2018 (2) TMI 328 - AT - Service Tax

Refund claim - Due to ignorance of law, the appellant had paid service tax on Inward Legal Services rendered by the advocates for the period March 2012 to March 2013 under reverse charge mechanism - N/N. 25/2012-ST dated 20.06.2012 - denial on the ground of time limitation. Held that - the findings of the Commissioner (Appeals) that the claim is barred by limitation is not sustainable in law as the lower authority has already held that the refund claim is not barred by limitation. The appellant s case is squarely covered by N/N. 25/2012 which exempts service tax levy on advocate services received by business entities with turnover of less than ₹ 10 lakhs. Once an activity is exempted under Section 66B in terms of Exemption N/N. 25/2012, the question of invoking N/N. 30/2012 issued under Section 68(2) dealing with reverse charge mechanism does not arise at all. The Education Guide dated 20.06.2012 issued by CBEC has also stated that exemption is available to business entities with less than turnover of ₹ 10 lakhs in respect of service tax payable under reverse charge mechanism. Matter remanded for verification of documents - appeal allowed by way of remand.

Summary

Issues:
Appeal against dismissal of refund claim based on payment of service tax under reverse charge mechanism due to ignorance of law and exemption eligibility.

Analysis:
The appellant, a business entity with nil turnover, erroneously paid service tax on Inward Legal Services under reverse charge mechanism. A refund claim was filed seeking ?8,47,972, stating they were exempt from service tax due to turnover limits during 2011-2013. The adjudicating authority initially rejected the refund claim based on limitation and unjust enrichment, but allowed it citing a High Court decision. However, the claim was ultimately rejected by the Commissioner on similar grounds, leading to the present appeal.

During the hearing, the appellant argued against the limitation imposed on the refund claim, citing legal provisions and exemptions under Notification No. 25/2012. They emphasized that once an activity is exempted under Section 66B, no tax can be levied under reverse charge mechanism. The appellant provided evidence of nil turnover and compliance with relevant notifications, disputing the Commissioner's reliance on a different notification.

The Appellate Tribunal found the Commissioner's decision unsustainable, noting the original authority's ruling on limitation and the appellant's eligibility for exemption under Notification No. 25/2012. Citing a Bombay High Court case, the Tribunal clarified that the exemption prevails over the reverse charge mechanism, emphasizing the availability of exemption for entities with turnover below ?10 lakhs. The Tribunal also highlighted discrepancies in the Commissioner's findings regarding submission of original documents and upheld the appellant's claim for a refund, directing the original authority to verify documents before sanctioning the refund.

In conclusion, the Tribunal allowed the appeal, setting aside the Commissioner's order and directing the original authority to process the refund claim in accordance with the law. The judgment emphasized the applicability of exemption notifications and the incorrect imposition of limitations on the refund claim, providing relief to the appellant based on legal provisions and judicial precedents.