2023 (3) TMI 1273 - AT - Service Tax

Rejection of Refund of Service Tax - tax deposited by the appellant under a mistaken belief that service tax was leviable on construction of individual independent residential houses - denial of refund of service tax for the reason that the appellant cannot claim benefit of the Exemption Notification dated June 20, 2012 for the period after July 01, 2012 - rejection of refund claim also on the ground of unjust enrichment. HELD THAT - A Division Bench of the Tribunal in AS SIKARWAR VERSUS COMMISSIONER OF CENTRAL EXCISE, INDORE 2012 (11) TMI 1000 - CESTAT, NEW DELHI also observed that service tax can be demanded only if the building concerned has more than 12 residential units in the building and such levy will not apply in cases where one compound has many buildings, each having not more than 12 residential units. 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. The Allahabad High Court in COMMISSIONER OF CUSTOMS CENTRAL EXCISE SERVICE TAX VERSUS M/S. INDIAN FARMERS FERTILIZERS COOPERATIVE LTD. 2014 (7) TMI 891 - ALLAHABAD HIGH COURT held that a refund can be claimed by a person who has borne the incidence of tax. 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. Appeal allowed.

Summary

Issues Involved:
1. Refund of service tax deposited under mistaken belief.
2. Applicability of Exemption Notification dated June 20, 2012.
3. Principles of unjust enrichment.

Detailed Analysis:

1. Refund of Service Tax Deposited Under Mistaken Belief:
The appellant, M/s Quality Builders & Contractor, sought a refund of service tax deposited under the mistaken belief that service tax was leviable on the construction of individual independent residential houses. The refund claims were for three periods: 01.07.2013 to 30.09.2013 (Rs. 84,504), 01.01.2014 to 31.02.2014 (Rs. 25,456), and 01.04.2013 to 30.06.2013 (Rs. 1,90,944). The appellant contended that the houses constructed for the Rajasthan Housing Board were individual units with independent entries and utilities, and hence, not subject to service tax.

2. Applicability of Exemption Notification Dated June 20, 2012:
The appellant argued that the construction of individual/independent residential houses was exempt from service tax under the Exemption Notification dated June 20, 2012, both prior to and after July 01, 2012. The Commissioner (Appeals) denied the exemption for the period after July 01, 2012, stating that the appellant could not claim the benefit of the said notification. However, the Tribunal noted that the definition of "residential complex" under Section 65(91a) of the Finance Act, 1994, includes buildings with more than twelve residential units. The appellant's construction of individual houses did not meet this criterion. The Tribunal referenced previous judgments, including Macro Marvel Projects Ltd. v/s Commissioner of Service Tax, Chennai, and Beriwal Constructions Co. vs Commissioner of Central Excise & Service Tax-II, which supported the appellant's stance that individual residential units were not taxable as "residential complexes."�

3. Principles of Unjust Enrichment:
The Commissioner (Appeals) also rejected the refund claim on the grounds of unjust enrichment, asserting that the appellant had passed on the service tax burden to the Housing Board. The Tribunal disagreed, noting that the work orders specified that the service tax was to be borne by the appellant. The Allahabad High Court's decision in Indian Farmers Fertilizers Coop. Ltd. established that a refund can be claimed by the person who bore the incidence of tax. The Tribunal found that the Housing Board had deducted 50% of the service tax under the reverse charge mechanism from the amount payable to the appellant, further supporting the appellant's claim.

Conclusion:
The Tribunal set aside the Order dated 09.01.2017 passed by the Commissioner (Appeals) and allowed the appeal, concluding that the appellant was entitled to the refund of service tax deposited under mistaken belief, that the construction of individual residential houses was exempt under the Exemption Notification dated June 20, 2012, and that the refund was not hit by the principles of unjust enrichment.