2023 (7) TMI 481 - AT - Service Tax

Refund of service tax - deposit by mistake for construction of individual/independent residential houses - refund rejected for the reason that service tax was payable to prior 01.07.2012 and had not been exempted w.e.f. 01.07.2012 and that they were also hit by unjust enrichment - HELD THAT - A Division Bench of the Tribunal in AS SIKARWAR VERSUS COMMISSIONER OF CENTRAL EXCISE, INDORE 2012 (11) TMI 1000 - CESTAT, NEW DELHI also observed that service tax can be demanded only if the building concerned has more than 12 residential units in the building and such levy will not apply in cases where one compound has many buildings, each having not more than 12 residential units. It is true that w.e.f. 01.07.2012 construction of complex is a declared service, but the Exemption Notification exempts services by way of construction, erection, commissioning or installation of original works pertaining to a single residential unit otherwise than as a part of a residential complex have been exempted - the Commissioner (Appeals) was not justified in holding that the appellant would not be entitled to the benefit of the Exemption Notification. Principles of unjust enrichment - HELD THAT - The Commissioner (Appeals) was also not justified in holding that the refund was hit by the principles of unjust enrichment. As per the work orders, service tax was to be borne by the appellant and the Commissioner (Appeals) has also found, as a fact, that the contract awarded by the Housing Board to the appellant mentions that service tax shall be borne by the contractor - The Allahabad High Court in COMMISSIONER OF CUSTOMS CENTRAL EXCISE SERVICE TAX VERSUS M/S. INDIAN FARMERS FERTILIZERS COOPERATIVE LTD. 2014 (7) TMI 891 - ALLAHABAD HIGH COURT held that a refund can be claimed by a person who has borne the incidence of tax. Even in accordance with the Exemption Notification dated 20.06.2012, 50% of the tax to be deposited by the Housing Board under the reverse charge mechanism was deducted by the Housing Board from the amount payable to the appellant. The Commissioner (Appeals) was, therefore, not justified in rejecting the refund claim of the appellant on the ground of unjust enrichment. The Commissioner (Appeals) also observed that the CENVAT credit for works contract services was admissible to the service receiver and, therefore, the Board may have taken the CENVAT credit and utilized the same for output services. It is for this reason also that refund was found to be not admissible - this was not a ground taken in the show cause notice and secondly, the Commissioner (Appeals) observed that the appellant may have taken the CENVAT credit and utilized the same for output services. The inference is based on conjectures and not on facts. The Commissioner (Appeals) could not have denied the refund on this account. Appeal allowed.

Summary

Issues Involved:
1. Refund of service tax deposited by mistake.
2. Applicability of service tax on construction of individual/independent residential houses.
3. Unjust enrichment.
4. Limitation period for refund claims.
5. Admissibility of CENVAT credit for works contract services.

Summary:

1. Refund of Service Tax Deposited by Mistake:
The appellant sought the quashing of the order dated 16.02.2016, which denied the refund of service tax deposited by mistake for the construction of individual/independent residential houses during 2012-13 to 2014-15. The appellant argued that the construction of such houses was not taxable prior to 01.07.2012 and was exempted under the Notification dated 20.06.2012.

2. Applicability of Service Tax on Construction of Individual/Independent Residential Houses:
The Tribunal examined the definition of 'residential complex' under Section 65(91a) of the Finance Act, 1994, which requires a complex to have more than twelve residential units to be taxable. The appellant constructed individual houses, each with separate entry, electricity, and water connection, and none of the buildings had more than twelve residential units. The Tribunal accepted the appellant's submission that these houses do not fall under the taxable category of 'residential complex' and thus were not subject to service tax.

3. Unjust Enrichment:
The Commissioner (Appeals) had rejected the refund claim on the grounds of unjust enrichment. However, the Tribunal found that the service tax was to be borne by the appellant as per the work orders, and the contract specified that the contractor would bear the service tax. The Tribunal referred to the Allahabad High Court decision in Commr. Of Cus., C. Ex. & S.T. vs. Indian Farmers Fertilizers Coop. Ltd., which allowed refund claims by the person who bore the incidence of tax. Therefore, the Tribunal held that the refund was not hit by unjust enrichment.

4. Limitation Period for Refund Claims:
Except for Service Tax Appeal No. 51458 of 2018, the Commissioner (Appeals) had held that the refund claims were barred by limitation. However, this issue was not elaborated upon in the Tribunal's final decision.

5. Admissibility of CENVAT Credit for Works Contract Services:
The Commissioner (Appeals) had also denied the refund on the grounds that the Rajasthan Housing Board (RHB) might have taken CENVAT credit for works contract services. The Tribunal found this reasoning conjectural and not based on facts, as it was not a ground mentioned in the show cause notice.

Conclusion:
The Tribunal set aside the order dated 16.02.2016, allowing all four service tax appeals and granting the refund claims. The Tribunal concluded that the construction of individual/independent residential houses did not attract service tax, the refund was not hit by unjust enrichment, and the denial of refund on the grounds of potential CENVAT credit utilization by RHB was unfounded.