2022 (10) TMI 427 - AT - Service Tax

Refund of service tax - amount said to have been deposited by mistake on construction of individual/independent residential houses - period from 01.04.2013 to 31.03.2014 - reverse charge mechanism - denial of refund of service tax paid for the reason that the appellant would not be entitled to claim benefit of the Exemption Notification dated June 20, 2012 - HELD THAT - It is true that w.e.f July 01, 2012 construction of complex‟ is a declared service, but the Exemption Notification exempts services by way of construction, erection, commissioning or installation of original works pertaining to a single residential unit otherwise than as a part of a residential complex have been exempted - the Commissioner (Appeals) was not justified in holding that the appellant would not be entitled to the benefit of the Exemption Notification. The Commissioner (Appeals) was also not justified in holding that the refund was hit by the principles of unjust enrichment. As per the work orders, service tax was to be borne by the appellant and the Commissioner (Appeals) has also found, as a fact, that the contract awarded by the Housing Board to the appellant mentions that service tax shall be borne by the contractor - Even in accordance with the Exemption Notification dated June 20, 2012, 50% of the tax to be deposited by the Housing Board under the reverse charge mechanism was deducted by the Housing Board from the amount payable to the appellant. The Commissioner (Appeals) was, therefore, not justified in rejecting the refund claim of the appellant on the ground of unjust enrichment. Relevancy of documents submitted with the refund claims - HELD THAT - The appellant had submitted with the refund applications copies of work orders against which work was done during the refund period, ST-3 returns of the relevant period, Form 26AS, VAT-41, copies of challans and copies of running bills prepared by the Housing Board showing deduction of service tax out of amount paid to the appellant. Further, the total tax deposited by the appellant and also deducted by the Housing Board is far more and more than the refund claim and that the appellant had claimed refund only in respect of tax deposited on construction of individual houses and corresponding tax deducted by the Housing Board on such construction. The order dated August 04, 2016 passed by the Commissioner (Appeals), therefore, cannot be sustained and is set aside - Appeal allowed.

Summary

Issues Involved:
1. Entitlement to refund of service tax deposited by mistake on construction of individual/independent residential houses.
2. Applicability of exemption under Notification No. 25/2012-ST dated June 20, 2012.
3. Consideration of unjust enrichment in the refund claim.
4. Relevance and adequacy of documents submitted with the refund claims.

Detailed Analysis:

1. Entitlement to Refund of Service Tax Deposited by Mistake:
The core issue across all four appeals is whether the appellant is entitled to a refund of service tax mistakenly deposited on the construction of individual/independent residential houses from April 1, 2013, to March 31, 2014. The appellant argued that the construction of such houses was not subject to service tax, both prior to and post-July 1, 2012, as per the Exemption Notification dated June 20, 2012. The Commissioner (Appeals) rejected the refund claims, asserting that the houses were part of a residential complex and thus taxable.

2. Applicability of Exemption under Notification No. 25/2012-ST:
The appellant contended that the constructed houses were independent residential units with separate entries and utilities, making them eligible for exemption under the Notification No. 25/2012-ST. The Commissioner (Appeals) disagreed, stating that the construction involved multiple houses in the same premises, thus forming a residential complex subject to service tax. The Tribunal, however, found that the definition of "residential complex" prior to July 1, 2012, required more than twelve residential units in a single building or complex. Post-July 1, 2012, the definition changed to more than one residential unit in a complex. The Tribunal accepted the appellant's submission that the houses constructed were independent units and not part of a residential complex, referencing several precedents, including Macro Marvel Projects Ltd. and Beriwal Constructions Co., which supported the appellant's interpretation.

3. Consideration of Unjust Enrichment:
The Commissioner (Appeals) also rejected the refund claims on the grounds of unjust enrichment, arguing that the service tax was included in the contract amount and thus passed on to the Housing Board. The Tribunal overturned this, noting that the service tax was to be borne by the appellant as per the work orders, and the Housing Board had deducted 50% of the service tax under the reverse charge mechanism from the payments to the appellant. The Tribunal cited the Allahabad High Court's judgment in Indian Farmers Fertilizers Coop. Ltd., which established that a refund could be claimed by the person who bore the tax incidence.

4. Relevance and Adequacy of Documents Submitted with the Refund Claims:
The Tribunal addressed the Commissioner (Appeals)'s concerns about the lack of crucial documents like photographs and designs. It was noted that the appellant had submitted comprehensive documentation, including work orders, ST-3 returns, Form 26AS, VAT-41, challans, and running bills showing the deduction of service tax by the Housing Board. The Tribunal found these documents sufficient to substantiate the refund claims.

Conclusion:
The Tribunal concluded that the appellant was entitled to the refund of service tax deposited by mistake, as the constructed houses were independent residential units and not part of a taxable residential complex. The rejection of the refund claims on the grounds of unjust enrichment was also overturned. The order dated August 4, 2016, by the Commissioner (Appeals) was set aside, and the appellant was granted the refund in accordance with the law. All four appeals were allowed.