The Court held that where no assessment or adjudication proceedings were initiated and the payment was voluntary, Section 142(8)(a) cannot be invoked to deny refund of Cenvat Credit.
The Gujarat High Court has allowed a refund of Rs. 36,34,040 paid as service tax under the reverse charge mechanism after the GST transition, holding that the CESTAT committed a grave error in applying Section 142(8)(a) of the CGST Act when no assessment or adjudication proceedings had been initiated against the assessee [M/s. Filatex India Limited v. Commissioner of Central Excise and Service Tax, Vadodara-II].
The bench of Justices Bhargav D. Karia and Nirzar S. Desai noted that the appellant had voluntarily paid service tax on banking and financial services related to external commercial borrowings for the period January 2013 to June 2017. The payment was made in 2018 after the DGGI issued a letter calling for information. The DGGI subsequently accepted the payment and closed the investigation by letter dated 07.02.2019.
The appellant claimed refund under Section 142(3) of the CGST Act since it could no longer avail Cenvat Credit post-GST. However, the refund was denied by the Commissioner (Appeals) and CESTAT on the ground that the payment was made pursuant to the DGGI investigation and constituted “recovery” under Section 142(8)(a), which bars input tax credit on amounts recovered through assessment or adjudication proceedings.
The High Court disagreed, holding that Section 142(8)(a) begins with the words “Where in pursuance of an assessment or adjudication proceedings instituted...” — and in this case, no such proceedings had been initiated. The DGGI had merely written a letter calling for information, and the payment was accepted and investigation closed. The Court held that the appellant was entitled to refund under Section 142(3) read with Section 174 of the CGST Act and remanded the matter for processing the refund claim.
2026-juristway.com-3084-HC(Gujarat)-GST
