2016 (2) TMI 774 - AT - Service Tax

Claim for refund of service tax alleged to have been collected from them contrary to law - Service tax was paid by the provider of construction of residential complex service - claim of refund by the joint owner / purchase of flat - The Assistant Commissioner rejected the refund claim on the ground that the joint application did not enclose proof that the tax paid by them had indeed been deposited to the credit of the government by the vendor of the property; that the plan of the house was such that, with minor alterations, it could altered in such a way that it could become three separate units; and on the further ground that the project of vendor was not restricted to their residential unit but was a larger complex of which their residence was only a part. Held that - The vendor, in the present instance, is liable to be taxed on any activity outsourced by it,in undertaking any construction. The vendor was not in possession of the completion certificate at the time of receipt of consideration from the appellants. Therefore, the transaction between appellants and vendor does not fall within the exception to the declared service. The appellants claim that theirs is a single residential unit. However, a perusal of the sale agreement reveals transfer of land and built-up facilities along with the constructed house; this would include a share in the common roads, community facilities and other land that is not assigned specifically to a house owner. That is part of the agreement for transfer and the consideration includes these assets. The residential unit, therefore, cannot but be part of a complex. Hence, the exemption under notification no. 25/2012-ST dated 20th June 2012 is not available to the appellants. There can be no doubt that the agreement between the appellants and the vendor is for transfer of immoveable property by way of sale. The vendor renounces all rights to any part of the property that is transferred. The transaction is squarely covered by the exclusion from service and, therefore, outside the ambit of tax. The tax collected from the appellants by the vendor and deposited in the government account is without authority of law and is liable to be refunded under section 11B of Central Excise Act, 1944 as made applicable to Finance Act, 1994. The appellants have borne the incidence of the tax. Deposit of tax collected from the appellants by the vendor in the government account is established to the extent that it is humanly possible. - Refund allowed

Issues Involved:
1. Refund of service tax collected contrary to law.
2. Proof of tax deposit by the vendor.
3. Taxability of the transaction under Finance Act, 1994.
4. Exemption eligibility under notification no. 25/2012-ST.
5. Definition and classification of "single residential unit" vs. "residential complex."
6. Applicability of section 65B(44) of Finance Act, 1994.

Issue-wise Detailed Analysis:

1. Refund of Service Tax Collected Contrary to Law:
The appellants sought a refund of service tax paid along with the purchase price of a house, claiming the transaction was not liable to tax. The Assistant Commissioner rejected the refund claim, citing the absence of proof that the tax paid was deposited to the government by the vendor. The first appellate authority upheld this decision, asserting the house was part of a larger complex and thus taxable under section 65(105)(zzzh) of the Finance Act, 1994.

2. Proof of Tax Deposit by the Vendor:
A significant ground for rejecting the refund application was the lack of evidence that the tax had been credited to the Consolidated Fund of India. The judgment clarifies that the responsibility for tax deposit lies with the supplier, and the recipient cannot be expected to furnish proof of subsequent deposit. The tax authorities should focus on whether the tax amount was included in the payment made to the supplier, as stipulated under section 11B of the Central Excise Act, 1944.

3. Taxability of the Transaction under Finance Act, 1994:
The first appellate authority's conclusion that the taxability had been settled before the appellants paid the tax was found inconsistent with the provisions of the Finance Act, 1994. Service tax is levied on each separate activity for which consideration is received. The appellants bore the incidence of tax and claimed the transaction was not taxable. The judgment emphasizes that the constitutional authority to collect tax lies with the proper officer, not the service provider.

4. Exemption Eligibility under Notification No. 25/2012-ST:
The appellants argued that their house qualified as a "single residential unit," exempt from service tax under notification no. 25/2012-ST dated 20th June 2012. The lower authorities contended that the exemption was intended for those constructing a residential unit independently, not as part of a group housing project. The judgment highlights that the exemption applies to single residential units, regardless of their inclusion in a larger project, as long as they are designed for use by one family.

5. Definition and Classification of "Single Residential Unit" vs. "Residential Complex":
The judgment clarifies that the definition of a "single residential unit" does not depend on the potential for future alterations or the number of doors. It is defined as a self-contained unit designed for use by one family. The appellants' house, being part of a larger project with common facilities, was deemed part of a "residential complex," thus not qualifying for the exemption.

6. Applicability of Section 65B(44) of Finance Act, 1994:
The appellants claimed that their transaction was a transfer of immovable property, excluded from the definition of "service" under section 65B(44) of the Finance Act, 1994. The judgment agrees, stating that the agreement was for the transfer of immovable property by way of sale, which is outside the ambit of service tax. Consequently, the tax collected from the appellants was without authority of law and should be refunded under section 11B of the Central Excise Act, 1944.

Conclusion:
The appeal was allowed, and the appellants were granted a refund of the service tax paid, with consequential relief. The judgment underscores the importance of adhering to statutory definitions and exemptions while determining tax liability and emphasizes the recipient's right to claim a refund when tax is collected without legal authority.

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