2025 (2) TMI 11 - AT - Service Tax

Refund of payment made on advance receipt prior to 30.06.2017 under Finance Act 1994 - tax paid twice - rejection of refund on the ground that tax was appropriately paid under the provisions of Finance Act 1994 as it then existed - HELD THAT - After considering the merits of the matter and concluding that the double taxation was avoidable even under the two tax regimes the matter was remitted by the Learned Single Member Bench in that case due to the natural justice not having been followed. This court finds that the observations made on the aspect of double taxation under two different tax regime are relevant and deserves to be followed. Due to the special features available in GST Regime the Learned Member of Single Member Bench of Chennai in M/S. THIRUMAL FA ADE SOLUTIONS VERSUS COMMISSIONER OF GST CENTRAL EXCISE CHENNAI 2023 (2) TMI 1252 - CESTAT CHENNAI has correctly held that there cannot be a double taxation. It is for department to choose whether it would like to refund tax or give credit under GST regume. Since in this case tax on the same transaction has been suffered twice therefore as per the provision of Finance Act 1994 including provisions of refund as have been borrowed from Central Excise Act 1944 the refund is permissible and deserves to be allowed. Conclusion - The appellant is entitled to a refund of the service tax paid under the Finance Act 1994 due to the subsequent taxation of the same transaction under the GST regime. Appeal allowed.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal issue in this case revolves around the concept of double taxation under two different tax regimes. The specific questions considered include:

• Whether the appellant was subject to double taxation for the same transaction under the Finance Act, 1994, and the GST regime.
• Whether the appellant is entitled to a refund of the service tax paid under the Finance Act, 1994, on advance receipts, given that the same transaction was taxed again under the GST regime.
• Whether the transition provisions between the Finance Act, 1994, and the GST regime allow for the refund or adjustment of taxes paid during the transition period.

ISSUE-WISE DETAILED ANALYSIS

Double Taxation under Two Tax Regimes

• Relevant Legal Framework and Precedents: The case hinges on the transition from the Finance Act, 1994, to the GST regime, effective from July 1, 2017. The appellant relied on the precedent set in M/s Thirumal Facade Solutions vs Commissioner GST and Central Excise Chennai, which addressed similar circumstances of double taxation and was decided in favor of the assessee.
• Court's Interpretation and Reasoning: The Court recognized that the appellant discharged service tax on advance receipts under the Finance Act, 1994, and subsequently paid GST on the same transaction. The Court acknowledged the challenges faced by taxpayers during the transition between tax regimes and emphasized that an overly legalistic approach should not be adopted during such periods.
• Key Evidence and Findings: The appellant submitted documentation to support the claim of double taxation. The Court noted that the appellant had complied with the requirements of both tax regimes, including filing the necessary Trans-I declarations under GST. The reversal of prepaid service tax in the GST return further supported the appellant's claim.
• Application of Law to Facts: The Court applied the principles of natural justice and the transition provisions between the two tax regimes. It concluded that the appellant had indeed been taxed twice for the same transaction, which was avoidable under the transition provisions.
• Treatment of Competing Arguments: The respondent argued that the tax was appropriately paid under the Finance Act, 1994, and thus not refundable. However, the Court found that the transition provisions allowed for continuity of credit and adjustment, and therefore, the appellant's claim for a refund was justified.
• Conclusions: The Court concluded that the appellant was entitled to a refund of the service tax paid under the Finance Act, 1994, on advance receipts, as the same transaction was taxed again under the GST regime. The Court directed the department to verify the facts and process the refund accordingly.

SIGNIFICANT HOLDINGS

• The Court held that double taxation on the same transaction under two different tax regimes is not permissible, especially when transition provisions allow for continuity and adjustment of tax liabilities.
• It was established that the appellant is entitled to a refund of the service tax paid under the Finance Act, 1994, due to the subsequent taxation of the same transaction under the GST regime. The Court emphasized that the department must choose whether to refund the tax or provide credit under the GST regime.
• The Court directed the department to consider the refund claim in accordance with the law, acknowledging the special features and transition provisions of the GST regime that prevent double taxation.