Under Section 142(5) of the CGST Act, 2017, service providers are entitled to cash refunds for service tax paid under previous laws if the services were not provided, which includes the unexpired period of cancelled insurance policies.

P.V. SUBBA RAO

1. Revenue has filed this appeal to assail the order dated 30.09.2019¹impugned order passed by the Commissioner (Appeals) in which he modified the order dated 19.03.2019 passed by the Assistant Commissioner and sanctioned refund of Rs. 5,64,15,669/- to M/s Oriental Insurance Company Limited²respondent

2. The facts which led to the issue of impugned order are that respondent is a public sector company engaged in insurance and re-insurance services. Policies were issued for periods varying from one to three years. The respondent collected the premia at the time of issuing the policies along with service tax and it also paid service tax. However, some policy holders cancelled their policies in the middle and the respondent refunded their premia for the remaining period along with the service tax.

2. As per Rule 6 (3) of the Service Tax Rules, 1994, if, after collecting an amount for rendering the service along with service tax, the service is not rendered in whole or part and the amount is refunded to the service recipient, the service provider could take credit of the service tax that was refunded. It could be utilized to pay service tax subsequently. No application for refund, etc. was required and the service provider could take credit on its own. From July, 2017, the Finance Act, 1994 was superseded by the Central Goods & Services Tax Act, 2017³CGST Act, 2017 Therefore, there was no service tax after 2017. In this case, the respondent had issued some policies and paid service tax before 2017 and thereafter some of these policies were cancelled between July 2017 and March 2018. The respondent refunded the premia with service tax to the policy holders. The respondent could not take credit of the service tax paid to the extent the policies were cancelled. Therefore, it filed a refund application under section 142 (5) of the CGST Act, 2017 for refund of Rs. 5,64,15,669/-. This section reads as follows :-

“Section 142. Miscellaneous transitional provisions.-

(5) Every claim filed by a person after the appointed day for refund of tax paid under the existing law in respect of services not provided 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”.

3. Section 142 is a transitional provision which dealt with cases under the provisions of the previous Acts which have to be handled after the introduction of the CGST Act. As per this section, any claims for refund under the previous Act shall be processed as per the provisions of the previous Act and notwithstanding anything contained in the previous Act, the amount shall be refunded in cash.

4. The Assistant Commissioner passed his order-in-original dated 19.03.2019 rejecting the refund. On appeal, the Commissioner (Appeals) sanctioned the refund.

5. Revenue has filed this appeal before us on the following grounds :-

“(i) Section 142 (5) of the Central Goods and Services Tax Act, 2017, is not applicable in this case as the services has already been provided by the party by way of issuance of insurance policies to various customers seeking insurance in resp0ect of which insurance premium was received along with applicable service tax and said service tax deposited to the Government’s exchequer and subsequent cancellation of insurance policies, few in full and few partial. As the service is complete once Insurance Premium along with service tax on insurance policy is charged and service tax is deposited with government exchequer.

Section 142 (5) of Central GST Act, 2017 : Every claim filed by a person after the appointed day for refund of tax paid under the existing law in respect of services not provided shall be disposed of in accordance with the provisions of existing law and any amount