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2019 (5) TMI 1415 - AT - Service TaxTaxability - Refund of service tax paid - construction and maintenance services provided to Government of India / Ministry of defence - Mega Exemption Notification No.25/2012-ST dated 20th June, 2012 - HELD THAT - The appellants were providing Commercial/Industrial Construction Services to Military Engineering Services (MES). It admittedly is a unit of Ministry of Defence, Govt. of India. MES is observed to be Construction Maintenance agency for Indian Army. We, therefore, opine that the Construction/ Maintenance Services of MES since being linked to the structures/buildings, which are not to be used for commercial purposes but for Ministry of Defence, any service rendered to MES is not taxable. Mega Exemption Notification No.25/2012-ST dated 20th June, 2012 - HELD THAT - Mega Exemption Notification No.25/2012-ST dated 20th June, 2012 had exempted the services as that of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance renovation or alteration of a civil structure when provided to a Governmental authority from the ambit of service tax. However, said exemption was recalled vide the Notification No.6/2015 dated 1st March, 2015 whereafter the services provided even to Government were leviable to service tax, therefore the same was borne by MES which Service Tax component was deposited by the appellant with the Service Tax Department. By virtue of Section 102 of Finance Act, 2016 incorporating the aforesaid entry No.12A that the services provided by the appellant to MES became exempted retrospectively from 01.04.2015 itself. This observation is sufficient to hold that the intention of the Government had always been to exempt the services being provided to anyone other than commerce industries business or profession i.e. the services provided to Government to remain exempted from the levy of service tax. No doubt for any amendment, which is substantive in nature the same has to be applied prospectively. The refund claim was initiated by the appellants/ the service providers on the request of the service recipient i.e. MES, Ministry of Defence, which is none other than the Government of India - There is a clear declaration in the form of Affidavit as was annexed with the refund claim that since the amount of service tax prayed to be refund has been reimbursed to the appellants/ applicants by the service recipient/ MES that they acknowledged to return the same to MES after the amount is sanctioned and disbursed. Since the service recipient is none other than the Government of India, rejection of refund claim which is liable to be refunded, but the refund claim is rejected only on the ground that the service recipient/ the Department of Government of India has born the burden of said service tax, will ultimately cause the loss to the Exchequer of the said Department of Government of India. The proceedings are placed back before the Assistant Commissioner of Central Excise Service Tax, Central Excise Service Tax Division, Jodhpur (Rajasthan) directing that without disturbing the findings and observations on the allowability of the refund claim he shall reconsider the claim - also not the petitioner, but the MES to pursue the refund claim. MES shall join as co-applicant. If so done within one month, the Competent Authority shall decide the applications within one month thereafter. Appeal allowed by way of remand.
Issues Involved:
Refund claim rejection based on unjust enrichment grounds for service tax paid during a specific period to Military Engineering Services (MES) by appellants providing work contract services to the Government of India. Detailed Analysis: Issue 1: Refund Claim Rejection on Grounds of Unjust Enrichment The appellants provided work contract services to MES, Ministry of Defence, which were initially exempted from tax but later became taxable from April 1, 2015. The appellants paid the service tax during this period and subsequently claimed refunds after the exemption was restored. The adjudicating authority rejected the refund claims citing lack of documents, time bar, and unjust enrichment due to the appellant's declaration that the amount was reimbursed by MES. The rejection was upheld by the original authority and the appeal was dismissed on the grounds of unjust enrichment. Analysis: The Tribunal considered the nature of services provided to MES and the retrospective exemption granted by Finance Act, 2016. It was observed that the service tax paid by the appellants during the specific period was no longer a duty due to the retrospective exemption. The Tribunal held that the rejection based on unjust enrichment was not applicable as the refund claim was initiated at the request of MES, and there was a clear declaration that the refunded amount would be returned to MES. The rejection solely on the grounds of MES bearing the service tax burden was deemed against the law and the existing principles. Issue 2: Applicability of Section 11B of Central Excise Act The Department argued that Section 11B of the Central Excise Act mandates that the service tax burden should not have been passed on to the service recipient for refund eligibility. The Commissioner (Appeals) upheld the rejection based on the appellant passing on the tax burden to MES. Analysis: The Tribunal concluded that Section 11B was not applicable in this case as the amount paid as service tax was considered a deposit in excess due to the retrospective exemption. The specific circumstances of the case, including the refund initiation by MES and the declaration of returning the refunded amount, exempted the appellants from the principle of unjust enrichment, making the rejection based on this ground unjustified. Conclusion: The Tribunal set aside the orders rejecting the refund claims, directing a reconsideration by the Assistant Commissioner without disturbing the findings on refund eligibility. The MES was instructed to join as a co-applicant for the refund claim, ensuring a fair resolution within a specified timeline. Significant Phrases: - Retrospective exemption under Finance Act, 2016 - Unjust enrichment principle - Section 11B of Central Excise Act - Refund claim initiation by MES - Declaration of refund amount return - Consumer Welfare Fund - Competent Authority reconsideration
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