2019 (7) TMI 498 - AT - Service Tax

Refund of tax collected without authority of law - whether denial of refund of tax, collected without authority of law, whether the same is justified? - HELD THAT - Under the scheme of the Act read with Rules, there is no such authority or power under which Revenue officer can collect the service tax for the second time from an assessee receiving the input/input service in case of defalcation, by the provider of service, who have admittedly collected the amount of tax. The action of Revenue in collecting the service tax for the second time alongwith interest from the appellant- assessee, is also hit by Article 265 of the Constitution of India, which provides that no tax can be collected without authority of law. Refund allowed - The appellant is entitled to refund of the full amount deposited alongwith interest as per rules - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Denial of refund of tax collected without authority of law.

Analysis:
The issue in this appeal revolves around the denial of a refund claim by the appellant, who had paid tax to a service provider but later discovered that the provider had not deposited the tax with the government. The appellant sought a refund of the amount paid, arguing that there was no provision allowing the Revenue officer to collect tax again from the service receiver. The appellant contended that the tax collected without authority of law should be refunded.

The appellant, a service provider, had received input services from another entity and paid the service tax to them. However, it was later revealed that the service provider had not deposited the tax collected from the appellant with the government. The Revenue officer then demanded the appellant to pay the tax again, under threat of adverse actions. Subsequently, the appellant deposited the amount in the government account to avoid coercive measures.

The appellant applied for a refund, which was rejected based on Rule 9(6) of the Cenvat Credit Rules, placing the burden of proof on the appellant to maintain proper records for input services. The Commissioner (Appeals) upheld the rejection of the refund claim. However, the Tribunal found that there was no authority under the Act to collect tax again from the service receiver in case of defalcation by the service provider.

In support of its decision, the Tribunal referred to a CBEC Circular and a ruling of the Delhi High Court, emphasizing that unless there is complicity between the parties, tax cannot be demanded for the second time from the receiver of services. The Tribunal also highlighted that collecting tax without authority of law violates Article 265 of the Constitution of India, which prohibits tax collection without legal authority. Consequently, the Tribunal set aside the impugned order and allowed the refund claim, directing the appellant to receive the full amount deposited along with interest.

In conclusion, the Tribunal's judgment focused on the lack of legal authority to collect tax again from the service receiver, highlighting the constitutional provision against tax collection without legal backing. The decision favored the appellant, granting the refund claim and emphasizing the importance of upholding legal principles in tax matters.