2023 (6) TMI 1000 - AT - Service Tax

Rejection of refund of Service Tax paid on construction activity - appellant is recipient of service - non-commercial organization or not - HELD THAT - With regard to the issue, as to whether, the service recipient can claim refund of service tax, the Hon ble Allahabad High Court, in the case of COMMISSIONER OF CUSTOMS CENTRAL EXCISE SERVICE TAX VERSUS M/S. INDIAN FARMERS FERTILIZERS COOPERATIVE LTD. 2014 (7) TMI 891 - ALLAHABAD HIGH COURT , have ruled in affirmative. It is also noticed that Section11B(2)(e) of the Central Excise Act, 1944 permit the person who has borne the tax, can file the refund claim.The case laws cited by the learned Advocate strengthen the view that it is not necessary that the refund claim should be filed only by the service provider /manufacturer. The person who has borne the duty burden can also claim the refund. There is absolutely no restriction in the provision of law. In the present matter contractor collected the service tax separately from the Appellant and deposited to the Central Government Account - Since the Service tax has been borne by the Appellant, they have rightly lodged the refund claim. In view of the various documentary evidence and certificates and registrations of the Appellants and analysis thereof and also considering the observations of the ld. Commissioner (Appeals) on this, there is no doubt that building constructed by the Contractor is medical college building - it is also noticed that the Appellant have been granted registration of Trust under Section 12AA of the Income Tax Act which shows that Appellant have been registered for non-commercial purpose. Since the organization of the appellant itself is non-profit purpose, it cannot be said that the building is used for commercial activity. Therefore we do not agree with the finding of the Ld. Commissioner that the activity of running medical college is nothing but a commercial one and same cannot be construed as non-commercial activity/ organization. C.B.E. C. had issued Circular No. 80/10/2004-S.T., dated 17-9-2004 and in Para 13.2 clarified that the leviability of Service Tax was primarily dependent upon the use of the building or civil structure. Further, it clarified that it was to be ascertained where building or civil structure was used or to be used for commercial or industrial purpose and further required to gather the information as to whether the buildings or civil structures were being used or to be used for the purpose of making profit or not and clarified that if the building or civil structure was used or to be used not for the purposes of profit then the same are not taxable. Thus, it is settled that merely by charging a higher fees an institution cannot be treated as commercial institute accordingly the reasoning on this count of the Lower Authority is absolutely illegal and incorrect. Appeal allowed.

Summary

Issues Involved:
1. Eligibility of refund claim under Section 11-B of the Central Excise Act, 1944.
2. Determination of the appellant as a non-commercial entity.
3. Entitlement of the service recipient to claim a refund of service tax.
4. Consideration of the nature of the building (commercial vs. non-commercial).

Summary:

1. Eligibility of Refund Claim:
The appellant filed refund claims for the service tax paid on the construction of a medical college building, which were rejected by the Adjudicating Authority and upheld by the Commissioner (Appeals). The appellant contended that the construction was for a non-commercial purpose and sought a refund under Section 11-B of the Central Excise Act, 1944.

2. Determination of Non-Commercial Entity:
The appellant argued that it is a registered non-commercial entity, plowing back any surplus for charitable purposes. The lower authorities failed to appreciate the Resolution by the Government of Gujarat and the Memorandum of Association, which indicated that the income generated was solely for the development of the hospital. The appellant cited various judgments to support that merely charging higher fees does not make an institution commercial. The Tribunal agreed, noting that the appellant is registered under Section 12AA of the Income Tax Act as a charitable trust.

3. Entitlement to Claim Refund:
The Tribunal held that the recipient of the service is entitled to claim a refund of the service tax paid by the service provider. It cited the Hon'ble Allahabad High Court's decision in Indian Farmers Fertilizers Coop Limited, which affirmed that the recipient who bore the incidence of service tax is entitled to claim a refund. Section 11B(2)(e) of the Central Excise Act, 1944, supports this entitlement.

4. Nature of the Building:
The Tribunal found that the building constructed by the contractor was for educational purposes and not for commercial use. It relied on various documentary evidence and certificates, including the Resolution by the Government of Gujarat, and registrations under the Societies Act and the Bombay Public Trust Act. The Tribunal also referred to several judgments that established that charging fees does not alter the non-commercial status of an institution. The Tribunal noted that the C.B.E. & C. Circular No. 80/10/2004-S.T. clarified that buildings not used for profit-making purposes are not taxable.

Conclusion:
The Tribunal concluded that the appellant's building is not used for commercial purposes and thus does not fall under taxable services. The impugned orders were set aside, and the appeals were allowed with consequential relief.