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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 ..... 4/2011, 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 refund claims with the department claiming refund of service tax paid by them to the builder/developer on the ground that service was not taxable before 01.07.2010 and theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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-CESTAT-DEL and Maharashtra Chamber of Housing Industry Vs UOI [2012 (25)S.T.R.305(Bom)] and Commissioner of Service Tax Vs Shrinandnagar's-IV Co-o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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) construction of a new residential complex or a part thereof or (b) completion of finishing services in relation to residential complex such a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 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 explanation, when a builder/promoter/developer got a residential com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 property act, sale deed and agreement t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 introductio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er 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 date also. This i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17.09.2004 and this is not denied by the Department and it is not 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It was submitted that in the case of MCI Leasing CPl Ltd., the Hon'ble 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 cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cording to the AR shows that the Hon'ble High Court was expressing their constraints/dilemma while considering 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. The first decision was in the case of UOI Vs. ITC Ltd. [1993 (67) E.L.T. 3 (SC)]. He relies on paragraph 5 to 8. However we 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s beyond one year from the relevant date, as mentioned above. Thus, the impugned refund claim filed by the respondents is hit by time bar in terms of Section 11B of the Central Excise Act, 1944. 11. I further find that the reliance 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 collec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 27 of the Customs Act, 1962. The Hon'ble Supreme Court has observed as under: "Such petitions must be held to be untenable in law, regardless of any direction to the contrary contained in the order in any appeal, suit or writ jurisdiction. Statutory time limit is not extendable by any 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 ena ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise is satisfied that the whole or any part of the duty of excise and interest, if any, paid on such duty paid by the applicant is refundable, he may make an order accordingly and the amount so determined shall be credited to the Fund: Provided that the amount of duty of excise and interest, if any, paid on such duty as determined by 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 r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annot exercise such authority. 29. This view is supported by the decision of the Hon'ble Supreme Court in the case of Singh Enterprises Vs. CCE, Jamshedpur [2008 (221) E.L.T. 163 (S.C)]. In this case Hon'ble Supreme Court took the view that the authorities under a statute cannot go beyond the statute and paragraph 8 of this decision is relevant and is reproduced below: "8. The Commissioner of Central Excise (Appeals) as also the Tribunal being creatures of Statute are vested with jurisdiction to condone the delay beyond the permissible period provided under the Statute. The period up to which the prayer for condonation can be accepted 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 day ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n any ground namely the refund itself cannot be made. This is because the refund can be made only when the claimant shows that the tax has been paid to the Government. It was his submission that the buyers who have made the claim for refund in these cases even if held eligible for refund, have to show that the tax has been paid to the Government. At this juncture it would be appropriate to reproduce the provision of Section 11B and we do so. Claim for refund or duty and interest, if any, paid on such duty - (1) Any person claiming refund of any duty of excise and interest, if any, paid on such duty may make an application for refund of such duty 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 refun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 on such duty borne by any other such class of applicants as the Central Government may, by notification in the Official Gazette, specify: Provided further that no notification under clause (f) of the first proviso shall be issued unless in the opinion of the Central Government the incidence of duty and interest, if any, paid on such duty has not been passed on by the persons concerned to any other person. (3) Notwithstanding anything to the contrary contained in any judgment, decree, order or direction of the Appellate Tribunal or any Court or in any other provision of this Act or the rules made thereunder or any other law for the time being in force, no refund shall be made except as provided in 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 notificat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ia, the date of entry into the factory; (d) in a case where a manufacturer is required to pay a sum, for a certain period, on the basis of the rate fixed by the Central Government by notification in the Official Gazette in full discharge of his liability for the duty leviable on his production of certain goods, if after the manufacturer has made the payment on the basis of such rate for any period but before the expiry of that period such rate is reduced, the date of such reduction; (e) in the case of a person, other than the manufacturer, the date of purchase of the goods by such person; (ea) in the case of goods which are exempt from payment of duty by a special order issued under sub-section (2) of section 5A, the date of issue of such order; (eb) in case where duty of excise is paid provisionally under this Act or the rules made thereunder, the date of adjustment of duty after the final assessment thereof; (ec) in case where the duty becomes refundable as a consequence of judgment, decree, order or direction of appellate authority, Appellate Tribunal or any court, the date of suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nbsp;73A. Service Tax collected from any person to be deposited with Central Government:- 1 Inserted (w.e.f. 18.04.2006) by s. 68 of the Finance Act, 2006 (21 of 2006) (1) Any person who is liable to pay service tax under the provisions of this Chapter or the rules made thereunder, and has collected any amount in excess of the service tax assessed or determined and paid on any taxable service under the provisions of this Chapter or the rules made there under from the recipient of taxable service in any manner as representing service tax, shall forthwith pay the amount so collected to the credit of the Central Government. (2) Where any person who has collected any amount, which is not required to be collected, from any other person, in any manner as representing service tax, such person shall forthwith pay the amount so collected to the credit of the Central Government. (3) Where any amount is required to be paid to the credit of the Central Government under sub-section (1) or sub-section (2) and the same has not been so paid, the Central Excise Officer shall serve, on the person liable to pay such amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any, surplus left that should have been credited to the Consumer Welfare Fund or repaid to the person who have borne the amount. The persons who have borne the service tax are before the Tribunal now. 38. The question that arises is 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. It is the submission of the counsels that it is so. This is because only after the clarification issued by the Board in 2009 and 2012, it came to be known that service tax was not payable according to the Government itself. Such being the situation, there was duty cast upon the officers of the Department to reassess or calculate the amount payable (which is nil in these cases) and thereafter either refund the amount or credit to the Consumer Welfare Fund. It was submitted that the Section also requires that a Public Notice has to be issued and in these cases since no one was aware of these provisions and when a decision was taken by the Government that no service tax was leviable, individual officers in whose jurisdiction the buyers are situated should have calculated the tax payable and amount r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rdance with law. In the normal course, there is no revised assessment at all. There is no reassessment also. The practice of departmental officers assessing returns and finding out whether the tax has been paid correctly has been discontinued from 1997 (probably) altogether. Therefore, it is totally self-assessment in the case of Central Excise and Service Tax. Therefore, it cannot be said that when the tax was paid by the service provider, he had collected the amount from the customers or buyers in these cases in excess of amounts payable or the amount was not at all payable to Government. The service provider thought that he was liable to pay, assessed the tax, collected the same and paid to the Government. That being the position, the provisions of subsection (1) are attracted at all. This subsection provides that any person who is liable to pay service tax and has collected any amount in excess of the service tax assessed or determined in the first part and secondly, collected any amount as representing service tax which would mean that it may not be service tax and may not be payable at all and required to be paid to the Government. This subsection applies only to persons who ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... attracted. In such cases, after recovering the amount if it is found that the amount was not payable to Government also but collected as service tax or amounts are collected in excess or amounts which are not required to be collected but not paid to the Government and subsequently recovered, the concerned officer has to issue a Public Notice so that the buyers who without being aware of the provisions of law which did not require service tax to be paid at all can come forward and claim. Therefore the provisions for refund in section 73A of 1994 Act cannot be applicable to the situation where a service tax is collected in a legal manner in accordance with law and paid to the Government in accordance with law under a wrong assumption that service tax was liable to be paid. Therefore the remedy is in Section 11B of the Act and not under Section 73A of 1994 Act. Therefore, we do not find any merit in the submissions that Section 73A would be applicable and therefore all the claims are within normal period of limitation. 43. Before we proceed to issue regarding the unjust enrichment, one point which was missed out when dealing with Section 11B is required to be considered at this stage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect. Therefore, we are unable to accept the proposition that the amount has to be considered as pre-deposit and therefore the time limit prescribed under law would not be applicable for accepting the same. 45. Now we proceed to examine the unjust enrichment. We have not considered the individual cases in detail and we do not propose to pass an order in detail in each and every case. We have decided to remand the matters to the original adjudicating authorities to decide the refund claim in accordance with observations made by us hereinabove and below. Therefore it would be necessary to record some guidelines to be followed while deciding unjust enrichment so that unnecessary litigation is avoided. We are conscious of the fact that buyer is required to prove that there is no unjust enrichment and there is no burden on the department to show that there is unjust enrichment while sanctioning the refund. Further, the counsels for the appellants requested that this issue quite often creates problem and it would be better if the Tribunal would lay down what are the documents required to be produced by the appellants before the original adjudicating authority for considering the refund c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t aside and the matters are remanded to the original adjudicating authority who shall proceed to decide the matter afresh after giving opportunity to the appellants to present their case in line with the observations made hereinabove. It is also made clear that appellants/claimants shall submit the documents and other details which are not submitted by them already and which are required to be submitted in accordance with our observations within three months from the date of receipt of this order. We also request the original adjudicating authority to ensure that before fixing the personal hearing or proposing rejection of refund claim either fully or partly, while issuing show-cause notice or otherwise, the appellants should be informed as to what exactly is required by the Department to consider the refund claim, if additional documents are required. It is also made clear that interest in accordance with law has to be paid since the matter has attained finality and that interest has to be paid from three months after filing the refund claim with the department wherever applicable and wherever refunds are sanctioned.
(Order has been pronounced and dictated in open court) X X X X Extracts X X X X X X X X Extracts X X X X
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