2020 (9) TMI 344 - AT - Service Tax

Refund of Advance Service tax paid - refund claimed on the ground that there was absolutely no service provided - Rule 6 (3) of the Service Tax Rules, 1994 - Time Limitation. When advance amount is paid for a service and such service could not be provided due to amalgamation, whether Section 11B ibid. applies when refund of the above amount is claimed? - HELD THAT - There is no dispute as to the eligibility or otherwise for refund except the claim being rejected as barred by limitation. There is also no dispute that both the service provider and the service recipient having merged into a single entity, there was no service provider or service receiver. Hence, the service for which the agreement was signed could not be provided also since the same would have amounted to providing a service to the self. Further, even Rule 3 of the Point of Taxation Rules, 2011 will have no role since the same would not apply to the case of service to the self. Section 66B of the Finance Act, 1994, which is the charging Section, requires the levy of Service Tax on the value of services other than the services specified in the Negative List, provided or agreed to be provided, by one person to another. Subsequent to the amalgamation in this case, there remained only one person for having provided service to himself/itself. Where an agreed service could not be provided either wholly or partially; that the Rule 6 (3) of the Service Tax Rules, in such a situation, permits the assessee to take credit of such excess Service Tax paid which falls under a separate category by itself, as a deposit and hence, loses the characteristics of tax , for which reason provisions of Section 11B ibid. are not attracted. There is also no dispute that even the ST-3 return itself recognizes this aspect by providing a separate column for taking credit without any time-limit and without even any reference to cash or credit, thereby enabling the taxpayer to set off the credit so taken against any tax liability. Unjust Enrichment - HELD THAT - The Revenue has not alleged unjust enrichment. When the amount loses the character of Service Tax, it could only be treated as a deposit, as held in innumerable precedents, which becomes an item for adjustment in terms of Rule 6 (3) ibid., since no service could ever be provided. Thus, the provisions of Rule 6 (3) would only apply and not the provisions of Section 11B ibid. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Challenging denial of refund due to amalgamation affecting service provision; Interpretation of Section 11B of Central Excise Act, 1944 regarding refund claim limitation; Applicability of Rule 6 (3) of the Service Tax Rules, 1994 in case of service not provided post-amalgamation.

Analysis:
The judgment revolves around the denial of a refund claim by the appellant due to an amalgamation that impacted the provision of services. The appellant, an Amalgamated Company, sought a refund of the advance payment made for a service that could not be provided post-merger. The key issue was whether Section 11B of the Central Excise Act, 1944 applies when a service provider merges with the service recipient, rendering service provision impossible.

The Adjudicating Authority rejected the refund claim citing limitation under Section 11B, as the refund application was filed after the prescribed one-year period. The Commissioner of G.S.T. and Central Excise upheld this decision. The central question was whether the advance payment, now losing its identity as Service Tax due to the merger, qualifies for a refund under Section 11B.

The Member (Judicial) analyzed the situation and concluded that the refund claim rejection was unjustified. The amalgamation resulted in a single entity, making service provision to oneself impossible. The Member highlighted Rule 6 (3) of the Service Tax Rules, which allows for credit of excess Service Tax paid in cases where services are not provided. This rule treats the excess payment as a deposit, distinct from regular tax, and not subject to Section 11B limitations.

The judgment emphasized that the Revenue did not raise concerns about unjust enrichment. The amount, now resembling a deposit, was deemed eligible for adjustment under Rule 6 (3), as no service could be rendered post-amalgamation. The Member found support for this interpretation in various legal precedents cited by the appellant, ultimately allowing the appeal and granting consequential benefits as per the law.

In conclusion, the judgment set aside the impugned order, ruling in favor of the appellant's refund claim. The decision was based on the application of Rule 6 (3) in the unique scenario of service impossibility post-amalgamation, where Section 11B limitations did not apply.