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2022 (8) TMI 640 - HC - Service TaxTime Limitation - Cash Refund of Service Tax paid - Service Tax paid against service to be provided which was not so provided when the advances were returned to the customers - provisions of Section 76 of the Finance Act, 1994 and Rule 6(3) of the Service Tax Rules, 1994 ignored - refund of Service Tax when no taxable service was provided and the payment of service tax was a mistake of law - time limitation - relevant date for computation of the limitation period under Section 11 B of the Central Excise Act, 1944 should be reckoned from the date of cancellation of the agreement to provide the taxable service since the cause of action for refund of service tax arises only on cancellation of the agreement to provide taxable service? HELD THAT - Admittedly, the GST Act has come into force w.e.f., 01.07.2017. It is not in dispute that agreements with three prospective purchasers have been cancelled during 2017. The writ petition filed against cancellation of No Objection by HAL has been disposed on 29.5.2020. It is obvious that if a project does not commence, the flat buyers might seek cancellation of agreements as they cannot wait indefinitely. The refunds have been made in July 2017 and the application has been filed in August, 2017. Section 142(5) of the GST Act makes it clear that the claim for refund must be processed notwithstanding anything contrary contained in Section 11B of the Central Excise Act. The respondent is directed to consider the application and refund the amount within an outer limit of three months from the date of receipt of a copy of this judgment - appeal allowed.
Issues:
1. Refund of Service Tax against service not provided 2. Rejection of refund claim based on limitation period 3. Applicability of Section 11B of the Central Excise Act, 1944 4. Relevant date for limitation period computation Issue 1: Refund of Service Tax against service not provided The appellant sought a refund of Service Tax paid for services not provided when advances were returned to customers. The contention was that the appellant was eligible for credit under Rule 6(3) of the Service Tax Rules, 1994, and entitled to a cash refund under Section 142(3) & (5) of the CGST Act, 2017. The Tribunal's decision to reject this claim was challenged. Issue 2: Rejection of refund claim based on limitation period The Tribunal rejected the refund claim citing the absence of taxable service provided, overlooking Section 76 of the Finance Act, 1994, and focusing solely on the limitation period from Section 11B of the Central Excise Act, 1944. The appellant did not press this issue during the appeal. Issue 3: Applicability of Section 11B of the Central Excise Act, 1944 The Tribunal's rejection of the refund claim was based on the applicability of Section 11B of the Central Excise Act, 1944, due to the absence of taxable service provided. The appellant argued against this application of the limitation provisions. Issue 4: Relevant date for limitation period computation A crucial question arose regarding the computation of the limitation period under Section 11B of the Central Excise Act, 1944. The appellant argued that the relevant date should be from the cancellation of the agreement to provide taxable service, as the cause of action for the refund of service tax arises only upon such cancellation. In a case involving a builder who had obtained necessary clearances for a residential project, the High Court of Karnataka examined the refund claim of Service Tax paid when agreements with prospective buyers were canceled. The appellant's refund application was initially rejected on grounds of limitation under Section 11B of the Central Excise Act, 1944. The appellant contended that Section 142(5) of the GST Act, 2017, allowed for refund processing despite the limitations of Section 11B. The Court, citing relevant legal precedents, emphasized the obligation to refund erroneously collected amounts. Consequently, the Court allowed the appeal, setting aside the Tribunal's decision and directing the refund consideration within three months.
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