2019 (11) TMI 1205 - AT - Service Tax

Refund claim - retrospective exemption accorded to the activity rendered in a works contract awarded by Jawaharlal Nehru Port Trust - principles of unjust enrichment - HELD THAT - The issue of whether any claim for refund has been preferred by the two sub-contractors who included the tax in the invoice raised on the respondent herein or had availed benefits is, in our opinion, too vague on allegation to be raised at this juncture. There is no essaying of any facts, or even speculation, on the nature, and extent, of benefits that could be availed. The Tribunal is not to be expected to either undertake an enquiry, or direct any of the lower authorities to proceed in that direction merely on the basis of apprehensions entertained by the Committee of Commissioners. Appropriately, a responsible approach on the part of the Committee would have been to enunciate some facts that could reasonably lead to such conclusion. In the absence thereof, this ground is not tenable. In fact, the apprehension that appears to have led by the Committee on that path is apparent from reference to the amount involved in the refund, superfluous though it be. The withdrawal of the exemption for a limited period was considered to be crucial enough for reconsideration and it is with full authority of Parliament that the exemption was not only restored but refund of amount already paid legislated upon Appeal dismissed.

Issues:
1. Refund of tax liability based on retrospective exemption in a works contract.
2. Eligibility for refund claim by the respondent as the person bearing the tax incidence.
3. Compliance with certification requirements of the exemption notification.
4. Allegations of capitalization and amortization of the tax amount for benefit availed.
5. Examination of accounting treatment and downstream benefits of capitalization.
6. Safeguards in place for excluding costs in the determination of actual rates chargeable.

Analysis:
1. The appeal pertains to the refund of tax liability amounting to ?48,61,75,921 sanctioned to the respondent based on retrospective exemption in a works contract awarded by Jawaharlal Nehru Port Trust. The tax liability was discharged for the period from 1st May 2015 to 29th February 2016, with changes in exemption notifications affecting the tax treatment during this period.

2. The respondent filed a claim for refund, including amounts payable to subcontractors, asserting eligibility as the entity bearing the tax incidence despite the subcontractors discharging the tax liability. The authorities examined the eligibility criteria and the concept of unjust enrichment before sanctioning the refund.

3. The certification requirements of the exemption notification were scrutinized, with the Tribunal finding compliance with the certification prescribed in the exemption notification. The attestation of the certificate by the competent authority sufficed as compliance, even though the form or manner of authentication was not explicitly specified.

4. Allegations were made regarding the capitalization and amortization of the tax amount for potential benefits, such as higher depreciation passed on as costs to customers. The Tribunal clarified that no amortization had taken place, and the accounting treatment reflected the refund amount as 'dues from the government of service tax refund receivable.'

5. The examination of accounting treatment and downstream benefits of capitalization revealed that the refund claim was not associated with amortization or capitalization, as the commencement of commercial operation had not occurred at the time of the refund claim. The Tribunal dismissed concerns regarding potential downstream benefits of capitalization.

6. The Tribunal highlighted the safeguards in place for excluding costs in the determination of actual rates chargeable from customers by the Tariff Authority on Major Ports (TAMP). The charges were computed on a 'cost plus' basis, ensuring that non-cost amounts were excluded from the calculation. Considering the findings and the absence of tenable grounds for appeal, the Tribunal dismissed the appeal, affirming the lower authorities' orders.

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