Pre-2010 flat construction by builders was not taxable, but refund claims still had to satisfy statutory limitation and unjust enrichment rules.

Before 01.07.2010, construction of residential flats by a builder for individual buyers was not covered by the taxable service as then defined, because the later explanation expanding the levy was prospective only. Refund claims for tax collected in that period were, however, required to follow the statutory refund framework under section 11B of the Central Excise Act, 1944, as applied to service tax, and could not bypass its limitation. Section 73A of the Finance Act, 1994 was treated as inapplicable to such self-assessed and paid amounts. For unjust enrichment, relevant proof could include the sale deed, tax payment evidence, encumbrance certificate, and undertaking; absence of a bill or invoice alone would not defeat the claim.

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Issues: (i) whether, prior to 01.07.2010, service tax was leviable on construction of residential flats/apartments by a builder or developer under agreement with individual buyers; (ii) whether refund claims of the buyers were governed by the limitation under section 11B of the Central Excise Act, 1944; (iii) whether section 73A of the Finance Act, 1994 displaced the refund mechanism under section 11B; and (iv) what documents and proof were relevant for the unjust enrichment inquiry in such refund claims.

Issue (i): whether, prior to 01.07.2010, service tax was leviable on construction of residential flats/apartments by a builder or developer under agreement with individual buyers.

Analysis: The taxable service under section 65(105)(zzzh) of the Finance Act, 1994, as it stood before 01.07.2010, covered construction of a residential complex. The later explanation inserted from 01.07.2010 expanded the scope by deeming construction intended for sale by a builder to be a service to the buyer. The earlier regime did not cover a builder's construction of an individual flat or residence for a purchaser under a direct agreement, and the amendment was held to be prospective. The ownership or transfer analysis under property law did not alter the character of the taxable service before the explanation.

Conclusion: Prior to 01.07.2010, the service in dispute was not taxable; this issue was decided in favour of the assessee.

Issue (ii): whether refund claims of the buyers were governed by the limitation under section 11B of the Central Excise Act, 1944.

Analysis: The refund was sought against tax paid and collected under the service tax law in a self-assessment regime. The Tribunal preferred the view that refunds of such amounts had to be pursued under section 11B of the Central Excise Act, 1944, as made applicable to service tax by section 83 of the Finance Act, 1994. It rejected the contention that the claim could be treated as a general law refund outside the statutory scheme and held that the statutory time limit could not be ignored even where the levy was later found to be illegal or not payable.

Conclusion: Refund claims were held to be subject to section 11B limitation; this issue was decided against the assessee.

Issue (iii): whether section 73A of the Finance Act, 1994 displaced the refund mechanism under section 11B.

Analysis: Section 73A was held to target amounts collected as service tax but not paid or amounts collected in excess and not required to be collected, and not amounts collected and paid by service providers under an apparent legal self-assessment. The Tribunal held that the provision did not convert these refund claims into claims governed by public notice or a separate refund route outside section 11B.

Conclusion: Section 73A was held inapplicable to these refund claims; this issue was decided against the assessee.

Issue (iv): what documents and proof were relevant for the unjust enrichment inquiry in such refund claims.

Analysis: The Tribunal held that the claimant had to establish that the incidence of service tax had not been passed on. It indicated that the relevant material could include the sale deed, proof of tax payment, evidence that the property had not been transferred further, an encumbrance certificate, and an undertaking. It also clarified that absence of a bill or invoice by itself would not defeat the claim if the necessary evidence otherwise showed that the claimant bore the burden of tax.

Conclusion: The matter was remitted for fresh consideration with guidelines on proof for unjust enrichment; this issue was left for reconsideration on remand.

Final Conclusion: The Tribunal held that the pre-01.07.2010 levy on buyer-builder flat construction was not sustainable, but refund claims remained subject to the statutory refund and limitation framework, and the cases were sent back for fresh adjudication.

Ratio Decidendi: Before 01.07.2010, construction of flats by a builder for individual buyers was not covered by the taxable service as then defined, but any refund of tax paid on such transactions had to be worked out strictly under the statutory refund provisions and within their prescribed limits.

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