Natural justice and circular applicability govern refund claims on tax paid for construction of CRPF training barracks.

Refund of service tax on construction of CRPF barracks could not be rejected without a show cause notice or personal hearing, as that breached natural justice. On merits, the claimant was a sub-contractor engaged in constructing barracks for training CRPF personnel, which was not equivalent to construction of residential houses; the departmental circular relied on by Revenue was therefore inapplicable. Because the rejection was procedurally invalid, the objections on limitation and unjust enrichment also could not be sustained. The refund claim was thus held admissible.

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Issues: Whether the refund claim of service tax paid on construction of CRPF barracks was payable to the assessee, and whether the rejection of refund without issuance of show cause notice and without personal hearing could be sustained.

Analysis: The refund was rejected without issuing a show cause notice and without granting a personal hearing, which violated the principles of natural justice. On merits, the assessee was a sub-contractor constructing barracks for training of CRPF personnel, which was not the same as construction of residential houses by NBCC. The departmental circular relied upon by the Revenue was held inapplicable to the facts. In the absence of a valid notice, the objections based on limitation and unjust enrichment were also held not sustainable.

Conclusion: The rejection of refund of Rs. 51,05,157/- was not sustainable and the assessee was held entitled to the refund.

Ratio Decidendi: A refund claim cannot be rejected without observance of natural justice, and a circular applicable to construction of residential houses cannot be applied to construction of non-commercial barracks for training purposes.

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