2015 (10) TMI 459 - HC - Service Tax

Refund of Service Tax under reverse charge method for the period prior to 18.4.2006 - Petitioner pleads to pass an appropriate writ for quashing erstwhile explanation to clause (105) of Section 65 of the Finance Act, 1994 as well as the Rule (2)(1)(d)(iv) of the Service Tax Rules, 1994 Held That - the issue with regard to the applicability of Rule (2)(1)(d)(iv) of the Service Tax Rules, 1994 is no longer open for debate. It is now well settled that the said Rule would be in operation only after 18.04.2006 when Section 66A was introduced in the Finance Act, 1994. This writ petition is disposed of with the direction that the petitioner is entitled to refund of the service tax paid by it under the said explanation and Rule inasmuch as the same pertains to a period prior to 18.04.2006 from which date Section 66A became effective. The consequential relief is that the petitioner shall be refunded the amount of service tax so paid. - Decided in favor of assessee.

Summary

Issues:
1. Applicability of Rule (2)(1)(d)(iv) of the Service Tax Rules, 1994.
2. Refund of service tax paid under the explanation to clause 105 of Section 65 of the Finance Act, 1994 for the period prior to 18.04.2006.

Analysis:

Issue 1: Applicability of Rule (2)(1)(d)(iv) of the Service Tax Rules, 1994
The petitioner sought the quashing of the erstwhile explanation to clause (105) to section 65 of the Finance Act, 1994, as well as Rule (2)(1)(d)(iv) of the Service Tax Rules, 1994. The Court noted that the applicability of Rule (2)(1)(d)(iv) is settled to be post 18.04.2006 when Section 66A was introduced in the Finance Act, 1994. The petitioner claimed to have paid Service Tax under the said Rule and explanation to clause 105 of Section 65 from June 2005 to 31.03.2006. Consequently, the Court found the amount paid during this period to be refundable to the petitioner. The prayer for refund of &8377; 69,54,930/- for the period June 2005 to 31.03.2006 was considered valid.

Issue 2: Refund of service tax paid under the explanation to clause 105 of Section 65 of the Finance Act, 1994 for the period prior to 18.04.2006
The Court disposed of the writ petition by directing that the petitioner is entitled to a refund of the service tax paid under the explanation and Rule for the period prior to 18.04.2006 when Section 66A became effective. The Court ordered the refund of the amount paid, subject to certain conditions. The petitioner was required to furnish details of the payments made, ensure that the refund does not result in unjust enrichment, and confirm that the taxes have not been passed on to any other party. The Court mandated the petitioner to provide these details within one week, and upon verification, the refund was to be processed within four weeks thereafter.

In conclusion, the Court granted the petitioner the relief sought in terms of refunding the service tax paid under the explanation to clause 105 of Section 65 of the Finance Act, 1994 for the period prior to 18.04.2006. The judgment emphasized the importance of complying with the specified conditions for the refund to be processed promptly and without unjust enrichment.