2014 (1) TMI 823 - AT - Service Tax

Denial of refund claim - Writing off of claims - Held that - service tax is payable on the receipt of the amount for the services provided. If a party files a refund claim on the ground that he had paid the tax on the basis of billed amount but the same had not been received, the refund can be sanctioned after verifying whether the amount has been received or not. This is because if and when the amount is received, in the concerned month the appellant is duty bound to pay service tax on the amount so collected - even though provisions of section 11B of Central Excise Act, 1944 have been made applicable to service tax matters, the levy of service tax and levy of excise duty are on different basis all together. The liability for excise duty arises as soon as the goods are manufactured and the payment has to be made at the time of removal. That is the reason why even when the goods are destroyed, the duty on goods have to be remitted and if the same is not remitted by the concerned proper officer, the excise duty becomes payable. Therefore, it has to be seen whether the liability to pay has arisen or not. Quite often the write off of a debt takes place after a long time of the event taking place because man lives on hope. There is always a hope that the other person may pay and therefore one chooses to wait for the same. Further, it can be said that there is a legal remedy available and the service provider may choose to file a civil suit against the person who has received the service. Till such civil suit is finalized, the amount may not be written off. We all know how long it takes for civil suits to get finalized in this country - after the order was passed by the learned Commissioner (A), the refund was sanctioned by the concerned refund sanctioning authority and a protective show-cause notice has been issued raising the same grounds which are in the appeal filed by the Revenue. It was also submitted that now the amount has been written off and Chartered Accountant s certificate to that extent is available. If that is the position, the objection taken by the Revenue also gets sorted out. Under these circumstances, the show-cause notice can be decided taking the observations made hereinabove into consideration - Decided against Revenue.

Summary

Issues:
1. Whether the Chartered Accountant's certificate was sufficient for sanctioning the refund claim.
2. Whether the refund claim could be sanctioned without a certificate stating the amount has been written off.
3. Interpretation of Section 11B of the Finance Act, 1994 in relation to the refund claim.
4. Analysis of the liability to pay service tax in comparison to excise duty.

Issue 1 - Chartered Accountant's Certificate:
The respondent filed a refund claim for service tax paid on amounts not received, supported by a Chartered Accountant's certificate. The Revenue contended that the certificate was insufficient as it only stated non-receipt up to a certain date. The Tribunal held that service tax is payable upon receipt of the amount for services provided. The refund can be granted after verifying non-receipt, as the liability to pay arises only upon monetary consideration being received.

Issue 2 - Requirement of Written Off Amount:
The Revenue argued that without a certificate stating the amount had been written off, the refund claim should not have been sanctioned. The Tribunal disagreed, stating that in service tax matters, unlike excise duty, the liability to pay arises upon receiving monetary consideration. Waiting for the amount to be written off is not necessary, as the liability does not arise until payment is received.

Issue 3 - Interpretation of Section 11B:
The Revenue invoked Section 11B of the Finance Act, 1994, emphasizing the term "incidence" and the prevention of unjust enrichment for refund sanctioning. The Tribunal differentiated service tax from excise duty, highlighting that liability for excise duty arises upon goods' manufacture, while service tax liability arises upon monetary consideration receipt. The Tribunal concluded that the requirement to write off the amount before claiming a refund may not be correct in service tax matters.

Issue 4 - Liability to Pay Service Tax:
The Tribunal clarified that the liability to pay service tax arises only upon receiving monetary consideration for services provided. Unlike excise duty, there is no provision for recovery of service tax if consideration is not received. The Tribunal emphasized that the write-off of a debt may not be immediate, as legal remedies like civil suits can be pursued. The Tribunal concluded that the requirement to write off the amount before claiming a refund in service tax matters may not be necessary.

In conclusion, the Tribunal disposed of the appeal, noting that the refund had been sanctioned, and a protective show-cause notice was issued. The Tribunal suggested that if the amount had been written off, the Revenue's objection would be resolved. The Tribunal emphasized that the liability to pay service tax arises upon receiving monetary consideration, and waiting for the amount to be written off before claiming a refund may not be mandatory in service tax matters.