2022 (4) TMI 1299 - AT - Service Tax

Refund of Service tax paid under authority of law - changed circumstances of the phasing out of service tax with effect from 1 st July 2017 - HELD THAT - The obligation to discharge tax under Finance Act, 1994 crystallized on 5th July 2017 in relation to the services provided between 6th June 2017 and 30th June 2017 as determined under Rule 3 of Point of Taxation Rules, 2011 to be the date in invoices pertaining to the taxable transaction or, in case of continuous supply of service, to be the date of each episode envisaged in the contract. As the impugned services were taxable under Finance Act, 1994 in accordance with the statutory powers, tax was rightly discharged. It was the difficulties faced by their customers in availment of credit of such tax in July 2017 that prompted them to cancel these invoices and issue fresh invoices after discharging tax under the new statute. While it is appreciated that tax has been paid twice on the very same transaction, the discharge of liability in accordance with the Finance Act, 1994 which was the prevailing statue precludes entitlement for refund. The ground of equity pleaded on behalf of the appellant does not advance their case for refund of tax paid in accordance with a constitutionally valid levy. Appeal dismissed.

Issues:
1. Claim for refund of service tax paid despite liability under Central Goods and Service Tax, 2017.
2. Interpretation of statutory provisions regarding refund of tax paid under Finance Act, 1994.
3. Applicability of Point of Taxation Rules, 2011 in determining tax liability.
4. Consideration of public interest and equity in tax refund cases.

Analysis:
1. The appeal involved a dispute by M/s Maharashtra Ex-Servicemen Corporation Ltd against the rejection of their claim for refund of service tax amounting to &8377;4,24,405, which was paid despite the liability under the Central Goods and Service Tax Act, 2017. The issue arose due to the phasing out of service tax with effect from 1st July 2017, leading to a situation where the same transaction was taxed twice under different statutes. The appellant contended that the refund was sought as their customers required tax payment under the new statute for credit availment, and the rejection of the claim was detrimental to public interest, considering their status as a governmental body with welfare objectives.

2. The Authorized Representative argued that the tax had been correctly discharged under the Finance Act, 1994, and cited the provisions of section 11B of the Central Excise Act, 1944, made applicable to service tax by section 83 of the Finance Act, 1994. It was contended that the statutory framework did not provide for a refund of tax paid under the authority of law, thus supporting the decisions of the lower authorities to reject the refund claim.

3. The Tribunal analyzed the obligation to discharge tax under the Finance Act, 1994, which crystallized during the period when the services were provided, as determined by the Point of Taxation Rules, 2011. The tax liability was deemed to be correctly discharged under the prevailing statute, despite the subsequent challenges faced by the customers in credit availment. The appellant's decision to cancel the invoices and issue new ones under the new statute was driven by these challenges, and the Tribunal found that the refund claim was not sustainable under the circumstances.

4. The Tribunal acknowledged the double taxation on the same transaction but emphasized that the discharge of liability under the Finance Act, 1994 precluded the entitlement for a refund. Despite the plea for equity and public interest considerations, the Tribunal held that the refund claim could not be supported when the tax had been paid in accordance with a valid levy. Consequently, the Tribunal dismissed the appeal, finding no grounds to interfere with the lower authorities' decisions.

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