2010 (12) TMI 331 - AT - Service Tax

Refund claim - The respondents are registered under Commercial and Industrial Building & Civil Structures services - They received advance to execute the work of construction from their client and accordingly deposited the department as advance received for service tax - Later on, the said contracts were cancelled by their client, accordingly the advance received by the respondents were returned to their clients - The respondents sought refund of the amount paid as service tax by them against the said advance for which no service has been rendered to their client As per the case of KVR ,the Hon ble High Court of Karnataka has held that as the petitioner is not held liable to pay service tax in respect of civil structures constructed and put to use, the amount paid by the assessee to the Revenue be treated as deposit at the hands of the Government and the provisions of Section 11B have no bearing, the limitation of one year are not applicable - Hence, the same treated as deposited for that the respondent is entitled for the refund claim without invoking the provisions of Section 11B of the Central Excise Act, 1944 - Accordingly, the respondents is entitled for the refund claim.

Summary

Issues:
- Appeal against the refund claim of service tax amount
- Interpretation of limitation period for claiming service tax refund

Analysis:
- The appeal was filed by the Revenue against an order allowing the refund claim of the service tax amount paid by them. The case involved the refund sought by the respondents after returning an advance received for construction work, for which no service was rendered. The adjudicating authority rejected the refund claim as barred by limitation, but the Commissioner (Appeals) allowed it, stating that the limitation starts from the date of refund. The Revenue contested this decision.

- The Revenue argued that the refund of service tax must be claimed within one year of payment, citing Section 11B of the Central Excise Act, 1944, and relied on a relevant case law. On the other hand, the respondent contended that the limitation period should start from the date of refund, not the date of payment, as no service was provided. They supported their argument with various case laws.

- The Tribunal noted that the respondent did not provide any service against which they made the advance payment of service tax. It was undisputed that the respondent was not entitled to a refund due to the elapsed one-year period from the payment date. However, the Tribunal distinguished the cited case law by highlighting the absence of service provision and the return of the service tax amount to the client. Referring to another case, the Tribunal emphasized that if no service was provided, the amount could be treated as a deposit, not subject to the one-year limitation period under Section 11B. Therefore, the Tribunal upheld the refund claim, rejecting the Revenue's appeal.