2015 (12) TMI 1573 - AT - Service Tax

Refund claim - Circular No. 108/02/2009, dated 29-1-2009 - non-leviability of service tax for the transactions made with the buyers of the flats - service tax paid by mistake of law and appellant had not collected the same from the customer/buyers - Held that - this special kind of agreement, where the builder has not sold the flat directly but made the buyers as owners of the land and those owners in turn entered into an agreement with the said builder for construction of flats for their own personal use, the provisions of Section 65(91a) of the Finance Act, 1994 are clear that said residences (flats) would not be covered under the definition of residential complex. Consequently these activities or the transactions in question would not attract liability of payment of service tax under the service of construction of complex service as per the provisions of Section 65(105)(zzzh) which defines the taxable service of construction of complex. The service in question is not liable for payment of service tax and the appellant s claim for refund would deserve examination and consideration as per the provisions of law as applicable during the relevant period. It is made clear that service is definitely under the exclusion category and not liabile for payment of service tax. This appeal is allowed by way of remand to the original adjudicating authority for examination and consideration of refund claim under the provisions of refund claims wherein the adjudicating authority will also examine the claim under both the criteria i.e. time bar as well as unjust enrichment .the service in question is not liable for payment of service tax and the appellant s claim for refund would deserve examination and consideration as per the provisions of law as applicable during the relevant period. It is made clear that service is definitely under the exclusion category and not liabile for payment of service tax. This appeal is allowed by way of remand to the original adjudicating authority for examination and consideration of refund claim under the provisions of refund claims wherein the adjudicating authority will also examine the claim under both the criteria i.e. time bar as well as unjust enrichment .the service in question is not liable for payment of service tax and the appellant s claim for refund would deserve examination and consideration as per the provisions of law as applicable during the relevant period. It is made clear that service is definitely under the exclusion category and not liabile for payment of service tax. This appeal is allowed by way of remand to the original adjudicating authority for examination and consideration of refund claim under the provisions of refund claims wherein the adjudicating authority will also examine the claim under both the criteria i.e. time bar as well as unjust enrichment . - Appeal allowed by way of remand

Summary

Issues: Admissibility of refund claim based on non-leviability of service tax, interpretation of Circular No. 108/02/2009, applicability of time bar on refund claim, liability of service tax on construction activities, exclusion under Section 65(91a) of Finance Act, 1994, 'unjust enrichment' aspect, examination of refund claim under relevant provisions.

Analysis:

The judgment revolves around the admissibility of a refund claim by the appellant, Kirthi Constructions, based on the non-leviability of service tax for transactions with flat buyers. The appellant argues that the refund claim arose due to paying service tax by mistake of law, citing Circular No. 108/02/2009, which exempts certain transactions from service tax under the definition of residential complex in Section 65(91a) of the Finance Act, 1994.

The appellant presents two agreements with flat buyers: one for transferring land share and another for flat construction, relying on legal precedents like Jain Housing v. CST, Chennai, to support their stance that service tax is not payable. They also argue that the refund claim is not time-barred as the tax was paid by mistake of law and not collected from buyers.

The Revenue argues that the construction activities are liable for service tax as they do not fall under the exclusion clause of Section 65(91a) and were not covered by the Circular dated 29-1-2009. They cite legal precedents like Mafatlal Industries Ltd. v. UOI to reject the refund claim, emphasizing the one-year limitation period for refund claims.

The main issue is whether the transactions are liable for service tax and if they qualify for exclusion under Section 65(91a), considering the Circular's clarification. The judgment delves into the definition of 'residential complex' and analyzes the unique agreements between Kirthi Constructions and flat buyers to determine the tax liability.

Ultimately, the Tribunal rules in favor of the appellant, stating that the services provided are not liable for service tax. The case is remanded to the original authority for a detailed examination of the refund claim under relevant provisions, including the time bar and 'unjust enrichment' aspect, with a directive to decide the claim within three months.