2014 (12) TMI 1095 - HC - Service Tax

Denial of refund claim - Petitioner initially paid service tax and claimed refund as the activity is not liable for service tax Refund rejected by the original authority, partly allowed by the Commissioner (Appeals) subject to verification of unjust enrichment Refund not grated even after the order of Commissioner (Appeals) - Held that - Once the petitioner asserted that it did not pass on the liability of service tax to its customer i.e .. BSNL, it could have been verified as to whether BSNL paid any amount to the petitioner towards service tax. The irresponsibility on the part of the incumbents, who held the office of the 3rd respondent from time to time, is evident from the fact that they just sat over the matter and did not release even a single rupee to the petitioner. If this is the treatment accorded to a Government of India undertaking, one can easily understand the type of treatment, which the officials of that Department are exhibiting towards ordinary citizens. It is to the effect that the Board issued Circular, dated 18.12.2002 clarifying that the activity of laying of cables and erection of equipment would attract service tax, since it falls under the technical assistance rendered by Consulting Engineer. The lack of bona fides on the part of the deponent of the counter affidavit is evident from the fact that though the very Board issued Circular dated 13.05.2004 stating that the Circular dated 18.12.2002 was issued by mistake and stands withdrawn, no reference was made to it. The attitude of the deponent is worse than that of a seasoned litigant. Unfortunately, it is on account of the irresponsible behaviour of such officers, that the entire Department gets bad reputation. By resorting to objectionable means, the Department is trying to enrich itself, at the cost of the petitioner. amount which remained unpaid, shall be refunded to the petitioner with interest, as provided for under the Act, within four (4) weeks - Decided in favour of assesse.

Summary

Issues:
Levy of service tax on government undertaking for consultancy and technical services; Refund of service tax paid under the Service Tax Act, 1998; Application of Section 11-B of the Act; Differentiation between government organizations and ordinary assessees; Responsibility of assessing officers; Compliance with refund procedures; Bona fides of the Central Board of Excise and Customs; Remedies available to petitioners for refund; Contempt of Court proceedings for non-compliance.

The judgment addresses the issue of levy of service tax on a government undertaking providing consultancy and technical services under the Service Tax Act, 1998. The petitioner, a government of India undertaking, remitted service tax under the impression that its services were taxable, but later found out the activities were not covered by the Act. The petitioner sought a refund, arguing that as a government agency, the time limit principles of Section 11-B should not apply to its case. The respondents contended that the activity became taxable as per a Circular issued by the Central Board of Excise and Customs. The court noted the lack of differentiation by assessing officers between government entities and regular assessees, emphasizing the responsible nature of the petitioner.

Regarding the refund claim, the court criticized the 3rd respondent for rejecting the refund without proper examination and for not complying with the order of the 2nd respondent, who allowed a partial refund subject to proof that the tax burden was not passed on to customers. The court highlighted the failure of the 3rd respondent to verify if the tax burden was transferred to the customer, showing irresponsibility in handling the matter. The court also noted the objectionable conduct of the 3rd respondent in raising new grounds in the counter affidavit that were not previously raised during the appeal process, indicating a lack of bona fides.

The judgment ultimately allowed the writ petition, directing the refund of the unpaid amount with interest to the petitioner. The court warned that if the refund was not processed within four weeks, the 3rd respondent would be held personally responsible, potentially facing contempt of court proceedings. The court emphasized the need for responsible and objective handling of refund claims, especially when dealing with government organizations, to avoid tarnishing the reputation of the department.