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2020 (2) TMI 632 - HC - Service TaxRefund of service tax - commercial and industrial construction service - time limitation - failure to furnish documents to prove that the said service tax amount had actually been deposited with the Central Government - Section 11B of the Central Excise Act, 1944 - HELD THAT - If the petitioners were not liable to pay service tax on the transaction of the purchase of the constructed area along with goods apart from undivided share of land at all, the payment which was made by the petitioners would not be a payment of service tax at all; that the department also could not have demanded payment of the same from the petitioners; and merely because the petitioners made the payment, it would not partake the character of service tax and the department cannot retain the amount paid by the petitioners which was in fact not payable by them. Allegation that Documents were not produced before it as proof of payment of service tax - HELD THAT - The petitioners did not furnish any document to prove that the said service tax amount was actually deposited with the Central Government by 4th respondent is concerned, it is not in dispute that the 1st respondent never asked the petitioners to produce such material in the first place. It is also not the case of the 1st respondent that it had asked the 4th respondent, who according to the petitioner received the said payment on 19.06.2014, as to whether the 4th respondent had credited the same to the Central Government or not - Nothing prevented the 1st respondent from verifying whether the said payment of ₹ 33,77,539/- made by the petitioners on 19.06.2014 was passed on by the 4th respondent to the Central Government by verifying the Service Tax Returns filed by the 4th respondent. The third ground raised by the 1st respondent in the impugned order for rejecting the claim of the petitioners, the 1st respondent had relied upon the decision in GD. BUILDERS AND OTHERS VERSUS UOI AND ANOTHER 2013 (11) TMI 1004 - DELHI HIGH COURT , but the said decision was overruled by the Supreme Court in COMMISSIONER, CENTRAL EXCISE CUSTOMS VERSUS M/S LARSEN TOUBRO LTD. AND OTHERS 2015 (8) TMI 749 - SUPREME COURT specifically. The Supreme Court held that the judgment in GD Builders s case was wholly incorrect in its conclusion that the Act contains both the charge and machinery for levy and assessment of service tax on indivisible works contracts - the said ground of rejection of the claim of the petitioners also cannot be accepted. No mechanism for ascertaining value of service component in contracts for construction of complexes - HELD THAT - Section 66E lays down what constitute declared services . Clause (b) thereof mentions construction of a complex, building, civil structure or a part thereof , including a complex or building intended for sale by a buyer fully or partly, except where the entire consideration is received after issuance of completion certificate by the competent authority - the Service Tax (Determination of Value) Rules, 2006 were notified vide Notification No.12/06-ST, dt.19.04.2006 and were amended vide Notification No.11/2014-ST, dt.11.07.2014 w.e.f. 01.10.2014. The said Rules were framed in exercise of power conferred on the Central Government by clause AA of sub-Section (2) of Section 94 of the Act - Rule 2A of the Service Tax (Determination of Value) Rules, 2006 deals with determination of value of service portion in the execution of a works contract mentioned only in clause(h) of Section 66E of the Act. Rule 2A of 2006 Rules deals only with determination of the value of the service portion in execution of a works contract referred to clause(h) of Section 66E of the Act; and even as of date, no rule has been enacted by the Central Government dealing with determination of value of service portion in a composite contract of sale involving not only a service component but also sale of built up area along with undivided share of land involving also sale of goods included in the total consideration paid for their purchase falling in clause (b) of Sec.66 E, as in the instant case. Since the claim for refund is based on the decision of the Delhi High Court in Suresh Kumar Bansal s case (1 supra) which was decided on 03.06.2016, and since the application for refund was filed on 19.08.2016, barely two months after the decision of the Delhi High Court in Suresh Kumar Bansal s case (1 supra), it cannot be said that there is any inordinate delay in the petitioners seeking refund of the tax paid by them to the 4th respondent. Petition allowed - the 1st respondent is directed to refund a sum of ₹ 33,77,539/- to the petitioners with interest @ 9% per annum from the date of payment of the same by the petitioners to the 4th respondent i.e., 19.06.2014 till the date of payment to the petitioners.
Issues Involved:
1. Bar of limitation for refund claim. 2. Proof of payment of service tax to the Central Government. 3. Applicability of the GD Builders case. 4. Mechanism for ascertaining the value of the service component in composite contracts. Detailed Analysis: 1. Bar of Limitation for Refund Claim: The petitioners challenged the rejection of their refund claim on the ground of limitation. The court examined Section 11B of the Central Excise Act, 1944, which mandates that claims for refund must be made within one year from the relevant date. The respondents argued that this provision applied to the petitioners' claim, rendering it time-barred. However, the petitioners countered by citing the Madras High Court's decision in Natraj and Venkat Associates v. Assistant Commissioner, Service Tax, Chennai-II, which held that the bar of limitation under Section 11B(1) applies only to claims for refund of "duty of excise." The court agreed with the petitioners, noting that the amount paid was not service tax but rather a deposit made under a mistaken notion of law. Consequently, the limitation period under Section 11B(1) was deemed inapplicable. 2. Proof of Payment of Service Tax to the Central Government: The respondents rejected the refund claim on the ground that the petitioners did not provide proof that the service tax amount was deposited with the Central Government. The court found that the 1st respondent had never requested such proof from the petitioners. Additionally, the petitioners had provided the service tax registration number of the vendor, enabling the 1st respondent to verify the payment. The court noted that the petitioners had subsequently submitted proof of payment, which was undisputed by the respondents. Therefore, this ground for rejection was also dismissed. 3. Applicability of the GD Builders Case: The respondents relied on the Delhi High Court's decision in GD Builders v. Union of India to reject the refund claim. However, the Supreme Court had overruled this decision in Commissioner, Central Excise and Customs, Kerala v. Larsen and Toubro Limited, holding that the Act did not contain both the charge and machinery for the levy and assessment of service tax on indivisible works contracts. Consequently, the court rejected this ground as well. 4. Mechanism for Ascertaining the Value of the Service Component in Composite Contracts: The court examined whether there was a mechanism to ascertain the value of the service component in composite contracts involving the sale of immovable property, goods, and services. The petitioners argued that no such mechanism existed under the Service Tax (Determination of Value) Rules, 2006. The respondents contended that Rule 2A applied to such situations. The court disagreed, noting that Rule 2A only dealt with the service portion in the execution of works contracts and not composite contracts involving the sale of land and goods. The court cited the Delhi High Court's decision in Suresh Kumar Bansal v. Union of India, which held that the absence of a mechanism to ascertain the value of the service component rendered the levy of service tax invalid. The court concurred with this view. Conclusion: The court allowed the writ petition, directing the 1st respondent to refund the amount of ?33,77,539/- to the petitioners with interest at 9% per annum from the date of payment to the 4th respondent until the date of refund. The court also dismissed any pending miscellaneous petitions and awarded no costs.
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