2019 (5) TMI 60 - AT - Service Tax

Refund of service tax paid - Benefit of N/N. 12/2003-ST - Works contract service - deduction on the value of materials which was not claimed by oversight - HELD THAT - Appellant have paid the service tax on the material component which was 55% of the value of the contract, learned counsel draw our attention to the fact that they had discharged state VAT on composition scheme of the total value of the contract and 55% value of contract is material cost has been worked out based upon the consumption of the materials by them and certified by the CA Benefit of notification 12/2003-ST cannot be denied to the respondent. Further, it has to be seen that even for the works contract services, Service Tax (Determination of value) Rules, 2006 provide for reduction of the cost of the materials/property transferred in execution of works contract. The Chartered Accountant s certificate which was produced by the respondent before the lower authorities, as also various bills, would indicate that the claim of the respondent as to there being 55% of the value of the works contract executed by them, is not being disputed. The first appellate authority has categorically recorded that respondent was able to convince him about the claim based upon documents which were in support of the respondent. It is also noted that revenue is not disputing the respondent s eligibility to benefit of notification 12/2003-ST. The claim of the respondent for deduction of material cost to the extent of 55% of the value of the works contract has been properly appreciated by the first appellate authority - though the first appellate authority has recorded an observation that the assessee/respondent is eligible for benefit of notification 01/2006, in effect has not extended that relief to the appellant. Hence, revenue s agitation seems to be irrelevant on this point and is academic in nature. Unjust enrichment - HELD THAT - The first appellate authority was correct in coming to a conclusion that respondent/assessee has passed the hurdle of unjust enrichment and has not recovered/collected the amount of service tax (claimed as refund) from their customer. Appeal dismissed - decided against Revenue.

Issues:
1. Eligibility for refund claim under works contract services.
2. Rejection of refund claim by lower authorities.
3. Justification of deduction on the value of materials.
4. Argument on unjust enrichment.
5. Interpretation of notification 01/2006-ST.
6. Validity of CA certificate.
7. Dispute over the findings of the first appellate authority.
8. Compliance with Service Tax (Determination of value) Rules, 2006.

Analysis:

1. The case involved a dispute regarding the eligibility of the respondent for a refund claim under works contract services. The respondent claimed a refund of service tax paid on the material component of the works contract, citing notification 12/2003-ST, which allows deductions for the value of goods and materials sold. The respondent supported their claim with documents such as bills, invoices, and a CA certificate, asserting that they had paid tax on 55% of the contract value for materials. The first appellate authority accepted the claim, leading to the revenue's appeal.

2. The lower authorities initially rejected the refund claim due to non-supply of documentary evidence regarding the cost of materials, limitation issues, and lack of proof for unjust enrichment. However, the first appellate authority overturned the decision, allowing a refund of a specific amount and ruling in favor of the respondent on unjust enrichment. The revenue challenged this decision, arguing that the findings were erroneous and that the CA certificate did not conclusively prove non-recovery of tax amounts from customers.

3. The respondent contended that they had consistently claimed a deduction equivalent to 55% of the contract value for material costs, as supported by the CA certificate and other documents. They emphasized that they never claimed the benefit of notification 01/2006-ST before the lower authorities and had provided all necessary bills for the refund claim. The respondent's representative highlighted that the CA certificate explicitly stated no unjust enrichment, supported by the auditor's professional expertise.

4. The appellate tribunal carefully considered both parties' submissions and found that the respondent had indeed rendered works contract services involving the transmission of electricity. The tribunal acknowledged the respondent's adherence to notification 12/2003-ST, allowing deductions for material costs, and upheld the first appellate authority's decision on the eligibility for the benefit. The tribunal also noted that the CA certificate and bills provided by the respondent supported their claim of paying tax on the material component.

5. Ultimately, the tribunal concluded that the impugned order was legally sound and correctly upheld. The tribunal rejected the revenue's appeal, emphasizing that the respondent had met the requirements for the deduction of material costs under the works contract services, as per the relevant notifications and rules. The tribunal found no grounds for interference and upheld the decision in favor of the respondent.

This detailed analysis highlights the key issues, arguments, and the tribunal's reasoning in the legal judgment concerning a refund claim under works contract services, providing a comprehensive overview of the case.

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