2013 (7) TMI 556 - AT - Service Tax

Service tax refund granted for unsold flats in residential complex, interest awarded. Section 11BB applicability analyzed.

The case involved the levy of service tax on the construction of residential units for subsequent sale. The Commissioner (Appeals) ordered a refund of Rs. ... Interest on refund - Service liability under protest - service tax under the taxable Construction of Complex Service – sectiion 11BB - Held that:- the order of the Commissioner (Appeals) modified directing the revenue that they shall refund the amount along with interest at the applicable rate The order of the appellate Commissioner directing refund plus applicable interest from the date of remittance thereof by the assessee - payment of refund amount retained by Revenue without the authority of law - u/s 11BB the assessee is entitled for interest on the amount deposited - Section 11BB is applicable on refund of service tax remittances in view of Section 83 that interest is liable to be paid, wherever any refund is due or ordered and remains unpaid for 3 months from the date of receipt of a refund application, under Section 11B(1) – decided against revenue. Issues:1. Levy of service tax on construction of residential units for subsequent sale.2. Seizure of documents and deposit of Rs. 5 lakhs towards service tax liability.3. Rejection of refund claim by the Assistant Commissioner.4. Appeal to the Commissioner (Appeals) and subsequent order for refund with interest.5. Applicability of Section 11BB of the Central Excise Act, 1944 for refund and interest calculation.Issue 1: Levy of service tax on construction of residential units for subsequent saleThe respondent constructed residential units on its own land for sale, engaging labor, leading to the initiation of service tax proceedings under the taxable Construction of Complex Service. A search was conducted on the premises, and documents seized. The Partner deposited Rs. 5 lakhs towards service tax liability without assessment, followed by a refund claim. The Commissioner (Appeals) noted that only one apartment block complex with 18 flats was constructed, of which 14 were sold before a specified date, leading to the order for refund of the deposited amount.Issue 2: Seizure of documents and deposit of Rs. 5 lakhs towards service tax liabilityDocuments were seized during a search at the respondent's premises, and the Partner was persuaded to deposit Rs. 5 lakhs towards service tax liability even before a formal assessment. The deposit was made under protest, and a subsequent refund claim was filed by the assessee.Issue 3: Rejection of refund claim by the Assistant CommissionerThe Assistant Commissioner rejected the refund application, asserting that the assessee had provided the specified taxable service, leading to the aggrieved assessee filing an appeal against this decision.Issue 4: Appeal to the Commissioner (Appeals) and subsequent order for refund with interestThe Commissioner (Appeals) reviewed the case and observed that the assessee had deposited Rs. 5 lakhs under protest and had constructed only one apartment block complex with 18 flats, of which 14 were sold before a specified date. Consequently, the appellate authority ordered the refund of Rs. 5 lakhs along with interest from the date of deposit until the payment of the refund, as the amount was retained by Revenue without legal authority.Issue 5: Applicability of Section 11BB of the Central Excise Act, 1944 for refund and interest calculationSection 11BB of the Central Excise Act, 1944 mandates the payment of interest on any refund due or ordered that remains unpaid for three months from the date of the refund application. The order of the appellate Commissioner directed the refund along with applicable interest on the deposited amount from the date of remittance by the assessee. The modification to the order ensured that the respondent would be refunded the amount of Rs. 5 lakhs along with interest at the applicable rate, starting from a specified date as per the legislative mandate of Section 11BB.