2019 (4) TMI 128 - AT - Service Tax

Refund of service tax - Construction of Residential Complex Services or not - refund claimed on the ground that they were not liable to payment of service tax under the said category as per the CBEC Circular No. 108/02/2009-ST dated 29.01.2009 - principles of unjust enrichment - Held that - Tribunal in the case of M/s. Real Value Promoters Pvt. Ltd. 2018 (9) TMI 1149 - CESTAT CHENNAI has held that in case of composite contracts, the activity cannot be subjected to levy of service tax under the category of Construction of Residential Complex Service (CRCS)/Commercial or Industrial Construction Service (CICS)/Construction of Complex Service (CCS). Even if the activity/service is not subject to levy of service tax, it has to cross the hurdle of not being hit by unjust enrichment. In the present case, the Department has alleged that the appellants have shown the said refund amount in their Books of Account as expenditure. This apart, the appellant has not raised any invoices. Thus, it is not forthcoming from the records whether the appellants have passed on the burden of tax to another person or not - That such workings/calculations are after giving the appellant the benefit of cum-tax. This has to be verified. For the purpose of verifying as to whether the demand is hit by unjust enrichment, the issue requires to be remanded to the adjudicating authority, who shall verify the same - appeal allowed by way of remand.

Summary

Issues:
Refund claim rejection based on Circular applicability, unjust enrichment, composite contracts, remand for verification of unjust enrichment.

Analysis:
The case involved an appeal regarding a refund claim for Construction of Residential Complex Services filed by the appellants based on CBEC Circulars. The Department contended that the Circulars did not apply, and the service tax was correctly paid. The appellant argued that they paid the tax based on Departmental Officers' calculations but later realized Circulars exempted them. They claimed no tax was collected from customers and cited a Tribunal decision supporting their case.

The appellant further argued that their services were part of composite contracts and should not be taxed. The respondent maintained that the Circulars did not cover the appellants and questioned unjust enrichment. They cited a Supreme Court case on indirect passing of tax liability. The Bench heard both sides and reviewed the Circulars specifying tax liability for residential complex services.

It was established that the appellants constructed 13 flats under separate agreements but provided common facilities. The Tribunal's precedent on composite contracts was considered. The issue of unjust enrichment was crucial, as the appellant's refund amount was recorded as expenditure without clear evidence of passing on the tax burden. The Bench decided to remand the case to verify unjust enrichment and instructed the adjudicating authority to examine this aspect.

The final decision allowed the appeal for remand, emphasizing the need to address unjust enrichment and the appellant's claim regarding cum-tax benefit. The adjudicating authority was tasked with verifying unjust enrichment, ensuring eligibility for a refund if the tax burden was not transferred. The Miscellaneous Application by the Department for a change of cause title was also approved.