2015 (12) TMI 211 - AT - Service Tax

Denial of refund claim - Construction of residential complex service - appellant had not submitted the NOC from the builder and also in view of the letter of the builder requesting the Revenue not to refund the amount to the appellant in view of some pending case between builder and appellant before the Consumer Disputes Redressal Commission for the same matter - Held that - As per the report dated 19.5.2014 received through the learned AR from the Assistant Commissioner (Refund), I find that the rejection of the refund claim vide order dated 7.7.2010 is bad in law and on fact and accordingly, I allow the interest to the appellant from the date on which the Revenue received the amount i.e. 18.6.2009 to the date of disbursement i.e. 8.7.2013 at such rate notified under the Rules. Such refund shall be disbursed to the appellant within a period of four weeks from the receipt of the order without waiting for any formal application for refund from the appellant. - Decided in favour of assessee.

Summary

Issues:
Refund claim rejection based on lack of NOC and builder's objection, applicability of Service Tax on security deposit, interest on refund amount.

Analysis:
The appeal pertains to a refund claim filed by the appellant, a flat buyer, against a security deposit made with the builder for potential Service Tax liability. The appellant's claim was rejected by the Assistant Commissioner for not submitting a No Objection Certificate (NOC) from the builder and due to the builder's objection citing a pending case. The Commissioner (Appeals) upheld the rejection, leading to the appellant's appeal before the Tribunal.

The appellant relied on a circular clarifying that in cases where the property remains under the ownership of the builder until completion of construction and full payment, no Service Tax is applicable. Subsequently, during the appeal process, the Revenue completed an investigation into the builder's case, collected the deposited amounts, and issued a Public Notice for refund applications. The appellant reapplied for a refund, which was sanctioned and disbursed. However, the appellant also sought interest on the refunded amount from the date of deposit with the Revenue until disbursement.

During the hearing, the Tribunal noted the lack of conditions for obtaining an NOC from the builder and the refundable nature of the deposited amount. Considering the facts and a report from the Assistant Commissioner, the Tribunal deemed the initial rejection of the refund claim as legally flawed. Consequently, the Tribunal allowed interest to the appellant from the date of Revenue's receipt of the amount to the date of disbursement, as per the applicable rate, directing the prompt disbursement of the refund without requiring a formal application.

In conclusion, the Tribunal found the rejection of the refund claim unjustified, granted interest on the refunded amount, and ordered the swift disbursement of the refund to the appellant. The judgment sets a precedent for cases involving Service Tax on security deposits and emphasizes the importance of legal clarity and procedural fairness in such matters.