Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2026 Supreme(Online)(CESTAT) 1388

CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
NEW DELHI
PRINCIPAL BENCH – COURT NO. – IV

Service Tax Appeal No. 51369 of 2025

[Arising out of Order-in-Appeal No. 14/ST/DLH/2025-26 dated 23.05.2025 passed by the Commissioner of CGST & Central Excise (Appeal-I), New Delhi]

M/s. Yokohama India Private Limited …Appellant
C/o Tipp Logistics,
Plot No. C-158, Mayapuri Industrial Area,
Phase-II, Delhi-110064
VERSUS
Principal Commissioner of CGST-Delhi East …Respondent
Room No. 134, C.R. Building,
I.P. Estate, East Delhi - 110002

APPEARANCE:
Shri Manish Hirani, Advocate for the Appellant
Shri Ram Pravesh Prasad, Authorized Representative for the Respondent

CORAM:
HON’BLE DR. RACHNA GUPTA, MEMBER (JUDICIAL)

DATE OF HEARING: 02.02.2026
DATE OF DECISION: 07.04.2026

FINAL ORDER NO. 50695/2026

Advocates:
For the Appellants/Petitioners: Manish Hirani
For the Respondents: Ram Pravesh Prasad

An assessee is entitled to a cash refund under Section 142(3) of the CGST Act, 2017, for service tax paid under Reverse Charge Mechanism for a period preceding the GST regime, even if the payment was made after the transition to the GST regime following an audit.

Headnote:(A) Central Goods and Service Tax Act, 2017 - Section 142(3) - Refund of Cenvat credit of service tax paid under Reverse Charge Mechanism (RCM) - Tax paid after the appointed day - Whether eligible for cash refund. The court held that under Section 142(3) of the CGST Act, 2017, claims for refund of Cenvat credit/duty/tax paid under existing law after the appointed day are maintainable and shall be paid in cash, notwithstanding anything to the contrary in existing laws. (Paras 6, 7)

(B) Cenvat Credit Rules, 2004 - Rule 9(1)(bb) - Applicability - The Tribunal observed that the rule regarding non-availability of credit does not apply to service recipients under the RCM, and specifically noted that invocation of such provisions against a service recipient is legally incorrect. (Para 8)

Facts of the case:
The appellant, a manufacturer of tires, was audited and found to have not paid service tax under RCM for the period 2016-17 and 2017-18. Upon being pointed out, the appellant paid the tax along with interest and penalties. Subsequently, the appellant filed a refund claim under Section 142(3) of the CGST Act, 2017, which was rejected by the authorities on grounds of suppression and the applicability of section 142(8)(a).

Findings of Court:
The court found no evidence of intent to evade tax or suppression, characterizing the payment as a bona fide compliance with audit objections. It reiterated that payment of service tax for the period prior to the GST regime, even if paid during the GST regime, entitles the assessee to Cenvat credit which, being unrealizable in the new regime, is refundable under Section 142(3).

Issues: Whether the appellant is eligible for a cash refund of service tax paid under RCM for a period preceding the GST regime, pursuant to an audit objection after the transition to GST.

Ratio Decidendi: A conjoint reading of Section 142(3) of the CGST Act 2017 mandates that any tax paid under existing law is refundable in cash, and such refund cannot be denied simply because the payment occurred after the transition to the GST regime.

Result: Appeal allowed.

DR. RACHNA GUPTA

Present appeal has been filed to assail Order-in-Appeal No. 14/25-26 dated 23.05.2025 vide which the order rejecting the refund claim of amount of Cenvat credit of the service tax paid under Reverse Charge Mechanism has been rejected. The facts in brief are as follows:

1.1 Appellant was audited for the period from 01.04.2016 to 30.06.2017 on 23.12.2021 and 16.02.2022. During the audit it was observed that service tax for the period 2016-17 and 2017-18 (up to June, 2018) is short paid/not paid by the appellant as below:

S.No.	Service	Service tax not paid/short paid	Date of payment	Mode
1.	Legal Consultancy or Import of Service	Rs.83,040/-	02.03.2022	Reverse Charge Mechanism
2.	Service Tax on Ocean Freight	Rs.6,79,550/-	02.03.2022	Forward Charge Mechanism

1.2 On being pointed out, the appellant deposited the aforesaid amount along with amount of applicable interest and the proportionate penalties. After depositing, appellant filed an online refund application dated 29.02.2024/11.03.2024 praying for the amount of service tax and KKC amounting to Rs.7,62,590/- was prayed to be refunded in terms of Section 142(3) of CGST Act, 2017. However, vide show cause notice dated 10.07.2024 the refund was proposed to be rejected opining that there is no express provision under Section 142 of the CGST Act for refund in cash when a rightful amount was paid as per law. The said proposal was initially confirmed vide Order-in-Original No. 12/24-25 dated 27.09.2024. The said order has been upheld vide impugned Order-in-Appeal. Being aggrieved the appellant is before this Tribunal.

2. I have heard Shri Manish Hirani, learned Advocate for the appellant and Shri Ram Pravesh Prasad, learned Authorized Representative for the respondent.

3. Learned counsel for the appellant has submitted that the refund claim was filed under Section 142(3) of CGST Act, 2017. However sub-clause (8) has wrongly been invoked for rejecting the said claim. It is further submitted that even Rule 9 of Cenvat Credit Rules, 2004 has wrongly been invoked as the said rule is applicable with respect to the service provider. The appellant herein is though manufacturer of tires but has discharged the service tax liability for receiving certain services and had paid the service tax under Reverse Charge Mechanism. Rejection of the claim while invoking wrong provisions is prayed to be set aside.

3.1 Learned counsel has mentioned that the issue otherwise has already been decided by different benches of this Tribunal and the department has accepted those decisions, since the issue is no more res integra, the order confirming rejection of refund claim is not sustainable. It is also submitted that service tax initially was not paid due to bona fide belief of it to be paid by the service provider. However, the same was paid immediately after it was pointed out but by that time the Goods and Service Tax Act, 2017 (GST Act) was already introduced. Not only this, the time period for filing Tran-1 had also expired. The appellant was left with no opportunity but to invoke Section 142(3) of the GST Act. The submission has not been considered by the adjudicating authorities below. To support his submissions, learned counsel has relied upon the following decisions:

(i) M/s. Jagannat Polymers Pvt. Ltd. Vs. Commissioner, CGST – Jaipur I in Service Tax Appeal No. 51182 of 2020 decided on 15.12.2021 vide Final Order No. 52078/2021.

(ii) M/s. Indo Tooling Pvt. Ltd. Vs. Commissioner of Central Goods and Service Tax & Central Excise, Indore in Excise Appeal No. 50204 of 2020 decided on 09.03.2022 vide Final Order No. 50263/2022.

(iii) M/s. Circor Flow Technologies India Pvt. Ltd. Vs. The Principal Commissioner of GST & Central Excise, Coimbatore in Service Tax Appeal No. 40597 of 2020 decided on 16.12.2021 vide Final Order No. 42467/2021.

(iv) M/s. Bosch Automotive Electronics India Pvt. Ltd. Vs. Commissioner of GST and Central Excise, Chennai

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