Pre-GST taxes cannot be refunded if paid pursuant to an inquiry

 This is to update you about an important decision by Tribunal in the case of Filatex India Limited vs. CCE & ST, EA No. 10231 of 2020, wherein the Tribunal held that refund of Service Tax (‘ST’) is not allowed under GST transitional provisions where such ST was paid in pursuant to an inquiry by Authorities.

 

Facts

 

·            Pursuant to an inquiry for pre-GST period by the Department, the Appellant paid ST under Reverse Charge Mechanism in 2018 i.e., post-GST.

 

·            The Appellant filed the refund of such ST paid in terms of Section 142(3) of the Central Goods and Services Tax Act, 2017 (‘CGST Act’) on the ground that cenvat credit of such tax could not be availed in GST.

 

·            The Department denied the refund on the ground that since ST was paid post an inquiry, no refund can be allowed.

 

CESTAT Decision

 

·            The Tribunal observed that the demand of tax, interest and penalty was paid by the Appellant pursuant to a recovery action initiated by Department.

 

·            The Tribunal agreed with the Department and held that since tax was paid as a result of recovery proceedings, no refund is allowed under Section 142(8)(a) of CGST Act.  

 

 | Comments

 

·            In the past, Tribunal in multiple cases has held any tax for pre-GST period is made by a taxpayer voluntarily in post-GST period and where cenvat credit of such tax paid was allowed in pre-GST regime, then refund under Section 142(3) read with Section 142(8)(b) is allowed in cash.

 

·            Since the present case involved payment of tax pursuant to a recovery action, the Tribunal distinguished the earlier decisions by Tribunal.

 

·            Many taxpayers have paid CVD on EPCG/Advance Authorisation defaults and service tax under RCM in post-GST period. In our view, the refund of such taxes are allowed if paid on voluntarily basis.