2023 (4) TMI 9 - AT - Service Tax

Refund of Service Tax - amount deposited by mistake for construction of individual/ independent residential houses - period July 01, 2012 to December 31, 2013 - appellant contends that the houses constructed by it for the Rajasthan Housing Board will not be covered by the definition of a residential complex and, therefore, would not be taxable as the contract executed with the Housing Board was not in relation to construction of a complex - principles 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 - Commissioner (Appeals) was, therefore, not justified in rejecting the refund claim of the appellant on the ground of unjust enrichment. Appeal allowed.

Summary

Issues Involved:
1. Refund of service tax deposited by mistake for construction of individual/independent residential houses.
2. Applicability of unjust enrichment principle.
3. Limitation period for refund claims.

Issue-wise Detailed Analysis:

1. Refund of Service Tax Deposited by Mistake:
The appellant sought the refund of service tax deposited by mistake for constructing individual/independent residential houses from July 01, 2012 to December 31, 2013. The Commissioner (Appeals) rejected the refund claims, stating that the service tax was payable prior to July 01, 2012, and had not been exempted from that date. The appellant argued that the construction of individual/independent residential houses was not taxable before July 01, 2012, and was exempted under the Notification dated June 20, 2012. The Tribunal examined the definitions under the Finance Act, 1994, and concluded that independent buildings with twelve or fewer residential units do not fall under the definition of a "residential complex" and are therefore not taxable. This was supported by previous Tribunal decisions in Macro Marvel Projects Ltd., Lakhlan & Qureshi Construction Company, Beriwal Constructions Co., and Quality Builders & Contractor, which established that individual residential units are not subject to service tax if they do not form part of a residential complex with more than twelve units.

2. Applicability of Unjust Enrichment Principle:
The Commissioner (Appeals) held that the refunds were hit by the principle of unjust enrichment, as the work orders were inclusive of service tax. However, the Tribunal found that the service tax was to be borne by the appellant as per the work orders, and the Rajasthan Housing Board deducted 50% of the service tax under the reverse charge mechanism from the amount payable to the appellant. The Tribunal referred to the Allahabad High Court's decision in Indian Farmers Fertilizers Coop. Ltd., which allowed refunds to persons who bore the incidence of tax. Therefore, the Tribunal concluded that the refund claims were not affected by unjust enrichment.

3. Limitation Period for Refund Claims:
In Service Tax Appeal No. 50524 of 2017, the issue of limitation was raised. The Tribunal referred to its decision in Service Tax Appeal No. 30781 of 2018 (M/s. Credible Engineering Construction Projects Limited), which held that the limitation prescribed under section 11B of the Excise Act does not apply if an amount is paid under a mistaken notion, as it is not required to be paid towards any duty/tax. Thus, the Tribunal found that the refund claim was not barred by limitation.

Conclusion:
The Tribunal set aside the order dated November 28, 2016, passed by the Commissioner (Appeals), and allowed all four service tax appeals. The Tribunal concluded that the construction of individual/independent residential houses was not taxable, the refunds were not hit by unjust enrichment, and the refund claims were not barred by limitation.