2022 (6) TMI 138 - AT - Service Tax

Relevant Date - Rejection of Refund claim - the tax paid was exempted in the hands of the appellant - rejection on the ground of time limitation - locus standi of appellant to claim refund - HELD THAT - This is not a tax paid by mistake on the part of the appellant or a tax that was to be discharged by the appellant within the deadline obligated in rule 6 of Service Tax Rules, 1994. It is, in a manner of speaking, tax exacted at gunpoint by an assessee who did not bother to ascertain taxability and bundled the presumed obligation in the liability of the appellant who had engaged them for an activity. It is a tax that was exempted in the hands of the appellant though without provision in law for repelling such collection and the sole restitution available after contracting out such activity exempted from tax in such circumstances is section 11B of Central Excise Act, 1944 by application of section 83 of Finance Act, 1994. The claim was, accordingly, preferred but was rejected leading to appeal against that denial before Commissioner of CGST Central Excise (Audit-II), Mumbai. Tax is levied on the taxable event or, as in the case of service tax , on activity and not on persons; unlike the erroneous enunciation by the first appellate authority, the exemption, likewise, is on the service and not the provider of service , who is, effectively, an agent of the tax administration for collection of tax from the recipient of service along with the contracted payment. The tax paid by the appellant to the provider of service should not, owing to the exemption, have been charged in the invoice. In such circumstances, retention thereof in the face of claim for it is, unless in accordance with procedure laid down in law, repugnant to constitutional authority for levy and collection of tax. Indeed, the refund mechanism of section 11B of Central Excise Act, 1944, as made applicable to Finance Act, 1994, is not restricted to assessee, or person liable to pay tax , but also is within the right of any person. The impugned order has erred in concluding otherwise on right to claim refund and in attributing the intent of the exemption to deployment of service of the provider of service for itself. The essence of service , at least as far as tax is concerned, is the transaction between provider and recipient for consideration, certainly excluding activities undertaken for oneself that, doubtlessly, is devoid of consideration from the scheme of tax which appears not to have weighed with the first appellate authority. The locus standi of the appellant to claim refund of tax borne by him has, therefore, been wrongly assailed in the impugned order. Considering the contrived disposal of the grievance by the first appellate authority and the plausible cause of that, the facts and submissions, suffices for disposal of this appeal without much further ado. More so, as the rejection by the original authority was not preceded by a show cause notice, which is the foundation of any proceedings, as well as the limiting framework of a tax dispute. The absence of show cause notices forecloses the scope for remand. The relevant date which determines operation of bar of limitation of time, for the person who has borne the burden of tax, is not so easily placed. The default, among the several circumstances envisaged in section 11B of Central Excise Act, 1944, is date of payment of tax. The original authority has not ascertained the relevant date for this purpose. Even with that default benchmark, four of the five invoices pass muster. For that sole invoice of 20th February 2014, the lower authorities have not determined the appropriate relevant date by applying the starting points in section 11B of Central Excise Act, 1944 adapted for service rendering any finding on bar of limitation of time to be faulty. Moreover, that the tax was charged without authority of law is not in doubt. Appeal allowed - decided in favor of appellant.

Issues Involved:
1. Rejection of refund application.
2. Bar of limitation of time.
3. Locus standi of the appellant to claim the refund.
4. Interpretation of exemption under notification no. 25/2012-ST.
5. Procedural appropriateness and principles of natural justice.

Detailed Analysis:

1. Rejection of Refund Application:
The appellant challenged the rejection of his refund application amounting to ?10,66,335, collected under the Finance Act, 1994. The original authority rejected the refund on the grounds of lack of correlation between the tax claimed to have been paid and the refund sought. The first appellate authority dismissed the claim by questioning the locus standi of the appellant, which was not initially notified to the appellant, thus violating principles of natural justice.

2. Bar of Limitation of Time:
The appellant contended that the bar of limitation would only impact one invoice dated 20th February 2014, involving tax of ?1,73,725. He cited the decision of the Hon’ble High Court of Bombay in Parijat Construction v. Commissioner of Central Excise, arguing that tax collected without authority of law cannot be retained in the Consolidated Fund of India by recourse to the ‘relevant date’ and closure of the statutory window for claims.

3. Locus Standi of the Appellant:
The impugned order questioned the appellant’s locus standi to claim a refund for tax paid by another entity, M/s Gandhi Associates & Co. The appellant argued that the first appellate authority’s decision was procedurally inappropriate and contravened natural justice principles. The appellant provided evidence, including certificates and disclaimers from the service provider, proving that the tax was collected and deposited, thus establishing his right to claim the refund.

4. Interpretation of Exemption under Notification No. 25/2012-ST:
The appellant argued that the services procured for constructing his dwelling were exempt under serial no. 14 of notification no. 25/2012-ST. The first appellate authority, however, misinterpreted the exemption, stating that the service provider, being a legal person, was not entitled to the exemption. The appellant contended that tax is levied on the ‘taxable event’ or activity, not on persons, and the exemption applies to the service, not the service provider.

5. Procedural Appropriateness and Principles of Natural Justice:
The appellant highlighted that the first appellate authority’s decision was not based on the original grounds for rejection but introduced a new ground (locus standi) without prior notice. This procedural deviation violated natural justice principles, as the appellant was not given an opportunity to address this new ground. The appellate tribunal noted that the original authority’s rejection was not preceded by a show cause notice, which is fundamental in tax proceedings.

Conclusion:
The appellate tribunal found that the original and first appellate authorities erred in their decisions. The appellant provided sufficient evidence to establish his claim for a refund. The tribunal concluded that the appellant’s claim should be disposed of on merit, considering the exemption under notification no. 25/2012-ST and the evidence provided. The impugned order was set aside, and the appeal was allowed. The tribunal also noted that the absence of a show cause notice foreclosed the scope for remand.

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