2019 (9) TMI 117 - AT - Service Tax

Refund claim - unjust enrichment - Retrospective exemption - Works contract service - Management, Maintenance or Repair Service - HELD THAT - No service tax shall be levied or collected in respect of management, maintenance or repair of roads, during the period from 16.6.2005 to 26.7.2009 (both days inclusive). The period involved in the present appeal is also 16.6.2005 to 26.7.2009. It seems that the learned commissioner rejected the refund of service tax on the ground of unjust enrichment because it has been recorded in the impugned order that the appellants have failed to produce the letter from NHAI that they have not paid the service tax to the Appellant. The appellants have not received any amount against service tax from NHAI and that they have paid the service tax amount of ₹ 6,19,766/- out of their own pocket under the category of Management Maintenance and Repair service for the period 2005-06 to 2009-10. According to us this evidence is sufficient to establish that the service tax has not been passed on to the customer i.e. NHAI by the Appellants - Appellants are eligible for refund of service tax. Penalty u/s 78 - HELD THAT - Had the service tax been not there, no penalty would have been imposed on the Appellants. Only because the appellants did not challenge the imposition of penalty and deposited the same without challenging it, cannot be a ground to refund the penalty because without demanding service tax, penalty cannot be imposed. Once service tax is set aside or refunded, penalty cannot survive. Therefore since the Service tax itself has been ordered to be refunded as aforesaid, the penalty deposited by the Appellant for default in not depositing the service tax on time, is also liable to be refunded. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Refund of service tax paid under maintenance and repair service.
2. Eligibility for refund of penalty imposed.
3. Proper format of appeal by Revenue before the learned Commissioner.

Analysis:

Issue 1: Refund of service tax paid under maintenance and repair service
The appeal was filed challenging the order passed by the Commissioner of Central Excise & Customs regarding the payment of service tax on works contract services. The appellants were engaged in construction, maintenance, and repair services under works contract and management categories. A show cause notice was issued for non-payment of service tax, which was later adjudicated, leading to a demand for service tax and penalty. The Commissioner (Appeals) modified the order, reducing the demand. The appellants paid the revised amount but the Revenue challenged the order belatedly. Subsequently, a refund claim was filed based on the introduction of Section 97 of the Finance Act, 2012, exempting service tax on maintenance or repair services for a specific period. The refund claim was initially sanctioned but later reversed by the Commissioner (Appeals). The appellants argued that they did not pass on the service tax to NHAI and thus were eligible for a refund. The tribunal, after reviewing the evidence and legal provisions, concluded that the appellants were entitled to a refund as per Section 97(1) of the Finance Act, 2012.

Issue 2: Eligibility for refund of penalty imposed
The penalty was imposed on the appellants for not paying the service tax on time. However, with the service tax being exempted retrospectively, the basis for the penalty imposition ceased to exist. The tribunal held that since the service tax itself was ordered to be refunded, the penalty deposited by the appellants was also liable for refund. The non-challenge of the penalty imposition did not preclude the refund, as without the service tax liability, the penalty could not be justified. Therefore, the tribunal granted the refund of the penalty along with the service tax and interest.

Issue 3: Proper format of appeal by Revenue before the learned Commissioner
The appellants raised a technical issue regarding the format of the appeal filed by the Revenue before the learned Commissioner. They argued that since it was a service tax matter, the appeal should have been filed in Form ST-4 as per the Finance Act, 1994, but it was filed in Form-EA-2 under the Central Excise Act, 1944. However, the tribunal did not delve into this technicality as the refund of service tax and penalty was granted on merits. Therefore, the tribunal did not find it necessary to decide on the format issue raised by the appellants.

In conclusion, the tribunal set aside the order of the Commissioner (Appeals) and allowed the appeal filed by the appellants, granting them the refund of service tax and penalty as per the law.