2022 (7) TMI 1031 - AT - Service Tax

Denial of refund of Service Tax - Revenue sought to change the classification of service from Erection Commissioning and Installation Service to Commercial Industrial Construction Service and adjustment of amount already paid under old head to new head - inclusion of value of free supply material in the assessable value - HELD THAT - The appellant had classified the service provided by them under Erection Commission and Installation Service and had paid service tax amounting to Rs. 20,22,971/-. Later on, Revenue initiated proceedings seeking to classify the service provided by them under Commercial Industrial Service and also sought to include the value of free supply material in the assessable value for the purpose of tax. The issue was decided by original adjudicating authority in favour of appellant on the grounds of limitation and the demand was set aside. It is apparent that while the Revenue s attempt to classify the service provided by the appellant under the Commercial Industrial Construction Service and to include the value of free supply material has failed in the Tribunal, the original self-assessment of the appellant made under the head of Erection Commissioning Installation remained undisturbed. The claim of refund is in respect of assessment under the head of Erection Commissioning and Installation remains undisturbed. Thus the claim of refund can only be made in respect of original assessment under the head of Erection Commissioning Installation . In this background, the limitation prescribed under Section 11B would be applicable and consequently, the refund claim filed much after the period of limitation would not be admissible - Appeal dismissed.

Summary

Issues Involved:
Refund of service tax denial; Classification of service under different heads; Inclusion of free supply material in assessable value; Limitation period for refund claim.

Refund Denial:
The appellant, M/s Aneesh Engineers, filed an appeal against the denial of a refund of service tax amounting to Rs. 20,22,971. The amount was initially paid under 'Erection Commissioning and Installation Service'. However, the Revenue sought to reclassify this service under 'Commercial Industrial Construction Service' and include the value of free supply material in the assessable value. A demand of Rs. 31,74,721 was raised against the appellant, but the original adjudicating authority dropped the demand due to limitation.

Appeal Proceedings:
The Revenue filed an appeal against the dropping of the demand on account of limitation for the free supply material. The Commissioner (Appeals) allowed the appeal, leading the appellant to challenge the decision before the Tribunal. The Tribunal set aside the demand on free supply material. The appellant argued that the amount already paid was adjusted as a pre-deposit by the Tribunal, and hence, the issue of limitation could not be invoked by the Revenue for the refund claim.

Classification of Service:
The Revenue argued that the show cause notice only demanded Rs. 31,74,721 and did not include the amount of Rs. 20,22,971. They contended that the amount claimed as refund was paid under 'Erection Commissioning and Installation Service', whereas the demand dropped was in relation to 'Commercial Industrial Construction Service'.

Judgment and Analysis:
The Tribunal observed that the appellant had initially classified the service under 'Erection Commission and Installation Service' and paid service tax accordingly. The Revenue's attempt to reclassify the service and include free supply material in the assessable value failed. The original self-assessment under 'Erection Commissioning Installation' remained undisturbed. Therefore, the claim for refund could only be made in relation to the original assessment under 'Erection Commissioning & Installation'. As the refund claim was filed much after the limitation period prescribed under Section 11B, it was deemed inadmissible, leading to the dismissal of the appeal.

This judgment highlights the importance of correct classification of services for tax purposes, the impact of limitation periods on refund claims, and the significance of challenging specific issues in appeal proceedings.