2021 (11) TMI 837 - AT - Service Tax

Refund of service tax - erroneous classification of service tax - services erroneously classified under the category of Renting of Immovable Property Services, whereas the services provided by them actually were Service by Hostel for residential/ lodging purpose - exemption under N/N. 25/2012-ST dated 20.06.2012 - HELD THAT - In the present case appellant has in the initial stage issued invoices claiming the service tax payable from their client, and have also deposited the same with the exchequer. Now by way of this application they seek the refund of the same. There can be no refund except for in the manner provided by Section 11B, i.e. without Assistant Commissioner recording his satisfaction to effect that the burden of tax paid and claimed as refund has not been further passed on. In the present case in absence of any such satisfaction matter needs to be referred back to the original authority of reconsideration of the refund claims - appeal allowed by way of remand.

Summary

Issues Involved:
1. Eligibility for exemption under Notification No 25/2012-ST for hostel services.
2. Requirement of satisfaction by the Assistant Commissioner regarding the non-passing of the tax burden for refund claims.

Detailed Analysis:

1. Eligibility for Exemption under Notification No 25/2012-ST for Hostel Services:
The appellant, a service provider running a girls' hostel, claimed a refund of ?4,43,827/- paid as service tax under the category of Renting of Immovable Property Services for the period 2016-17. The appellant argued that the services provided were actually exempt under Notification No 25/2012-ST dated 20.06.2012, which exempts services by a hostel for residential or lodging purposes with a tariff below ?1,000 per day.

The Assistant Commissioner and Commissioner (Appeals) rejected the refund claim, stating that the exemption under the notification did not apply to hostels. The appellant contended that the term "hostel" should be included within the broad scope of the notification, which uses the phrase "by whatever name called" to describe services by hotels, inns, guest houses, clubs, or campsites for residential or lodging purposes.

The Tribunal analyzed various dictionary definitions of "hostel" and concluded that the term "hostel" fits within the broad scope of the notification. The Tribunal held that the phrase "by whatever name called" is wide enough to include hostels, thereby making the appellant eligible for the exemption.

2. Requirement of Satisfaction by the Assistant Commissioner Regarding Non-Passing of the Tax Burden for Refund Claims:
The Tribunal referred to the statutory requirements under Section 11B of the Central Excise Act, which mandates that no refund shall be granted unless the claimant establishes that the burden of the tax has not been passed on to another person. The Tribunal cited the Supreme Court's decisions in Mafatlal Industries and Addisson & Co, which emphasize that the claimant must prove that they have borne the tax burden to avoid unjust enrichment.

In the present case, the appellant initially issued invoices claiming service tax from their clients and deposited the same with the exchequer. The Tribunal noted that the Assistant Commissioner did not record any satisfaction regarding whether the tax burden had been passed on to the service recipients. Consequently, the matter was remanded back to the original authority for reconsideration of the refund claims in light of the Supreme Court's decisions and the statutory requirements under Section 11B.

Conclusion:
The appeal was allowed, and the case was remanded to the original authority for reconsideration of the refund claims. The original authority was directed to decide the claim within three months, following the principles of natural justice and ensuring compliance with Section 11B requirements regarding the non-passing of the tax burden.