2014 (3) TMI 694 - AT - Service Tax

Refund - Taxability of service - construction of complex service or works contract service - residential complex having more than 12 residential units - agreements entered into by a builder/promoter/developer with prospective buyers for construction of residential units in a residential complex against payments being made by the prospective buyers in instalments during construction - Held that - such contracts are to be treated as works contracts, it has to be held that during the period of dispute, there was no intention of the Government to tax the activity in terms of such contracts a builder/developer with prospective customers for construction of residential units in a residential complex. Such works contracts involving transfer of immovable property were brought within the purview of taxable service by adding explanation to Section 65 (105) (ZZZh) w.e.f. 01/7/10, and therefore, it has to be held that such contracts were not covered by Section 65 (105) (ZZZh) during the period prior to 01/7/2010. - Decided in favor of assessee. Tribunal in the case of CCE, Chandigarh vs. U.B. Construction (P) Ltd. 2014 (1) TMI 402 - CESTAT NEW DELHI has held that the explanation to Section 65 (105) (ZZZh) added w.e.f. 01/7/10 expands the scope of this clause and hence the same is not a clarificatory amendment and, as such, it cannot be given retrospective effect and accordingly during period prior to 01/7/10, when this explanation was not there, no service tax can be charged on the amount received by the builders/developers from the prospective buyers, that same view has been taken by the Tribunal in the case of R.F. Properties & Trading Ltd. vs. CCE, Jaipur 2013 (7) TMI 44 - CESTAT NEW DELHI that in view of this, in both the cases, the appellant/respondent are eligible for refund on merits Refund - period of limitation - Held that - since in terms of the findings of the Commissioner (Appeals) which have not been disputed, the service tax had been paid under protest, the limitation period would not apply. Unjust enrichment - Held that - there is no evidence that they had charged any amount towards service tax from their customers. The presumption under Section 12B of the Central Excise Act, 1944 is a rebuttable presumption and when an assessee shows invoices issued by him is support of his claim that no amount representing service tax had been charged by him from his customers, the burden would shift to the department to produce evidence that the incidence of the tax, paid whose refund is sought had been passed on to the customers. In this case, no such evidence has been produced by the department. - Refund allowed.

Issues Involved:
1. Liability to pay service tax under Section 65 (105) (ZZZh).
2. Eligibility for refund of service tax paid.
3. Applicability of limitation period for refund claims.
4. Impact of unjust enrichment on refund claims.

Detailed Analysis:

1. Liability to Pay Service Tax Under Section 65 (105) (ZZZh):
The appellant firms, engaged in constructing residential complexes, entered into agreements with customers for building and finishing flats. The central issue was whether these firms were liable to pay service tax under Section 65 (105) (ZZZh) for the construction of residential complexes. The department argued that the firms were liable for service tax, while the appellants contended that, as per Circular No. 332/35/2006-TRU dated 01/8/06, the liability rested with the contractors they engaged. The Tribunal noted that the explanation added to Section 65 (105) (ZZZh) on 01/7/10, which expanded the scope of taxable service to include builders/developers, was prospective and not retrospective. Therefore, for the period before 01/7/10, the appellants were not liable for service tax under this section.

2. Eligibility for Refund of Service Tax Paid:
Both M/s Krishna Homes and M/s Raj Homes applied for refunds of service tax paid during the disputed period. The Tribunal held that the appellants were eligible for refunds on merits, as the service tax was not applicable to them during the disputed period. The Tribunal referenced the case of CCE, Chandigarh vs. U.B. Construction (P) Ltd., which held that the explanation added to Section 65 (105) (ZZZh) was prospective and expanded the scope of taxable service. Thus, the appellants were entitled to refunds for the service tax paid during the period before the explanation was added.

3. Applicability of Limitation Period for Refund Claims:
The Tribunal examined whether the refund claims were within the limitation period prescribed under Section 11B. In the case of M/s Krishna Homes, the refund claim was filed within the prescribed period. For M/s Raj Homes, the service tax was paid under protest, and hence, the limitation period did not apply. The Tribunal concluded that both refund claims were timely and not barred by limitation.

4. Impact of Unjust Enrichment on Refund Claims:
The Tribunal addressed the issue of unjust enrichment, which requires proving that the incidence of the service tax had not been passed on to the customers. The Commissioner (Appeals) found that M/s Raj Homes had not charged any amount towards service tax from their customers, as evidenced by sample invoices. Similarly, there was no evidence that M/s Krishna Homes had passed on the service tax to their customers. The Tribunal held that the presumption under Section 12B of the Central Excise Act, 1944, was rebuttable and that the appellants had successfully shown that they had not passed on the tax burden to their customers. Therefore, the refund claims were not hit by unjust enrichment.

Conclusion:
The Tribunal dismissed the Revenue's appeal against M/s Raj Homes and allowed the appeal filed by M/s Krishna Homes. The Tribunal concluded that the appellants were not liable for service tax during the disputed period, their refund claims were timely, and the claims were not affected by unjust enrichment. The operative part of the order was pronounced in the open court.

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