2023 (6) TMI 309 - AT - Service Tax

Refund of Service Tax amount - advance amount returned/ refunded to the buyer, upon the cancellation of the flats booked by the said buyer - HELD THAT - The first principle of service tax is that tax is to be paid only on the services which are taxable under the said statute and for that purpose there has to have some service . Unless service is there no service tax can be imposed. If any service has been provided which is taxable as specified in the Finance Act, 1994 as amended from time to time then certainly the assessee is liable to pay, but when no such service has been provided then the assessee cannot be saddled with any such liability and in that case the amount deposited by the assessee with the exchequer will be considered as deposit only and keeping the said amount by the department is violative of Article 265 of the Constitution of India which specifically provides that No tax shall be levied or collected except by authority of law. It is not the case of the department that the appellant is raising a fake claim. The only ground of rejection is section 11B ibid. When no service has been provided, as the booking has been cancelled, then how the tax on it can be retained by the exchequer and in what capacity? This amount has been paid by the customers and when they have cancelled the booking they want to get refund of their entire amount including the amount of service tax paid by them separately, which they are entitled to. Since Service Tax in issue, is not backed by any authority of law, the department has no authority to retain the same. Buyer booked the flat with the appellant and paid some consideration. The appellant as a law-abiding citizen entered the same in their books of accounts and paid the applicable service tax on it after collecting it from the buyer. But once the said bookings have been cancelled, where is the question of providing any service by the appellant to those customers. If there is no service then question of paying any tax on it does not arise and the department can t keep it with them as service tax. Once the buyer cancelled the booking and the consideration for service was returned, the service contract got terminated and once it is established that no service is provided, then refund of tax for such service become admissible. In view of the peculiar facts of this case, the appellant cannot be said to be liable to pay service tax as no service has been provided and the amount paid by them would not take the character of tax. The provisions of Section 11B ibid would, therefore, not be applicable to such applications and the question of applying the limitation prescribed u/s.11B ibid would not arise. The appellant is entitled for the refunds as claimed by them. Accordingly the appeals filed by them are allowed, with consequential relief, as per law.

Summary

Issues Involved:
The issue involves the refund of Service Tax amount on the advance amount returned/refunded to the buyer upon the cancellation of the flats booked by the said buyer.

Issue Analysis and Judgment Details:
The appellant, engaged in providing Construction of Residential Complex Service, faced a situation where two customers cancelled their bookings for flats in a project. The customers requested a refund of the service tax amount paid, which the appellant sought on their behalf. The department issued show cause notices proposing to reject the refund claim as time-barred under Section 11B of the Central Excise Act, 1944. The Adjudicating Authority and the Commissioner (Appeals) rejected the refund claims. However, the Tribunal analyzed the situation, emphasizing that service tax is imposed only when a taxable service is provided. Since no service was provided due to the cancellation of bookings, the appellant should not be held liable for service tax. The Tribunal referred to previous decisions supporting the view that the retention of the tax amount without authority of law violates Article 265 of the Constitution of India. It was established that the appellant is entitled to a refund as no service was provided, and the tax amount paid should not be retained by the department. The Tribunal allowed the appeals filed by the appellant, granting them the refunds as claimed.

Separate Judgment by the Tribunal:
The Tribunal, in a separate judgment, highlighted that the retention of any amount by the department, paid by the appellant without any liability or in excess of the liability, violates Article 265 of the Constitution of India. This further supports the appellant's entitlement to the refunds claimed.

This comprehensive analysis of the legal judgment outlines the issues involved, the details of the case, and the Tribunal's decision regarding the refund of the Service Tax amount in the context of cancelled flat bookings.