2019 (7) TMI 1671 - AT - Service Tax

Refund of service tax paid - trust recognised under the provisions of Section 12(A)/ 12AA of the Income Tax Act - ground taken for refund in the application is that the appellant have got a building constructed for charitable purposes and they being Charitable Trust recognized under the provisions of the Income Tax Act which entitles to exemption from service tax under clause 13(c) of Notification No.25/2012-ST dated 20.06.2012 - HELD THAT - The appellant is in possession of the certificate of registration under Section 12A(a) read with Section 12AA of the Income Tax Act. The certificate is granted under Section 12A and the procedure for grant of certificate is given in Section 12AA of the Income Tax Act. Further it is evident from the certificate of registration dated 08.12.1998 that the appellant is having the status of being registered under the provisions of Section 12AA of the Income Tax Act. Further the appellant has also led evidence that they are continuing the status as the Charitable Trust/Organisation as they have been granted exemption in their assessments for the financial years 2014-15 and 2015-16 by the Income Tax authorities which is applicable to Charitable Trust registered under Section 12AA as is evident from the intimation under Section 143(1) of the Income Tax Act issued by the Income Tax Department. The appellant is entitled to refund with interest as per Rules - Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Entitlement to refund of service tax paid by a trust recognized under Section 12(A)/12AA of the Income Tax Act.

Analysis:
The main issue in this appeal revolves around the entitlement of the appellant, a trust recognized under the provisions of Section 12(A)/12AA of the Income Tax Act, to a refund of service tax paid. The appellant sought a refund of service tax amounting to Rs. 4,07,514/- paid on services provided by a construction company, claiming that the services were not taxable due to their status as a charitable trust registered under Section 12A/12AA of the Income Tax Act. The trust operates a "Satsang Bhawan" primarily for religious use by the general public and is registered for discharging service tax liability under the reverse charge mechanism for works contract services related to the construction of a building for religious purposes. The service provider had charged service tax in their invoices, and the appellant, as the service receiver, paid the remaining 50% tax under the reverse charge mechanism. However, upon realizing that the services provided were exempt from tax as per Notification No. 25/2012-ST, the appellant applied for a refund of the entire tax amount paid by both parties.

The appellant's refund application was initially denied by the adjudicating authority, stating that the Certificate of Registration under Section 12A(a) of the Income Tax Act was not equivalent to the certificate of registration under Section 12AA as required by the exemption notification. The Commissioner (Appeals) upheld this decision, leading the appellant to appeal before the Tribunal. The appellant argued that the registration certificate issued under Section 12A(a) was in line with the requirements of Section 12AA, emphasizing that the trust was genuinely engaged in charitable activities and eligible for exemption under the Income Tax Act. The appellant presented evidence of their registration status and exemption granted by the Income Tax Department for the relevant financial years.

After considering the arguments presented, the Tribunal found that the appellant possessed a valid certificate of registration under Section 12A(a) read with Section 12AA of the Income Tax Act. The Tribunal noted that the appellant had maintained their status as a Charitable Trust/Organization, evidenced by the exemptions granted in their assessments for the relevant financial years. Consequently, the Tribunal allowed the appeal, setting aside the impugned order and ruling in favor of the appellant. The appellant was deemed entitled to a refund of the service tax paid, along with interest as per the rules.