Pranav B Prem

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), New Delhi has allowed Punjab National Bank’s appeal and set aside the refund rejection order issued by the Commissioner (Appeals), CGST, Dehradun. The Tribunal held that the Bank was entitled to receive a cash refund of ₹2,61,589 under Section 142(9)(b) of the Central Goods and Services Tax Act, 2017, which governs refund of pre-GST credits arising from revised returns.

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Punjab National Bank, a registered assessee under the erstwhile service tax regime, originally filed its ST-3 return for April–June 2017 showing a zero closing balance of Cenvat credit. After discovering errors, the Bank filed a revised return on 19 September 2017 reflecting an increased credit balance of ₹2,61,589. In accordance with Section 142(9)(b), which allows cash refunds when credit increases due to revision of pre-GST returns, the Bank applied for refund of this amount. A subsequent revision in November 2020 indicated an additional ₹32,599 that had already been transitioned via TRAN-1, while the disputed ₹2,61,589 credit had not been transitioned and was specifically claimed as cash refund.

The Department issued a discrepancy notice, asserting that the refund claim should be rejected because the Bank had not carried forward the disputed credit through TRAN-1. It also contended that the ST-3 return recorded the credit under “inputs”, while supporting documents showed credit pertaining to “input services” such as audit fees, and the mismatch in figures justified refusal. The adjudicating authority rejected the claim in 2019 and the Commissioner (Appeals) upheld the order, prompting the Bank to approach the Tribunal.

Before the Tribunal, counsel for the Bank argued that the issue was already settled in several earlier CESTAT rulings in PNB’s own cases, and that the Bank was legally entitled to a cash refund once the Cenvat credit increased following revision of the ST-3 return. It was submitted that not carrying forward the disputed amount through TRAN-1 could not operate as a bar to cash refund, since the CGST Act consciously gives the assessee a choice between transition and refund. The Department reiterated the grounds of mismatch and maintained that rejection was justified.

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The Tribunal examined Section 142(9)(b) and found that the statutory conditions were fully satisfied: the return had been revised within the permissible time, the closing credit balance had increased due to that revision, and the Bank opted to seek refund rather than transition the said credit. It held that the law does not require simultaneous availment of TRAN-1 to qualify for cash refund. Relying on prior rulings involving Punjab National Bank, the Tribunal reaffirmed that where an assessee has the option to either carry forward credit through TRAN-1 or seek cash refund, exercising the latter option cannot be used as a ground for rejection.

Addressing the issue of mismatch, the Tribunal accepted the Department’s contention that the ST-3 return recorded the credit under “inputs”, whereas documents showed the credit related to “input services”. However, the Tribunal observed that although the entries did not perfectly tally, the Bank had in fact incurred the audit-fee-related service tax credit reflected in the revised return, and the discrepancy was merely a clerical error. It specifically noted: “the error is not really very serious affecting the merits of the entitlement” and also pointed out that PNB is a nationalised bank and “no malafides can be attributed except there has been some negligence on the part of some officer.”

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Concluding that the authorities below erred in denying the statutory benefit, the Tribunal set aside the impugned order and allowed the appeal with consequential relief. The ruling directs that the refund claim of ₹2,61,589 be granted to the Bank in cash, thereby resolving a long-pending dispute arising from transitional filings during the shift from the service tax regime to GST.

Appearance

Counsel For  Petitioner: Gunjan Goel, Chartered Accountant 

Counsel For Respondent: Rohit Issar, Authorised Representative

Cause Title: PNB Versus Commissioner of CGST

Case No: Service Tax Appeal No. 51004 of 2020

Coram: Hon’ble Ms. Binu Tamta, Member (Judicial)