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TMI Blog2014 (9) TMI 597X X X X Extracts X X X X X X X X Extracts X X X X ..... s not payable. It remains a tax collected in accordance with law and can be refunded under the provisions of the relevant law. - provisions of section 11B are applicable. - Decided against the assessee. Claim of refund by the service recipient (buyers) - revenue contended that refund can be made only when the claimant shows that the tax has been paid to the Government. - Held that:- Nowhere we find the word 'government' in relation to the refund claim made by a buyer under the section and Section does not provide that only when there is evidence to show that tax has been paid to the Government refund would be admissible to the buyer of the goods/services. - it is sufficient if the buyer shows that he has paid the service tax to the registered service/goods suppliers/providers and there is evidence to the effect that the service tax has been collected from him by the registered service provider. - Decided against the revenue. Determination of relevant date for claiming refund - whether the service tax which was assessed by an assessee and paid to the Government can be considered as covered under the provisions of Section 73A at all. - Held that:- the provisions for refund in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 011, ST/2176/2011, ST/2179/2011, ST/2182/2011, ST/2183/2011, ST/2190/2011, ST/2191/2011, ST/2206/2011, ST/2209/2011-ST/2213/2011, ST/2220/2011, ST/2224/2011, ST/2228/2011, ST/2231/2011, ST/2244/2011, ST/2252/2011, ST/2267/2011, ST/2268/2011, ST/2270/2011, ST/2271/2011, ST/2275/2011, ST/2276/2011, ST/2277/2011, ST/2278/2011, ST/2279/2011, ST/2283/2011, ST/2295/2011, ST/2299/2011, ST/2300/2011, ST /3155/2012, ST/3156/2012, ST/3158/2012, ST/3159/2012, ST/3421/2012, ST/3422/2012, ST/3423/2012 B S V Murthy and S K Mohanty, JJ. For the Appellant : Mr Rajesh Kumar, CA; Mr M S Nagaraja, Mr Raghuraman, Mr B Venugopal Mr Pradyumna GH, Adv. For the Respondent : Mr S K Singh, Commissioner (AR); Mr A K Nigam, Addl. Commissioner (AR); Mr R Gurunathan, Addl. Commissioner (AR); Mr S Teli, Asst. Commissioner (AR) and Mr N Jagdish, Supdt. (AR) JUDGEMENT Per B S V Murthy: In all these appeals, the issue involved is common and therefore a decision was taken to club all these appeals and hear them together so that all the issues can be dealt with and discussed in detail. In all these cases, purchasers of apartments/flats/residences from builders or developers have filed r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of flat/apartment in a residential complex is entered into between the builder/developer with a purchaser, the service provided till the actual sale takes place and the possession is given is considered as residential complex service. This is in view of the explanation introduced and reproduced above. The issue is only whether prior to 01.07.2010 when a builder/developer entered into a construction agreement with purchaser which requires payment of amounts as per the progress of construction or in installments, is there a liability to pay service tax on the builder/developer or not. There could be separate agreement for sale of undivided share of the land and after registration of undivided share of land, construction of flat can take place under a separate agreement. In both the situations, the builders/developers paid the tax to the department and now the buyers have claimed refunds from the department which is the issue before us. 4. The taxability of this transaction has been the subject matter of litigation and there are several decisions on this issue. Reliance was placed on behalf of the appellants on the decisions in the case of Krishna Homes Vs CCE Bhopal 2014-TIOL-402 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material as well as service, it amounts to works contract service and therefore does not come under the residential complex service at all and therefore it would be leviable to tax as a works contract. This view was clearly negated by the Tribunal in the case of Krishna Homes (supra). In fact, the decision in the case of Krishna Homes considered besides the above issue relating to works contract, all other submissions and the precedent decisions and in para 8 came to the conclusion that prior to 01.07.2010 there is no liability to pay service tax and for better appreciation this paragraph is reproduced below: 8. Coming first to the question as to whether the activity of M/s Krishna Homes and M/s Raj Homes was taxable during the period of dispute or not, by Finance Act, 2005, Clause (ZZZh) was introduced into Section 65 (105) of Finance Act, 1994, so as to bring within the purview of the term 'taxable service', a service provided or to be provided to any person by any other person In relation to construction of complex . The expression construction of complex was defined in sub-Section (30a) of Section 65 and accordingly this expression covered - (a) construct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... romoter/developer under construction of complex service falling under Section 65 (105) (ZZZh) of the Finance Act, 1994 and that if no person is engaged by the builder, promoter, developer for construction work who undertakes construction work on his own without engaging the services of any other person than in such cases, in absence of the service provider and service recipient relationship, the question of providing taxable service to any person by any other person does not arise. W.e.f. 01/7/10 an explanation was added to Section (105) ( ZZZh ) which was as under :- Explanation - For the purposes of this sub-clause, the construction of a new building which is intended for sale, wholly or partly, by a builder or any person authorized by the builder before, during or after construction (except in cases for which no sum is received from or on behalf of the prospective buyer by the builder or the person authorized by the builder before grant of completion certificate by the authority competent to issue such certificate under any law for the time being in force) shall be deemed to be service provided by the builder to the buyer.] Thus, in terms of this explana ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agreement for sale of undivided share of land and separate agreement for construction, the situation will be different. 8. The learned Commissioner (A.R.) on behalf of the Revenue submitted that no doubt there are several decisions on this issue and the Board Circulars also have taken such a view but yet he submitted that the provisions of Registration Act and Transfer of Property Act have not been taken into account in any of the decisions or in any of the Circulars till date. 9. In his opinion, the provisions in these two enactments when read with the Circular issued in 2009, make it clear that there was liability for taxation prior to 01.07.2010. Even though the principles of judicial discipline requires us to follow the precedent decisions and there are decisions of High Courts and a decision of the Tribunal, yet we feel it appropriate that this issue has to be dealt with since it has been presented before us and cannot be ignored and is a point which has never been considered in any decision and so far has not been raised before any forum. Learned A.R. referred to paragraph-3 of the Circular issued in 2009. He drew our attention to the words generally, transfer of prope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest to the extent of the amount he has paid and therefore it cannot be said that the seller retains the possession or the right over property till the entire amount is paid and sale deed is executed. Therefore, he submits that this cannot be considered as a self-service. The buyer has already acquired an interest in the property as soon as he makes the payment of the first installment and finally when the sale deed takes place and it gets registered also. Also the date of registration is not the date for the purpose of determination as to who is the owner. Therefore, he submits that this cannot be considered as self-service and therefore the circular issued in 2009 would not be applicable to the facts of this case. 14. We have considered these submissions. Even though the circular supports the case of the appellant and treats the service as a self-service of the builder/developer, in our opinion, the definition of service which we have considered earlier is relevant. Prior to 01.07.2010, what was liable to be taxed was only the construction of a residential complex service. Construction of residential flats for an individual entered into the taxability area only after the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... builder/developer constructs a complex and enters into an agreement to sell such flats/residence to the customers even before their completion, he is rendering a service to the purchasers. There cannot be a dispute on this issue. It is felt that both are definitely services. The first one is construction of residential complex service and the second one was not covered by the residential complex service because the definition did not include the nature of services provided by the builder/developer to the individual. The second one can be called as construction of flat/residence service which is now covered by the definition by introducing words 'part of the complex'. Now both the services are liable to tax. 16.1 Before concluding our observations on taxability, it is necessary to cover another issue that was raised before us. In some cases refund claims have been rejected on the ground that even if the Board Circular is to be followed and the service is considered non-taxable according to the definition as it existed prior to 01.07.2010, the explanation introduced to the definition on 01.07.2010 has retrospective effect and therefore the service is taxable prior to that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... even denying the nature of construction/ services rendered by the petitioner was exempted from to payment of Service Tax. What one has to see is whether the amount paid by petitioner under mistaken notion was payable by the petitioner. Though under Finance Act, 1994 such service tax was payable by virtue of notification, they were not liable to pay, as there was exemption to pay such tax because of the nature of the institution for which they have made construction and rendered services. In other words, if the respondent had not paid those amounts, the authority could not have demanded the petitioner to make such payment. In other words, authority lacked authority to levy and collect such service tax. In case, the department was to demand such payments, petitioner could have challenged it as unconstitutional and without authority of law. If we look at the converse, we find mere payment of amount, would not authorize the department to regularize such payment. When once the department had no authority to demand service tax from the respondent because of its circular dated 17.09.2004, the payment made by the respondent company would not partake the character of service tax liable t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e High Court was considering an appeal filed by the appellants in respect of refund claim under Section 11B of the Act and therefore this decision has to be preferred to KVR Construction Ltd. decision. In MCI Leasing, the relevant portion of the paragraph 4 is reproduced below: 4. The learned counsel appearing for the assessee assailing the impugned order contended that admittedly the assessee was not liable to pay service tax under the Act. By mistake the said amount is paid. Therefore the amount paid and the amount claimed as refund is not an amount which falls within the Finance Act, 1994. It is only in respect of amounts which are paid under the Act, the amounts which are due under the Act, the period of limitation prescribed under Section 11B is attracted and therefore he submits that the authorities were not justified in holding that the claim for refund beyond the period of one year was barred by time. In respect of his contentions he relied on the judgment of the Division Bench of this Court in Writ Appeal No. 2992-93/2009 where this Court has held that if the amount due claimed as refund did not fall within the Act, the provisions of Section 11 B are not attracted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sidering the appeal and on the one hand they felt that refund should be granted and on the other hand they found under the provisions of Section 11B of the Act, it cannot be given. It is his submission that therefore the Hon'ble High Court chose to grant refund by exercising the writ jurisdiction and it is his submission that this cannot be considered as a ratio decidendi to apply the provisions of Limitation Act for refund claims made under Section 11B of the Act. 21. In our opinion, since the decision in the KVR Construction is one rendered on a writ appeal, it may not be appropriate for us to apply this decision to the present cases before us. Further we are also conscious on the fact that in the subsequent paragraphs we are going to rely upon a Supreme Court decision which again requires us not to consider this decision in view of the decision of the Apex Court. Moreover there can be a danger in applying decisions in writ petitions to normal appeals before us. We are conscious of the fact that in several instances high courts have refused to interfere but have directed the petitioners to exhaust the remedy available to them. Question arises whether we should apply those ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... find that decision in the case of ITC Ltd. is not applicable to the present cases because the Section 11B as it exists today was not the one under consideration by the Hon'ble Supreme Court during the relevant time. Moreover in that case duty was recovered by assessment by proper officer before removal and there was no self-assessment. In that case a view could be entertained that duty was recovered which is not the case here. 24. At this stage we have to take note of the fact that a Single Member Bench of this Tribunal in the case of CCE, Pune-III Vs. Beharay Rathi Constructions reported in [2009 (14) S.T.R. 246 (Tri.-Mum.)] had considered the issue as to whether limitation under Section 11B of the Act would be applicable in the cases where no tax was payable or the levy itself was illegal. Paragraph 8 of the decision gives the details of decisions considered by the Tribunal and is reproduced below: 8. The Commissioner (Appeals) has relied upon the following case laws: (i) Order dated 10.12.1987 issued by Hon'ble High Court of Judicature at Allahabad in Civil Misc. Writ Petition No. 257 of 1980 in the case of Agra Beverages Corporation Pvt. Ltd. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... placed by the Commissioner (Appeals) on the case laws cited at para 8(i), 8(ii) and 8(iv) above is misplaced as these case laws relate to the period prior to 20-9-1991, when the provisions of Section 11B of the Central Excise Act, 1944 were amended vide Notification No.30/91-C.E. (N.T.), dated 19-9-1991 by Section 3 of the Central Excises and Customs Laws (Amendment) Act, 1991 (40 of 1991). Hence, the ratio of these case laws cannot be applied post 20-9-1991. The respondents' case is governed by the judgment of the Constitutional Bench of the Hon'ble Supreme Court in the case of M/s. Mafatlal Industries Ltd v. Union of India reported in 1997 (89) E.L.T. 247 (S.C.), which has dealt with the amended provisions of Section 11 B of the Central Excise Act, 1944 in all aspects. The Hon'ble Supreme Court in the said judgment has held as under: Where a duty has been collected under a particular order which has become final, the refund of that duty cannot be claimed unless the order [whether it is an order of assessment, adjudication or any other order under which the duty is paid] is set aside according to law. So long as that order stands, the duty cannot be r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y authority or court in case of illegal levy. 13. Further, the Hon'ble Delhi High Court in the case of M/s. Jumax Foam Pvt. Ltd. v. Union of India reported in 2003 (157) E.L.T. 252 (Del.) after discussing the Hon'ble Supreme Court's views in M/s. Mafatlal Industries Ltd. and Anam Electrical Manufacturing Co. cases (cited supra) held that : even if the tax is collected by the authority under the Act by misinterpretating or miss-applying any of the Rules, regulations or Notifications or by an erroneous determination of the relevant facts, i.e. an erroneous finding of the facts, the same may be called an illegal levy, however, even for the refund of the aforesaid amount, a claim has necessarily to be preferred under and in accordance with the provisions of the respective enactments before the authorities specified thereunder and within the period of limitation prescribed therein. 14. I further note that the Hon'ble Supreme Court, vide its Order dated 22-1-1997, as reported in 1997 (94) E.L.T. A59, has allowed the appeal filed by the Union of India in SLP (Civil) No. 10502 of 1988 (with SLP (C) No. 14042 of 1988) against the said Order dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise] under the foregoing provisions of this sub-section shall, instead of being credited to the Fund, be paid to the applicant, if such amount is relatable to - (a) rebate of duty of excise on excisable goods exported out of India or on excisable materials used in the manufacture of goods which are exported out of India; (b) unspent advance deposits lying in balance in the applicant's account current maintained with the Commissioner of Central Excise: (c) refund of credit of duty paid on excisable goods used as inputs in accordance with the rules made, or any notification issued, under this Act; (d) the duty of excise and interest, if any, paid on such-duty paid by the manufacturer, if he had not passed on the incidence of such duty and interest, if any, paid on such duty to any other person; (e) the duty of excise and interest, if any, paid on such duty borne by the buyer, if he had not passed on the incidence of such duty and interest. if any, paid on such duty to any other person; (f) the duty of excise and interest, if any, paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccepted is statutorily provided. It was submitted that the logic of Section 5 of the Indian Limitation Act, 1963 (in short the 'Limitation Act') can be availed for condonation of delay. The first proviso to Section 35 makes the position clear that the appeal has to be preferred within three months from the date of communication to him of the decision or order. However, if the Commissioner is satisfied that the appellant was prevented by sufficient cause from presenting the appeal within the aforesaid period of 60 days, he can allow it to be presented within a further period of 30 days. In other words, this clearly shows that the appeal has to be filed within 60 days but in terms of the proviso further 30 days time can be granted by the appellate authority to entertain the appeal. The proviso to sub-section (1) of Section 35 makes the position crystal clear that the appellate authority has no power to allow the appeal to be presented beyond the period of 30 days. The language used makes the position clear that the legislature intended the appellate authority to entertain the appeal by condoning delay only up to 30 days after the expiry of 60 days which is the normal period f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uty and interest, if any, paid on such duty to the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise before the expiry of one year from the relevant date in such form and manner as may be prescribed and the application shall be accompanied by such documentary or other evidence (including the documents referred to in section 12A) as the applicant may furnish to establish that the amount of duty of excise and interest, if any, paid on such duty in relation to which such refund is claimed was collected from, or paid by, him and the incidence of such duty and interest, if any, paid on such duty had not been passed on by him to any other person : Provided that where an application for refund has been made before the commencement of the Central Excises and Customs Laws (Amendment) Act, 1991, such application shall be deemed to have been made under this sub-section as amended by the said Act and the same shall be dealt with in accordance with the provisions of sub-section (2) substituted by that Act: Provided further that] the limitation of one year shall not apply where any duty and interest, if any, paid on such duty has been paid under prot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n sub-section (2). (4) Every notification under clause (f) of the first proviso to sub-section (2) shall be laid before each House of Parliament, if it is sitting, as soon as may be after the issue of the notification, and, if it is not sitting, within seven days of its re-assembly, and the Central Government shall seek the approval of Parliament to the notification by a resolution moved within a period of fifteen days beginning with the day on which the notification is so laid before the House of the People and if Parliament makes any modification in the notification or directs that the notification should cease to have effect, the notification shall thereafter have effect only in such modified form or be of no effect, as the case may be, but without prejudice to the validity of anything previously done thereunder. (5) For the removal of doubts, it is hereby declared that any notification issued under clause (f) of the first proviso to sub-section (2), including any such notification approved or modified under sub-section (4), may be rescinded by the Central Government at any time by notification in the Official Gazette. [Explanation. - For the purposes of thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any court, the date of such judgment, decree, order or direction; (f) in any other case, the date of payment of duty. 33. Nowhere we find the word 'government' in relation to the refund claim made by a buyer under the section and Section does not provide that only when there is evidence to show that tax has been paid to the Government refund would be admissible to the buyer of the goods/services. Therefore in our opinion it is sufficient if the buyer shows that he has paid the service tax to the registered service/goods suppliers/providers and there is evidence to the effect that the service tax has been collected from him by the registered service provider. 34. The next issue while dealing with limitation under Section 118 of the Act is the question what should be the relevant date for determining the eligibility of the buyer to the refund. According to Section 11B of the Act, the relevant date in the case of a person other than the manufacturer, the date of purchase of the goods by such person. Provisions of Section 11 B of the Act have been made applicable for service tax matters. Therefore we have to replace the word 'purchase' by 'purchase of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as specified in the notice, should not be paid by him to the credit of the Central Government. (4) The Central Excise Officer shall, after considering the representation, if any, made by the person on whom the notice is served under sub- section (3), determine the amount due from such person, not being in excess of the amount specified in the notice, and thereupon such person shall pay the amount so determined. (5) The amount paid to the credit of the Central Government under sub-section (1) or subsection (2) or sub-section (4), shall be adjusted against the service tax payable by the person on finalisation of assessment or any other proceeding for determination of service tax relating to the taxable service referred to in sub-section (1). (6) Where any surplus amount is left after the adjustment under sub-section (5), such amount shall either be credited to the Consumer Welfare Fund referred to in section 12C of the Central Excise Act, 1944 or, as the case may be, refunded to the person who has borne the incidence of such amount, in accordance with the provisions of section 11B of the said Act and such person may make an application under that section in such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the refund claim. They have not done so. In the absence of such notice being issued, only option left is to treat the circular issued by the Board in 2012 as a public notice. Once such a conclusion is arrived at, the refund claims filed by the appellants will be within the limitation period and in any case, the period has to be calculated from the date of the circular issued by the Board. Alternatively, it was also submitted that it can be held that no Public Notice has been issued and therefore all the refund claims are within time and it has to be settled accordingly. Once this provision is applied, according to the counsels for the appellants, all the refunds would be within time and all the claims have to be settled by the Department. On the other hand, the authorized representatives on behalf of the Department submitted that Section 73A would come into picture only when a person has collected service tax in excess of what is payable or paid to the Government or what is not at all payable to the Government and in these cases, the service tax was paid after undertaking an assessment as required under law by the assessees and therefore it was a payment made in the course of norma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the first place. The subsection is attracted only when the amount is collected and not paid. Therefore the subsection (1) may not be applicable to these cases at all. 40. When we come to subsection (2), it provides that any person who has collected any amount, which is not required to be collected, in any manner as representing service tax has to pay the amount so collected to the Government. This is not the case where the service providers have collected the amount as service tax which is not required to be collected. During the relevant time the service providers thought that they were required to collect, collected it and paid. In self-assessment, only the registered service provider while assessing the tax considers that he is required to pay the amount and collects it and pays. We cannot say that subsection (2) is attracted. Earlier when there was a practice of assessment, the system of recovery or refund in terms of assessment order was in vogue but not now. 41. Subsection (3) comes into picture only when a person has not fulfilled the obligations on subsection (1) or (2). In fact as submitted by the authorized representatives for the Revenue, the provisions of Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t all, the provisions of Section 11B of the Act would not be attracted. In fact, the refund claim arises only when an amount was not payable in accordance with law. It could be due to excess payment, it could be due to non-availment of exemption notification and it could be due to payment of tax under a wrong impression. In all these cases, it can be said that the payment was not a Central Excise duty at all. If this concept is accepted, any amount claimed under Section 11B of the Act would not be a Central Excise duty at all and therefore all refunds either have to be rejected because they are all claims which are not for Central Excise duty. In our opinion, when a payment has been made as service tax or central excise duty, for claiming refund, the remedy also has to be taken under that law only. 44. Another submission that was made was that the amount has been paid as pre-deposit and it cannot be said as duty at all. When no tax was payable, the amount has to be considered as a deposit made. A query was put to the learned counsel by the Bench that an amount is deposit only when there are two parties, one of them either makes the deposits or authorizes the other party to make ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ming the refund should produce (a) a copy of the Sale Deed to show that he had purchased the property after the agreement ended. (b) Further, he should also show proof that service tax was charged and he had paid the same. (c) Further, at the time of filing the refund claim it should be shown that he had not parted with the property and had not sold it. (d) For this purpose, an Encumbrance Certificate (EC) obtained from the Registrar, which will show that the buyer was in possession at the time of making refund claim would be one of the documents, in our opinion, would be sufficient for the purpose. (e) An undertaking may also be given by the claimants stating that they have not passed on the liability of service tax to any other person and the entire amount of service tax has been paid and borne by them. 46. It is made clear that the claim may not be rejected on the ground that there is no bill or invoice. What is required according to the provisions of Section 11B of the Act is the evidence that the person claiming the refund has borne the service tax liability and not passed on the same to any other person. As long as the document shows that the service provider is a register ..... X X X X Extracts X X X X X X X X Extracts X X X X
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