2020 (12) TMI 700 - AT - Service Tax

Refund of Service Tax paid under protest - contribution received from members of a co-operative housing society - Rejection of refund claim on the ground that appeal is pending in the Hon'ble Supreme Court against the cited judgment gives an impression that orders of the Tribunal are to be disregarded after filing of the appeal - Principles of natural justice - SCN not issued to appellant before rejection order - HELD THAT - Rejection of refund claim by him on the ground that appeal is pending in the Hon'ble Supreme Court against the cited judgment gives an impression that orders of the Tribunal are to be disregarded after filing of the appeal . It appears that he was empowered to violate the principles set by the Tribunal, once the same had been challenged in an appellate forum despite the settled principle of law that such an order has to be respected unless and until the same is set aside - learned Commissioner (Appeals) had gone on a different ground basing on the Circular No. 175/01/2014-ST and Notification No. 25/2012-ST Sr. No. 28 (c) that has clearly demonstrated that such Residential Welfare Association (RWA) must be a non-profit entity and collecting a contribution within monetary celling of ₹ 5000/- prescribed in the said notification though without expressing in clear language that in fulfilling such conditions only, doctrine of mutuality would be respected. As found from the case record, appellant was not even issued with a show-cause notice before rejection of such refund claim, for which appellant also raised the issue of violation of principles of natural justice as a ground for setting aside the Order-in-Original before Commissioner (Appeals). Compliance of such a requirement would have enabled the appellant to establish per head contribution of members to RWA and if such constitution is non-profit in nature. This is a fit case that requires to be re-adjudicated by the Commissioner (Appeals) who is equally empowered under Section 35A(3) of the Central Excise Act, 1944, applicable to Service Tax matters too, to make an inquiry himself and arrive at a finding - appeal is allowed by way of remand to the Commissioner (Appeals).

Summary

Issues:
Refund claim rejection on Service Tax paid under protest from contributions of a co-operative housing society.

Analysis:
The appellant filed a refund claim for Service Tax paid under protest from contributions collected from members of a housing society. The claim was rejected by the Deputy Commissioner and subsequently by the Commissioner of GST & CX (Appeals-I), leading to the appeal before CESTAT. The appellant's counsel cited legal precedents, including a Supreme Court judgment and a Tribunal order, to argue that the contributions cannot be considered a service for a consideration, hence not liable for Service Tax. The respondent's representative defended the order passed by the Commissioner of GST & CX (Appeals-I) by referring to specific exemptions for housing societies in a notification. The Tribunal found the adjudicating authority's order to be cryptic and lacking regard for judicial precedents. It criticized the rejection of the refund claim based on a pending appeal in the Supreme Court, stating that Tribunal orders should be respected unless set aside. The Commissioner (Appeals) based his decision on a circular and notification, emphasizing the non-profit nature and monetary ceiling of contributions. The Tribunal noted the absence of a show-cause notice before rejecting the refund claim, highlighting a violation of natural justice principles. It deemed the case fit for re-adjudication by the Commissioner (Appeals) under Section 35A(3) of the Central Excise Act, leading to the appeal being allowed for remand.

The appeal was allowed by remanding the case to the Commissioner (Appeals), setting aside the earlier order. The Tribunal emphasized the need for a re-adjudication by the Commissioner (Appeals) to consider the issues of natural justice, compliance with notification requirements, and the non-profit nature of the housing society. The order was pronounced in open court on 16.12.2020.