Voluntary service-tax payments without assessment or adjudication qualify for refund under Section 142(3).

Before 1 July 2017, Filatex was subject to the central excise and service-tax regime and availed CENVAT credit.

It had received banking and financial services from overseas institutions for external commercial borrowings between January 2013 and June 2017 but had not paid service tax under the reverse-charge mechanism.

After the DGGI sought information in January 2018, Filatex paid service tax of ₹36,34,040, with interest and penalty; the investigation was subsequently closed.

Filatex’s refund application was rejected, as were its appeals to the Commissioner (Appeals) and CESTAT. CESTAT treated the payment as recovery following an investigation and applied Section 142(8)(a) of the CGST Act.

1. Whether Filatex’s payment, made after the DGGI’s inquiry but without assessment or adjudication proceedings, was a voluntary payment or a recovery within Section 142(8)(a) of the CGST Act.

2. Whether Filatex could seek a refund under Section 142(3) of the CGST Act of service tax paid after the appointed day, where the corresponding CENVAT credit could not be availed under the GST regime.

Section 142(8)(a) of the CGST Act concerns amounts recoverable pursuant to assessment or adjudication proceedings instituted under the existing law; it does not apply in the absence of such proceedings.

Section 142(3) provides that refund claims for CENVAT credit, duty, tax, interest or other amounts paid under the existing law are to be disposed of under that law, with any amount eventually accruing payable in cash, subject to the statutory provisos, including Section 11B(2) of the Central Excise Act, 1944.

Section 174 of the CGST Act preserves specified rights and liabilities under the repealed enactments.

The Court also directed the Adjudicating Authority to consider the decisions relied on by Filatex when processing the claim.

The Court found that the DGGI’s request for information and Filatex’s ensuing payment did not amount to assessment or adjudication proceedings.

The payment therefore could not be treated as a recovery under Section 142(8)(a), and CESTAT had erred in relying on that provision to deny the claim.

Because the service tax related to the pre-GST period and the transitional refund provision applied, the refund claim was required to be processed under Section 142(3), read with the applicable existing law and Section 174.

It remanded the matter to the Adjudicating Authority to process the refund claim in accordance with law, particularly Section 142(3), and the decisions relied on by Filatex.

Filatex stated that it would not claim interest on the refund.