealed.

(2) The repeal of the said Acts and the amendment of the Finance Act, 1994 (32 of 1994) (hereafter referred to as “such amendment” or “amended Act”, as the case may be) to the extent mentioned in the sub-section (1) or section 173 shall not-

(a) revive anything not in force or existing at the time of such amendment or repeal; or

(b) affect the previous operation of the amended Act or repealed Acts and orders or anything duly done or suffered thereunder; or

(c) affect any right, privilege, obligation, or liability acquired, accrued or incurred under the amended Act or repealed Acts or orders under such repealed or amended Acts:

PROVIDED that any tax exemption granted as an incentive against investment through a notification shall not continue as privilege if the said notification is rescinded on or after the appointed day; or

(d) affect any duty, tax, surcharge, fine, penalty, interest as are due or may become due or any forfeiture or punishment incurred or inflicted in respect of any offence or violation committed against the provisions of the amended Act or repealed Acts; or

(e) affect any investigation, inquiry, verification (including scrutiny and audit), assessment proceedings, adjudication and any other legal proceedings or recovery of arrears or remedy in respect of any such duty, tax, surcharge, penalty, fine, interest, right, privilege, obligation, liability, forfeiture or punishment, as aforesaid, and any such investigation, inquiry, verification (including scrutiny and audit), assessment proceedings, adjudication and other legal proceedings or recovery of arrears or remedy may be instituted, continued or enforced, and any such tax, surcharge, penalty, fine, interest, forfeiture or punishment may be levied or imposed as if these Acts had not been so amended or repealed;

(f) affect any proceedings including that relating to an appeal, review or reference, instituted before on, or after the appointed day under the said amended Act or repealed Acts and such proceedings shall be continued under the said amended Act or repealed Acts as if this Act had not come into force and the said Acts had not been amended or repealed.

(3) The mention of the particular matters referred to in sub­sections (1) and (2) shall not be held to prejudice or affect the general application of section 6 of the General Clauses Act, 1897 (10 of 1897) with regard to the effect of repeal.”

40. Section 142 of the CGST Act, 2017 provide for Miscellaneous Transitional Provisions. The following are the pre-conditions of refund in cash under section 142(3) : –

a. Sub Section-(3) deals with claim for refund filed before, on or after the appointed day. Thus it, interalia, deals with applications for refund filed before the appointed date and pending on the appointed date apart from the refund applications filed on or after the appointed date.

b. Further the refund application should be for refund of any amount of CENVAT Credit, duty, tax, interest or any other amount paid under the existing law.

c. Such application filed before, on or after the appointed day is to be disposed of in accordance with the provisions of existing law.

d. If any amount eventually accrues the same is to be refunded in cash, notwithstanding anything to the contrary contained under the provisions of existing law other than the provisions of sub-section (2) of section 11-B of the Central Excise Act, 1944.

e. It also provides that where any claim for refund of CENVAT Credit is fully or even partially rejected, the amount so rejected shall lapse.

f. The second proviso provides that no refund shall be allowed of any amount of CENVAT Credit where the balance of the said amount as on the appointed day has been carried forward under the CGST Act.

41. Thus, section 142(3) of CGST, Act clearly provides that refund application with respect of any amount relating to CENVAT Credit, duty, tax, interest or any other amount paid under the existing law is to be disposed of in accordance with the provisions of existing law and if any such amount accrues the same shall be paid in cash. Such right to refund in cash has been conferred notwithstanding anything to the contrary contained under the provisions of existing law other than the provisions of sub-section (2) of section 11-B of the Central Excise Act, 1944.

42. It is not in dispute that the refunds under the existing law of Service Tax as well as Central Excise Act, 1944 are governed by section 11B of the Central Excise Act, 1944 and subsection 2 of section 11 B also refers to application for refund made under section 11 B(1) of Central Excise Act, 1944. Further section 11B(3) of Central Excise Act, 1944 clearly provides that all kinds of refunds including those arising out of judgement , decree or orders of court or tribunal are to be dealt with in accordance with the provisions of section 11B (2) of Central Excise Act, 1944 . It is also important to note that section 11B(2) of Central Excise Act, 1944 deals with the manner in which applications for refund under section 118 (1) are to be dealt with as it uses the word “such application” which is clearly referrable to section 118 (1) of Central Excise Act, 1944. Further, the proviso to section 118(2) deals with situations of rebate of duty; unspent advance deposits; principles of unjust enrichment in cases where duty of excise is paid by manufacturer or borne by buyer and who have not passed on the incidence of such duty to any other person; and also where duty of excise is borne by any other class of applicant as the central government may notify in official gazette with a further proviso regarding unjust enrichment.

43. The entire section 118 of Central Excise Act, 1944, as it stood immediately before the appointed date, does not sanction any refund where the assessee has failed to claim CENVAT Credit as per CENVAT Credit Rules, 2004 and has lost its right to claim such credit by not claiming it within the time prescribed. Further section 118 also has its own strict time lines for claiming refund. Rule 5 of the CENVAT Credit Rules provides for refund only when the inputs are used in relation to export, which is not the case here. These aspects of the matter have been rightly considered and decided against the petitioner while passing the impugned orders whose details have already been stated above.

44. Under the provisions of section 118 the right to claim refund was conferred not only to the assessee but also to such classes of applicants as notified by the central government and also covers situations arising out of judgements of courts and tribunals. On the appointed date there could be claims of refund of any amount of CENVAT Credit, duty, tax, interest or any other amount paid under the existing law in connection with which the applications for refunds were pending or time limit for claiming refund was yet to expire or may crystalize on account of any judgement of courts or tribunals in relation to pending litigations. These are some of the situations which would be covered by the miscellaneous transitional provisions as contained in section 142(3) of CGST, Act which would continue to be governed by section 11B(2) of Central Excise Act, 1944.

45. The provision of section 142(3) does not entitle a person to seek refund who has no such right under the existing law or where the right under the existing law has extinguished or where right under the new CGST regime with respect to such claim has not been exercised in terms of the provision of CGST, Act and the rules framed and notifications issued. Meaning thereby, section 142(3) does not confer a new right which never existed under the old regime except to the manner of giving relief by refund in cash if the person is found entitled under the existing law in terms of the existing law. Section 142(3) does not create any new right on any person but it saves the existing right which existed on the appointed day and provides the modalities for refund in cash if found entitled under the existing law as the entire claim is mandated to be dealt with as per the existing law. It neither revive any right which stood extinguished in terms of the existing law nor does it create a new right by virtue of coming into force of CGST, Act.

46. Section 174 of the CGST Act read with section 6 of the General Clauses Act saves the right acquired, accrued or vested under the existing law and does not create any new right which never existed on the appointed day i.e on 01.07.2017 under the existing law.

47. The argument of the petitioner by referring to second proviso to section 142(3) of CGST Act that it indicates that section 142(3) would apply to the situations where the assessee has failed to take transitional credit under section 140(1), is also devoid of any merits. The second proviso only indicates that if the assessee has taken transitional credit he will not be entitled to refund. Certainly, an assessee cannot simultaneously claim transitional credit as well as refund of the same amount. The second proviso to section 143(2) 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.

47. Section 140(5) applies under the circumstances where input services are received after the appointed day but the tax has been paid by the supplier under the existing law within the time and in the manner prescribed with a further condition that the invoice etc are recorded in the books of account of the such person within a period of 30 days from the appointed day. Section 140(5) also does not help the petitioner. Section 140 (5) has no applicability to the facts and circumstances of this case. In the instant case, admittedly the services in the nature of “port services” were received by the petitioner in the month of April 2017 and invoice was also generated in the month of May 2017.

48. In the peculiar facts of this case, the petitioner did not claim transitional credit but claimed the impugned amount of service tax on “port services” as credit in their ST-3 return which they were admittedly not entitled as they were assessee under service tax only on reverse charge mechanism and admittedly the “port services” availed by the petitioner was not covered under reverse charge mechanism. Thus, the petitioner on the one hand illegally took credit of service tax on “port services” as credit in their ST-3 return and on the other hand filed application for refund of the same amount under section 142(3) of the CGST, Act which is certainly not permissible in law. The authorities have rightly considered these aspects of the matter also while rejecting the application for refund filed by the petitioner.

50. It is not in dispute that the petitioner has claimed the credit of service tax involved in the present case paid on “port services” as “input service” in ST-3 return filed on 22.09.2017, though they were not entitled to claim such a credit. It is further not in dispute that the petitioner did not include the impugned service tax paid on “port services” in its ER-1 return and accordingly was neither entitled to include nor included the same as transitional credit in TRAN-1 under CGST Act. As per the notification (Annexure-5) extending the date of filing TRAN-1 to 31.10.2017, the same was in relation to certain service tax issues which were paid after 30.06.2017 under reverse charge basis to cover instances of bills raised on 30.06.2017 since credit is available only if the payment is made and the payment in such cases could be made only after 30.06.2017. However, in the instant case the bill was admittedly generated on 23.05.2017, services availed and bill amount including service tax was paid in April 2017 but the original bill did not reach the petitioner for unknown/undisclosed reasons.

51. It is apparent from the impugned orders that the specific case of the respondent is that the petitioner had claimed CENVAT Credit under ST-3 return thereby treating the services involved in the present case as their input services used for providing output service, whereas they are not output service provider and the same cannot be used for providing output services. Therefore, it cannot be their input services under Rule 2 (l) of CENVAT Credit Rules, 2004. I am also of the considered view that the petitioner could not have claimed the impugned service tax on port services in ST-3 return as they were registered for discharging their liability under the service tax only on reverse charge mechanism. Rather it is the case of the petitioner that they had included the impugned service tax in ST-3 Return under compelling circumstances of non-receipt of original invoice dated 23.05.2017 and this was done only attempting to save their credit which they had failed to claim through ER-1 return and then as transitional credit through TRAN-1 under section 140(1) of the CGST Act. Thus, the authority has rightly held that petitioner had wrongly claimed Credit of the impugned service tax under ST-3 return and omitted to claim the impugned service tax as CENVAT Credit in ER-1 Return.

52. Further case of the respondent is that the petitioner as a manufacturer was eligible to claim CENVAT Credit on impugned service i.e “port services” and should have claimed the credit in their ER-1 Return within the prescribed time and accordingly could have claimed transitional credit through TRAN-1 under section 140 of CGST, Act. Thus, late receipt of the original invoice which has been cited as the reason for failure to claim CENVAT Credit under the existing law and transitional credit under section 140(1) of the CGST, Act was wholly attributable to acts and omissions of the petitioner and its service provider of the “port services” and the respondent authorities had no role to play. The petitioner had failed to avail the opportunity to claim CENVAT Credit of service tax on port services in terms of the existing law read with section 140 of CGST, Act and had no existing right of refund on the date of coming into force of CGST, Act. The petitioner having not used the port services for export was not entitled to claim refund under the existing law. The petitioner was also not entitled to refund on account of the fact that the petitioner had already taken credit of the service tax paid on port services in ST-3 Return of service tax although admittedly the petitioner was not entitled to take such credit in ST-3 Return. On account of aforesaid three distinct reasons the petitioner was rightly held to be not entitled to refund under section 142(3) of CGST, Act by the impugned orders.

53. All the aforesaid provisions referred to and relied upon by the learned counsel of the petitioner do not entitle a person like the petitioner to any relief in the circumstances of acts and omissions of the service provider (port authority) or the service recipient (the petitioner) who have failed to comply the provision of law, both under the existing law and also under the CGST Act. The relied upon provisions of CGST Act do not cover any such situation relating to any consequences due to inter parte acts and omissions. In the instant case, as per the case of the petitioner, the entire problem has cropped up due to non-receipt of the invoice in original from the port authorities although the port services were availed and payments for the same to the port authorities were made by the petitioner in the month of April 2017, the invoice was generated by the port authorities in the month of May 2017 but the original invoice was received by the petitioner only on 20.09.2017 i.e after coming into force of CGST Act. The late receipt of the invoice is essentially between the petitioner and the port authorities and the tax collecting authorities had nothing to do in the matter. Certainly, the delay in receipt of original invoice is not attributable to the respondent authorities under the existing law or under the new law.

54. The authorities have held in the impugned orders that in the instance case, the timeline for claiming CENVAT Credit qua the service tax paid on port services was not followed by the petitioner, although the services were availed, the entire payment was made and the bill was also generated in the month of April/May, 2017. Further, it has also been held in the impugned orders that the petitioner not only failed to claim the CENVAT Credit as per law, but illegally claimed the credit of the same while filing service tax return although the petitioner was not entitled to do so as the petitioner was not registered as a service provider. The authorities have also held that the service tax paid on port service was not eligible for refund under the existing law as the said services were not utilised for export. Thus, the petitioner on the one hand did not claim CENVAT Credit as per the procedure established by law under the existing law and on the other hand violated the provisions of law while filing his service tax returns and claimed the amount as input service and thereafter filed his petition for refund on 28.06.2018 referring to Section 142(3) of the CGST Act. The petitioner never had a right to claim refund under the existing law and had failed to exercise their right to claim CENVAT Credit as per law and wrongly claimed the impugned amount as credit in Service Tax Return (S.T. 3 return).”

4.6 Appellant placed reliance on the decision of Hon‟ble Bombay High Court in case of Combitic Global Caplet Pvt Ltd and my decision in case of Simbhaoli Sugar Ltd. I do not find that these decisions have been rendered in respect of the amounts which became due to the concerned parties prior 30.06.2017. Thus these decisions are clearly distinguishable and do not support the case of the appellant.

4.7 In view of the discussions as above I do not find any merits in this appeal.

5.1 Appeal is dismissed.

(Order pronounced in open court on-15 October, 2024)