2014 (10) TMI 30 - AT - Service Tax

Works contract service - Construction of complex - Held that - Sufficient material is on record to show that the appellant had paid the service tax out of its own pocket in respect of exempted service and the appellant has not passed on the burden of tax so deposited with the Revenue, on the service receiver. Thus, the appellant is entitled to refund of the excess tax paid of ₹ 11,21,974/- along with interest as per rules - Decided in favour of assessee.

Summary

Issues: Service tax liability for construction work for educational institutions; Refund claim denial based on unjust enrichment; Burden of proof regarding passing on tax incidence to service receivers.

Analysis:

1. Service Tax Liability for Construction Work for Educational Institutions:
The appellant, engaged in civil construction work, entered into contracts for building construction for educational institutions. The issue arose regarding the applicability of service tax on these constructions. The appellant contended that the construction for educational institutions should be exempt from service tax as per relevant circulars. Despite the absence of specific mention in the agreements, the appellant had paid service tax on the gross amounts received from the institutions. The dispute centered on whether the burden of tax was passed on to the service receivers. The appellant filed refund claims, citing the exemption for constructions meant for educational, charitable, or philanthropic purposes. The Tribunal analyzed the evidence and concluded that the appellant had not collected service tax from the service receivers, leading to the decision in favor of the appellant for a refund of excess tax paid.

2. Refund Claim Denial Based on Unjust Enrichment:
The refund claim was initially denied on the grounds of unjust enrichment, as the authorities observed that the appellant might have collected service tax implicitly, even though not separately mentioned in the bills. The Commissioner (Appeals) upheld this decision, relying on previous rulings emphasizing the inclusive nature of the gross value when service tax is not explicitly stated. However, the appellant argued that they had not passed on the tax burden to the service receivers, supported by evidence such as certificates and affidavits. The Tribunal noted that there was no conclusive evidence of the tax burden being transferred to the service receivers and allowed the appeal for refund, emphasizing that the appellant had paid the service tax out of its own pocket for exempted services.

3. Burden of Proof Regarding Passing on Tax Incidence to Service Receivers:
The Tribunal scrutinized the evidence provided by the appellant, including certificates, bills, and statements, to determine whether the burden of tax had been passed on to the service receivers. The appellant demonstrated that they had not collected service tax from the institutions and had paid the tax themselves. The Revenue failed to establish that the tax burden had been shifted to the service receivers. The Tribunal considered the absence of specific mentions in bills or contracts regarding service tax collection and concluded that the appellant was entitled to a refund of the excess tax paid, along with interest, as they had not passed on the tax burden to the service receivers.

In conclusion, the judgment by the Appellate Tribunal CESTAT MUMBAI ruled in favor of the appellant, allowing the refund claim for the excess service tax paid, highlighting the importance of demonstrating the non-passing on of tax burden to service receivers in cases of service tax disputes.