2014 (9) TMI 597 - AT - Service Tax

Refund claim - issue of taxability - period of limitation - service tax was paid as builder/developer - appellants contended that service was not taxable before 01.07.2010 and therefore they are eligible for the refund. - Held that - prior to 01.07.2010 the service in dispute in these cases was not taxable - transactions before us where individuals have entered into agreements for purchase of flats/residences with the builder/developers, in our opinion, is not covered by the definition. Period of limitation of one year where levy is unauthorized and illegal - When the levy is unauthorized or illegal, the refund has to be sanctioned under Limitation Act according to the appellants. - Held that - It is not a case of payment during investigation and collected as arrears from buyers or customers. It is an assessment made by the service provider in accordance with law, collected by him in accordance with law and deposited with the government in accordance with law. The character of such deposit of the duty or tax does not change just because subsequently it is found that tax was not payable. It remains a tax collected in accordance with law and can be refunded under the provisions of the relevant law. - provisions of section 11B are applicable. - Decided against the assessee. Claim of refund by the service recipient (buyers) - revenue contended that refund can be made only when the claimant shows that the tax has been paid to the Government. - Held that - Nowhere we find the word government in relation to the refund claim made by a buyer under the section and Section does not provide that only when there is evidence to show that tax has been paid to the Government refund would be admissible to the buyer of the goods/services. - it is sufficient if the buyer shows that he has paid the service tax to the registered service/goods suppliers/providers and there is evidence to the effect that the service tax has been collected from him by the registered service provider. - Decided against the revenue. Determination of relevant date for claiming refund - whether the service tax which was assessed by an assessee and paid to the Government can be considered as covered under the provisions of Section 73A at all. - Held that - the provisions for refund in section 73A of 1994 Act cannot be applicable to the situation where a service tax is collected in a legal manner in accordance with law and paid to the Government in accordance with law under a wrong assumption that service tax was liable to be paid. Therefore the remedy is in Section 11B of the Act and not under Section 73A of 1994 Act. - Decided against the assessee. Unjust enrichment - Held that - buyer who is claiming the refund should produce (a) a copy of the Sale Deed to show that he had purchased the property after the agreement ended. (b) Further, he should also show proof that service tax was charged and he had paid the same. (c) Further, at the time of filing the refund claim it should be shown that he had not parted with the property and had not sold it. (d) For this purpose, an Encumbrance Certificate (EC) obtained from the Registrar, which will show that the buyer was in possession at the time of making refund claim would be one of the documents, in our opinion, would be sufficient for the purpose. (e) An undertaking may also be given by the claimants stating that they have not passed on the liability of service tax to any other person and the entire amount of service tax has been paid and borne by them. Matter remanded back to the original adjudicating authority who shall proceed to decide the matter afresh after giving opportunity to the appellants to present their case in line with the observations made hereinabove. - Decided partly in favor of assessee.

Issues Involved:
1. Taxability of the service before 01.07.2010.
2. Applicability of the limitation period for refund claims.
3. Applicability of Section 73A of the Finance Act, 1994.
4. Unjust enrichment and documentation required for refund claims.

Detailed Analysis:

1. Taxability of the Service Before 01.07.2010:
The primary issue is whether the service provided by builders/developers to purchasers of apartments/flats/residences was taxable before 01.07.2010. The service in question falls under clause (zzzh) of Section 65(105) of the Finance Act, 1994. The Tribunal noted that prior to 01.07.2010, the definition of "residential complex" did not include individual flats/residences. The explanation added on 01.07.2010 clarified that the construction of a complex intended for sale by a builder would be deemed a service provided by the builder to the buyer. The Tribunal referred to several decisions, including Krishna Homes Vs. CCE Bhopal, which concluded that prior to 01.07.2010, there was no liability to pay service tax on such services. The Tribunal upheld this view, stating that the service was not taxable before 01.07.2010.

2. Applicability of the Limitation Period for Refund Claims:
The Tribunal considered whether the limitation period under Section 11B of the Central Excise Act, 1944, applied to the refund claims. The appellants argued that the limitation period should not apply when the levy itself is illegal. However, the Tribunal referred to the decision in Assistant Collr. of Cus. vs. Anam Electrical Manufacturing Co., where the Supreme Court held that even in the case of illegal levy, the refund claim must adhere to the limitation period prescribed by the Act. The Tribunal concluded that the refund claims must be filed within the one-year limitation period under Section 11B, and this period cannot be extended by any authority or court.

3. Applicability of Section 73A of the Finance Act, 1994:
The appellants argued that Section 73A of the Finance Act, 1994, which deals with the deposit of service tax collected, should apply to their cases, making their refund claims timely. The Tribunal examined the provisions of Section 73A and concluded that it applies only when an amount is collected as service tax but not paid to the government or collected in excess of the amount payable. Since the service providers in these cases collected and paid the service tax based on a self-assessment, Section 73A was deemed inapplicable. The Tribunal held that the remedy for refund lies under Section 11B of the Act, not under Section 73A.

4. Unjust Enrichment and Documentation Required for Refund Claims:
The Tribunal addressed the issue of unjust enrichment and the documentation required to process refund claims. It emphasized that the burden of proof lies on the buyer to show that they have borne the service tax liability and have not passed it on to any other person. The Tribunal provided guidelines for the documentation required, including (a) a copy of the Sale Deed, (b) proof of service tax charged and paid, (c) an Encumbrance Certificate showing the buyer's possession at the time of the refund claim, and (d) an undertaking from the claimant stating that they have not passed on the service tax liability to any other person. The Tribunal remanded the matters to the original adjudicating authorities to decide the refund claims in accordance with these guidelines and observations.

Conclusion:
The Tribunal concluded that the service in question was not taxable before 01.07.2010, and refund claims must adhere to the one-year limitation period under Section 11B of the Act. Section 73A of the Finance Act, 1994, was deemed inapplicable, and the Tribunal provided detailed guidelines for documentation to address unjust enrichment in refund claims. The matters were remanded to the original adjudicating authorities for fresh consideration.

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