No refund if demand overlaps for the same period unless refund amount is substantiated from demand


Quick Summary
The CESTAT, Chennai ruled that a business cannot claim a refund for a period that overlaps with a confirmed demand unless that demand is successfully challenged and set aside. In this case, Bharat Cylinders sought a refund for service tax paid incorrectly, but their claim was denied because the refund period overlapped with an existing demand for GTA services. The tribunal found the appellant couldn't sufficiently distinguish the amounts related to the demand, thus upholding the denial of the refund.

Court :
CESTAT, Chennai

Brief :
The CESTAT, Chennai in the case of M/s. Bharat Cylinders v. Commissioner of GST & Central Excise [Service Tax Appeal No. 40090 of 2014 dated June 01, 2023] held that if refund overlaps with the period for which the demand has been confirm, the assessee will be eligible for refund only when the demand would be set aside. 

Citation :
Service Tax Appeal No. 40090 of 2014 dated June 01, 2023

The CESTAT, Chennai in the case of M/s. Bharat Cylinders v. Commissioner of GST & Central Excise [Service Tax Appeal No. 40090 of 2014 dated June 01, 2023] held that if refund overlaps with the period for which the demand has been confirm, the assessee will be eligible for refund only when the demand would be set aside. 

Facts

M/s. Bharat Cylinders (“the Appellant”) is inter alia providing goods transport agency services ("GTA services”). The Appellant being a service provider transported cylinders to the bottling unit and mistakenly paid service tax under forward charge in the year 2010, since in case of GTA services the recipient of service is liable to pay GST.

The Appellant filed refund claim of INR 54,736/- for the period January 2010 to December 2010. However, the Adjudicating Authority rejected the refund claim. Aggrieved by rejection Order the Appellant filed an Appeal before the Commissioner of Central Excise (Appeals), Madurai who vide Order-in-Appeal No. 125/2013 dated September 30, 2013("the Impugned Order”) rejected the appeal of the Appellant.

Aggrieved by the Impugned Order the Appellant filed an appeal before the CESTAT, Chennai.

Before the CESTAT, the Revenue contended that the Appellant is not eligible for refund since, the demand against the Appellant related to GTA service for the period October 01, 2009 to September 30, 2010. Since, the refund period overlaps with the demand period, the Appellant is not eligible for refund unless the demand for such period is set aside.

Issue

Whether the Appellant can claim refund for the period which overlaps with the demand period? 

Held

The CESTAT in [Service Tax Appeal No. 40090 of 2014] held as under: 

  • Noted that, the Appellant was not able to differentiate the amount on which the demand order not applies.
  • Held that, the period involve in the present appeal overlaps with the period for which the demand has been confirmed and therefore appellant is not eligible for any refund. 
     

FAQ :

Generally, no. The CESTAT has ruled that if a refund period overlaps with a period for which a demand has been confirmed, you are only eligible for the refund if that demand is set aside.

The CESTAT held that Bharat Cylinders was not eligible for a refund because the refund period overlapped with a confirmed demand for GTA services, and they could not differentiate the amounts involved.

The case involved Goods Transport Agency (GTA) services, where the appellant mistakenly paid service tax under the forward charge instead of the reverse charge mechanism.

Businesses must ensure that any refund claim period does not overlap with a confirmed demand period. If it does, the demand must be successfully challenged and annulled for the refund to be considered.

 

Bimal Jain
Published in Excise
Views : 337

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