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

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.

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.