2007 (2) TMI 60 - AT - Service Tax

Tribunal grants refund for Service Tax, ruling service receiver not liable pre-notification.

ADITYA CEMENT Versus COMMISSIONER OF C. EX., JAIPUR-II

The Tribunal allowed the appeal, setting aside the rejection of the refund claim for Service Tax paid by the appellant for services received from ... Refund – Department contended that appellant is paid service tax according to the law and accordingly not eligible for refund – Commissioner after considering detail rejected department contention and allow the refund Issues:Refund claim rejection based on Service Tax payment for services received from non-resident engineering consultants.Analysis:The appellant filed a refund claim for Service Tax paid for services received from non-resident consultants. The authorities rejected the claim, stating the appellant correctly paid the tax as a service receiver. The appellant argued they were not liable to pay tax under Section 68 of the Finance Act, 1994, and sought a refund. The advocate cited a Tribunal decision supporting the appellant's position. The Departmental Representative contended the tax was paid correctly and voluntarily, relying on another Tribunal decision.The Tribunal considered both arguments and examined the law. The appellant received services from a non-resident consultant and paid tax based on their understanding of the law. The Tribunal noted that if an assessee pays tax due to a misunderstanding of the law, a refund is warranted. Referring to Section 68 of the Finance Act, 1994, the Tribunal highlighted the distinction between service providers and receivers. It noted that a notification made service receivers liable to pay tax from 1-1-2005, indicating no liability before that date.The Departmental Representative cited Rule 2(d)(iii) of the Service Tax Rules to justify collecting tax from the appellant. However, the Tribunal reasoned that this rule alone wasn't sufficient, as the notification under Section 68(2) specified the liability of service receivers from non-residents without offices in India from 1-1-2005. The Tribunal emphasized that rules cannot supersede statutory provisions.The Tribunal distinguished the case law cited by the Departmental Representative, as it involved a retrospective amendment not applicable in this case. It reiterated that rules must align with statutory provisions. Considering the facts that the services were received before the notification date, the Tribunal found the refund claim rejection improper and allowed the appeal with consequential relief.In conclusion, the Tribunal set aside the order rejecting the refund claim, emphasizing the statutory provisions governing Service Tax liability for service receivers from non-residents without offices in India.