2020 (2) TMI 344 - AT - Service Tax

Refund of service tax - construction of complex service - levy of tax on the said service, ultra vies or not - refund sought following the decision of the Hon'ble High Court of Delhi in SURESH KUMAR BANSAL ANUJ GOYAL ORS. VERSUS UNION OF INDIA ORS. 2016 (6) TMI 192 - DELHI HIGH COURT declaring that, in the absence of machinery provision for segregation of service component of consideration, the levy would be ultra vires - refund rejected on the ground that the decision of the Hon ble High Court of Bombay, in MAHARASHTRA CHAMBER OF HOUSING INDUSTRY AND ANOTHER VERSUS UNION OF INDIA AND OTHERS 2012 (1) TMI 98 - BOMBAY HIGH COURT upholding the validity of the levy including the Explanation inserted in section 65 (105)(zzh) of Finance Act, 1994 by Finance Act, 2010, took precedence over that of any other High Court. HELD THAT - It cannot but be noticed that the dispute in re Maharashtra Chamber of Housing Industries arose from the incorporation of a legal fiction to distinguish rendering of service from supply of goods in a composite transaction the taxability of which was, itself, not denied. In re Suresh Kumar Bansal, the approval accorded to the legal fiction by Hon'ble High Court of Bombay was not discarded but its implementability was discarded in the absence of a mechanism, in the statute, for isolating the value of services in a composite transaction. Hence there is no bar on taxation of such composite transaction. The dispute before the Hon'ble High Court of Delhi was on the inclusion of the tax in the amount charged in the invoice. It was not an appeal against rejection of a refund claim. While specific directions were issued on the handling of tax deposited, if any, the consideration of claim for refund under section 11B of Central Excise Act, was not a part of the document - Their applicability to the scheme of the negative list as well as the eligibility for refund has not been decided upon in the impugned order especially as the claim is not a consequential relief ordered by the Hon'ble High Court but needs examination in the context of section 11B of Central Excise Act, 1944. The claim for refund is restored for consideration afresh by the original authority to ascertain the eligibility of appellant on the extent to which taxability under the negative list regime is impacted - appeal allowed by way of remand.

Summary

Issues:
Dispute over rejection of refund claim by original authority based on levy of service tax for 'construction of complex service'; Applicability of decisions by Hon'ble High Courts of Delhi and Bombay; Interpretation of legal fiction in distinguishing service from supply of goods in composite transactions; Impact of definitional changes post-July 2012 on taxability of services; Eligibility for refund under the negative list regime.

Analysis:
The judgment concerns a dispute regarding the rejection of a refund claim by the original authority, which was upheld by the Commissioner of Central Tax (Appeals-II), Pune. The appellant, charged with service tax as a recipient of 'construction of complex service,' sought a refund following a Delhi High Court decision declaring the levy ultra vires due to the absence of a mechanism for segregating service component. The original authority rejected the claim citing a Bombay High Court decision upholding the levy's validity and the appellant's failure to prove full tax discharge by the service provider. The first appellate authority concurred with this decision.

The appellant argued that the levy was beyond the law's authority and highlighted the Delhi High Court's decision distinguishing it from the Bombay High Court's ruling. The Authorized Representative contended that the lower authorities were bound by the jurisdictional High Court's decision, which settled the constitutionality of the levy and collection method through an inserted Explanation.

The judgment delves into the legal fiction introduced to differentiate service and goods supply in composite transactions, emphasizing that the taxability of such transactions was not denied. It discusses the impact of definitional changes post-July 2012, erasing specific taxable activities and introducing deemed services, affecting the scope of taxation. The judgment notes the necessity for ascertaining consideration paid for taxability, especially under the negative list regime, and the need to examine the refund claim in light of relevant legal precedents.

Ultimately, the Tribunal sets aside the impugned order and restores the refund claim for fresh consideration by the original authority. The decision emphasizes the need to evaluate the appellant's eligibility for refund under the negative list regime, considering the judgments cited in the claim and those relied upon by the lower authorities. The judgment concludes by disposing of the appeal accordingly, highlighting the importance of assessing refund eligibility under the specific legal framework.