2023 (2) TMI 1252 - AT - Service Tax

Rejection of refund claim - time limitation - the date of last challan on which service tax was paid was on 08/07/2017 and the last return filed on 13/08/2017 whereas the Appellant filed refund claim only on 12/03/2019 for the refund of prepaid service tax - Double taxation or not - violation of principles of natural justice - HELD THAT - The appellant is involved in civil construction and works contract service and the completion of a project is spread over a period of time. They have filed a Trans1 declaration for the service tax paid on advances after the introduction of GST on 01/07/2017. On being pointed out by the Department about having wrongly carried forward the prepaid service tax to TRAN-1 they reversed the same in the GST return filed in the month of January 2019. Consequent to reversal they filed refund claim on 12.3.2019 for the refund of prepaid service tax. The cause of action took place only after the introduction of GST due to which they had to pay duty once again under the GST regime for part taxes paid under Service tax for their projects. The matter is hence not time barred. The factual question is whether tax has been discharged twice for the same activity. The transition from one tax regime to another has its own challenges for tax payers and an overtly legalistic view is not called for in this difficult period. The Appellant has made available documents that would facilitate the verification of double taxation as claimed. Since the department has asked the Appellant to reverse the prepaid service tax claimed as per GST TRAN 1 and if the facts on verification are found in order then the amount has to be refunded in cash to the Appellant. The ends of justice would be met if Revenue verifies the facts of the activity being taxed twice and decides on the refund application accordingly. The refund matter is remanded back to the Original Authority for verification of facts and de novo adjudication on the only issue of taxation of the same activity twice which has led to the claim of refund. The lower authority shall follow the principles of natural justice and afford a reasonable and time bound opportunity to the appellant to state their case both orally and in writing if they so wish before issuing a speaking order in the matter - Appeal disposed off by way of remand.

Summary

Issues:
1. Refund claim of prepaid service tax filed after the introduction of GST.
2. Rejection of refund claim by the Commissioner of GST & Central Excise.
3. Appeal against the Order-in-Original rejected by the Commissioner (Appeals).
4. Time-barred claim due to the date of filing the refund claim.
5. Double taxation issue arising from the transition to GST regime.
6. Remand of the matter for verification of facts and de novo adjudication.

Analysis:
1. The appellant, engaged in civil construction and works contract service, filed a refund claim for prepaid service tax after the introduction of GST. The claim was rejected by the Commissioner of GST & Central Excise, citing time-barred filing as the last return was filed before the introduction of GST. The appellant argued that the cause of action arose post-GST implementation, necessitating the payment of duty under the new regime for taxes previously paid under service tax.

2. The Tribunal noted that the appellant had reversed the prepaid service tax claimed in the GST return and filed the refund claim accordingly. Emphasizing the need to verify if the same activity was taxed twice, the Tribunal highlighted the challenges faced by taxpayers during the transition between tax regimes. The appellant provided documentation to support the claim of double taxation, urging a pragmatic approach to address the issue.

3. Consequently, the Tribunal remanded the refund matter to the Original Authority for verification of facts and de novo adjudication specifically focusing on the potential double taxation. The Tribunal directed the lower authority to adhere to principles of natural justice, allowing the appellant an opportunity to present their case before issuing a reasoned decision. Cooperation from both parties was urged to expedite the process, with a deadline of ninety days for the completion of the verification and adjudication process.

4. The judgment, delivered on 06.02.2024, signifies a balanced approach to resolving the refund claim issue, highlighting the importance of thorough verification and adherence to procedural fairness in addressing complex tax matters arising from the transition to a new tax regime. The Tribunal's decision reflects a commitment to ensuring justice by examining the factual basis of the claim and providing a fair opportunity for all parties to present their arguments before reaching a final decision.