The Mumbai bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has allowed the service tax refund on input services, in pre- GST era on manufacturing of ‘cut and polished diamonds’ which were exported post commencement of GST regime.
The bench of Suvendu Kumar Pati (Judicial Member) has observed that since the Commissioner (Appeals) was supposed to pass his order in accordance to Section 35A(4) of the Central Excise Act, 1944, equally applicable to Service Tax matters, in view of operation of Section 85(5) of the Finance Act, 1994 and as no other ground or reason is cited by the Commissioner (Appeals) for refusal of refund, which Appellant is entitled to get the refund as sought under the existing law.
The Appellant/petitioner is primarily engaged in export of cut and polished diamonds after procuring rough diamonds and undertaking necessary manufacturing process. As a part of requirement by the importer/buyer, Appellant gets the final product certified by GIA Laboratory India Pvt. Ltd. and pays the charges with Service Tax under Reverse Charge Mechanism (RCM) on the said certification services provided by GIA Laboratory India Pvt. Ltd.
The payment of Service Tax under RCM was made before commencement of GST in India w.e.f. 01.07.2017 and exports have taken place between the month of July, 2017 and March, 2018. Appellant-Exporters sought for refund of the said duty paid under Rule, 5 of the CENVAT Credit Rules, 2004 read with Notification No. 41/2012-ST dated 29.06.2012 (2016) meant for refund of Service Tax paid by the manufacturer who clears final product for export without payment of duty under bond.
The Department issued show-cause notices to it proposing to deny those credits, which were contested by the Manufacturer Exporter unsuccessfully before the refund Sanctioning Authority and before the Commissioner (Appeals).
The ground taken by the Assistant Commissioner was that Appellant could have transitioned those credits to Trans-1 ledger as unutilised ITCas provided under Section 140 of the CGST Act, 2017 and it should have been dealt under Section 16(3) of the IGST Act, 2017 but in view of the fact that Notification No. 41/2012-ST is no more in operation w.e.f. 01.07.2017, no refund can be granted to the Appellant.
The tribunal while allowing the appeal held that Section 42 read with Section 174 of the CGST Act have made it crystal clear that Service Tax paid on inputs or input services before commencement of GST would be dealt by the Finance Act, 1994 and its connected notifications, rules etc. As could be noticed from the order passed by the Refund Sanctioning Authority, it has been clearly mentioned that Appellant/Claimant had issued export invoices after 01.07.2017 i.e. after the appointed day prescribed in CGST Act, 2019.
Case Details
Case Title: M/s. Sheetal Manufacturing Company Pvt. Ltd. Versus Assistant Commissioner of CGST
Case No.: Service Tax Appeal No. 86324 of 2021
Date: 08.01.2025
Counsel For Appellant: Padmavati Patil
Counsel For Respondent: Dhananjay Dahiwale
