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2020 (2) TMI 1256 - AT - Service TaxRefund of service tax - merger arrangement / scheme of amalgamation - who is eligible to claim refund - merged company or amalgamated / resulted company - effective date of amalgamation / merger - HELD THAT - The appellant is engaged in the business of health care services and the another company M/s. Manipal Health System Private Limited is also involved in the business of establishing, promoting or otherwise carrying on the business of running of nursing homes and hospitals. In the normal course of business, appellant availed taxable services from MHSPL on which service tax was paid up to March 2016. Thereafter both the companies entering into the Scheme of Arrangement approved by their respective Board and thereafter filed a petitions before the Hon ble High Court and the Hon ble High Court of Karnataka vide their order dated 04.12.2015 approved the Scheme of Arrangement without making any such changes to the appointed date specified therein. The perusal of the various clauses of the Scheme of Arrangement clearly shows that all the present assets or receivables of the demerged undertaking on or after the appointed date shall be the assets and receivables of the resultant company and the treatment of the taxes, levies, cess etc., paid by the demerged company with regard to the demerged undertaking shall, after appointed date but prior to the effective date i.e., 11.03.2016 be treated and deemed as the tax paid by the resultant company - Further, the conduct of the business with effect from the appointed date until the effective date by demerged company will be in trust for the resultant company. The Hon ble Apex Court has observed in the case of MARSHALL SONS AND COMPANY (INDIA) LIMITED VERSUS INCOME-TAX OFFICER 1996 (11) TMI 6 - SUPREME COURT that it is the date of Amalgamation as presented in the scheme which has to be taken as the transfer date in as much as the Courts approval may be given later. Further the Hon ble Supreme Court has observed that the scheme of amalgamation would not take effect from the date of order sanctioning the scheme but would laid back to the transfer date as presented in the amalgamation scheme. The business carried out by the subsidiary company shall be deemed to have been carried on the business and for and on behalf of the transferee company as such by taking into account the other facts and circumstances of the case, the Court observed that subsequent to the sanction of the scheme, formalities of filling the certified copies of the order before the Registrar of the company, allotment of shares etc may take some time but the date of amalgamation would be the date as presented in the scheme. Appeal allowed - decided in favor of appellant.
Issues Involved:
1. Limitation of time for refund claim. 2. Submission of Chartered Accountant certificate. 3. Proof of not passing on the burden of tax to customers (unjust enrichment). Issue-Wise Detailed Analysis: 1. Limitation of Time for Refund Claim: The appellant filed an application on 16.11.2016 claiming a refund of ?10,41,33,907/- on the grounds that pursuant to the Karnataka High Court's order dated 04.12.2015, the merger/amalgamation became operative from 01.04.2014. The original authority held that the refund claim was within time and not hit by unjust enrichment. The Commissioner of Central Tax, however, set aside this decision, arguing that the scheme becomes operative from the appointed date (01.04.2014) but is effective only from the effective date (11.03.2016). 2. Submission of Chartered Accountant Certificate: The appellant submitted a detailed reply to the show-cause notice, including the Chartered Accountant certificate. The original authority examined this certificate and various case laws cited by the appellant, concluding that the refund was justified. The Commissioner of Central Tax disagreed, leading to the present appeal. 3. Proof of Not Passing on the Burden of Tax to Customers (Unjust Enrichment): The original authority found that the refund was not hit by unjust enrichment, meaning the appellant had not passed the tax burden onto customers. This was contested by the Commissioner of Central Tax, who argued that both companies were separate legal entities at the time of the service tax payment, thus required to discharge their service tax liability. Comprehensive Analysis: The appellant, engaged in health care services, entered into a Scheme of Arrangement with another company, which was approved by the Karnataka High Court on 04.12.2015. The scheme specified the appointed date as 01.04.2014. The appellant argued that from this date, the two companies constituted a single entity, making them eligible for a refund of service tax paid. The Tribunal referred to multiple clauses of the Scheme of Arrangement, which indicated that all assets and liabilities, including taxes paid by the demerged company, would be transferred to the resultant company from the appointed date. The Tribunal also cited the Supreme Court's decision in Marshall Sons & Co. (India) Ltd., which established that the date of amalgamation is the date specified in the scheme unless the court specifies otherwise. The Tribunal found that the original authority correctly allowed the refund based on the appointed date of 01.04.2014, as mentioned in the approved Scheme of Arrangement. The Tribunal emphasized that the appointed date is crucial for determining the merger's legal effect, not the date of completing formalities. The Tribunal concluded that the impugned order by the Commissioner of Central Tax was not sustainable in law. The Tribunal set aside the impugned order, allowing the appeal with consequential relief, if any, following the binding precedents set by the Supreme Court and the Tribunal in similar cases. Conclusion: The Tribunal upheld the original authority's decision to grant the refund, emphasizing the appointed date in the Scheme of Arrangement and the binding judicial precedents. The Tribunal found that the appellant was entitled to the refund, as the merger took effect from the appointed date, making the service tax paid eligible for refund. The appeal was allowed with consequential relief.
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