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2021 (2) TMI 774 - AT - Service TaxTaxability - Construction services or not - construction service to the Government of Madhya Pradesh through the nodal agency - Madhya Pradesh State Cooperative Marketing Federation Ltd. (MP MARKFED), being funded by the Government of India towards Drought Mitigation Scheme - service provided to the State Government - refund of service tax paid erroneously - time limitation under Section 11B of the Central Excise Act - HELD THAT - In view of the difference of opinion, the following question arise for consideration by learned 3rd Member (1) Whether the limitation prescribed under Section 11B of the Central Excise Act will not be applicable as the tax was paid erroneously though eligible to exemption and as such is in the nature of deposit and hence limitation is not attracted as held by Member (Judicial) following the ruling of Hon ble Karnataka High Court in COMMISSIONER OF CENTRAL EXCISE (APPEALS), BANGALORE VERSUS KVR CONSTRUCTION 2012 (7) TMI 22 - KARNATAKA HIGH COURT affirmed by Hon ble Supreme Court in COMMISSIONER VERSUS KVR CONSTRUCTION 2011 (7) TMI 1334 - SC ORDER . OR Limitation prescribed under Section 11B is applicable as held by Member (Technical) in view of the ruling of Hon ble Supreme Court in MAFATLAL INDUSTRIES LTD. VERSUS UNION OF INDIA 1996 (12) TMI 50 - SUPREME COURT . Registry is directed to put up the appeal record before Hon ble President for nomination of 3rd member to consider the aforesaid questions and difference of opinion for his opinion.
Issues Involved:
1. Whether the services provided by the appellant to the Government of Madhya Pradesh through MP MARKFED are exempt from service tax. 2. If the service tax paid erroneously is refundable, whether the refund claim is barred by limitation under Section 11B of the Central Excise Act. Issue-wise Detailed Analysis: 1. Exemption from Service Tax: The appellant provided construction services to the Government of Madhya Pradesh through MP MARKFED, funded by the Government of India for the Drought Mitigation Scheme. Initially, the appellant paid service tax under the mistaken belief that it was required. Later, they claimed exemption under Notification No. 25/2012-ST dated 20.6.2012 [Sl. No. 12(a)], which exempts construction services provided to the Government or Government authorities from service tax. The Department accepted this exemption for the period after July 2014, as no service tax was paid, and no demand was raised. The appellant filed a refund claim for the service tax paid earlier. The adjudicating authority rejected the refund claim, stating that MP MARKFED is not a Government or Government authority. The Commissioner (Appeals) upheld this decision, noting that services provided to MP MARKFED do not fall under the exempted category. However, the Tribunal found that MP MARKFED acted as a nodal agency for the State Government, and the construction services were for the State Government. Therefore, the services provided by the appellant were exempt from service tax under Notification No. 25/2012-ST. 2. Limitation under Section 11B: The appellant argued that the service tax paid by mistake should be treated as a deposit, not as tax, and thus, the limitation under Section 11B of the Central Excise Act should not apply. They cited the Karnataka High Court ruling in Commissioner of Central Excise (Appeals), Bangalore Vs. KBR Construction, which held that amounts paid under a mistaken notion do not constitute tax and are not subject to Section 11B's limitation. The adjudicating authority and the Commissioner (Appeals) rejected this argument, stating that the refund claim is barred by the one-year limitation period under Section 11B. The Tribunal, relying on the Karnataka High Court ruling, held that the amount paid erroneously is in the nature of a deposit, not tax, and thus, the limitation under Section 11B does not apply. Consequently, the refund claim is not time-barred. Separate Judgments Delivered: Member (Judicial): Agreed that the appellant is entitled to a refund on merits and that the limitation under Section 11B does not apply, following the Karnataka High Court ruling. Member (Technical): Disagreed, stating that the limitation under Section 11B should apply, as per the Supreme Court ruling in Mafatlal Industries Ltd vs UOI, which mandates that all refund claims must be processed under the provisions of the respective enactment, including the limitation period. Conclusion: The Tribunal allowed the appeal, directing the adjudicating authority to grant the refund with interest, holding that the services provided were exempt from service tax and the refund claim was not barred by limitation. However, due to the difference of opinion between the Judicial and Technical Members regarding the applicability of Section 11B's limitation, the matter was referred to the President for nomination of a third member to resolve the issue.
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