Can an application for the refund of Service Tax paid in excess, which was transitioned to and reversed under the GST regime, be tenable under section 11B of the Central Excise Act, 1994.

PJ/CASE LAW/21-22/3652

Pujan Builders Engineers & Contractors v/s C.C.E. & S.T. Vadodara II

Issue: Can an application for the refund of Service Tax paid in excess, which was transitioned to and reversed under the GST regime, be tenable under section 11B of the Central Excise Act, 1994.
Brief Facts: The appellant filed their Service Tax returns for the period from April to June 2017 in August 2017. The returns were revised in September 2017 due to cancellation of some invoices. The appellant transitioned the Service Tax in excess, which has arisen out of the cancellation of invoices, into the GST regime by filing form GST Tran-1.
The GST authorities raised an objection on the transition of the amount and the appellant reversed the amount so that it transitioned in February 2019 along with applicable interest. Thereafter, a refund claim was filed by the appellant in April 2019. The claim was rejected by the authorities who treated it as time barred in accordance with section 11B of the CE Act.
Appellant Contention: The appellant made the following submissions:
·       Upon cancellation of invoices, no Service Tax is payable and the amount should be treated as a deposit.
·       Alternatively, upon the reversal of such a transitioned amount with interest, one must recognize that the refund had accrued to the appellant and as such filing the refund application on April 5, 2019 is within the limitation period prescribed under section 11B of CE Act.
Respondent Submission: The departmental authorities submitted that the refund claim was filed beyond the limitation period of one year and that the test of unjust enrichment must be examined.
Conclusion: The Honorable tribunal observed as follows:
·       The appellant has transferred the amount of Service Tax paid in excess by filing form GST Tran-1 and it was reversed in February 2019. The trigger event for the refund arose only after the amount was reversed by the appellant.
·       The refund claim application was filed within the time limit of one year i.e., April 2019 as prescribed under section 11B of the CE Act.
·       The tribunal observed that even though the refund claim was filed within the prescribed time limit, the issue of unjust enrichment i.e., whether the incidence of the refund amount has been passed on or otherwise must be examined by authorities.
·       Thus, the Hon’ble tribunal remanded the matter back to the adjudicating authority to verify the aspect of unjust enrichment and to dispose of the refund claim.
Comment: Generally, upon the cancellation of invoices, the assessee should file a Service tax refund application within the limitation period. In the given case, the honorable tribunal has identified the date of reversal of the transitioned amount as the relevant date for computing the limitation period rather than the original date of the payment of Service tax. The present judgement would certainly be useful in dealing with similar situations arising during the implementation of GST.
Prepared by:Sakshi Jain

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PJ/CASE LAW/21-22/3652

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