Retrospective service tax refund extends to Cenvat credit payments and related interest under section 102 exemption.

Retrospective exemption under section 102 of the Finance Act, 1994 was treated as a complete refunding provision for service tax collected for the relevant period, so tax paid through valid Cenvat credit was also refundable; Rule 6 and Rule 11 of the Cenvat Credit Rules, 2004 did not bar refund or require reversal on these facts. The contract requirement under section 102(1)(c) was satisfied because the tender was opened and the bidder identified before 1 March 2015, with the later work order treated as procedural. Interest paid on delayed service tax was also refundable because it was ancillary to the underlying refundable tax.

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Issues: (i) Whether service tax paid through utilisation of Cenvat credit was refundable under the retrospective exemption contained in section 102 of the Finance Act, 1994, and whether Rule 6 or Rule 11 of the Cenvat Credit Rules, 2004 required reversal or barred such refund; (ii) whether the contract for project B-2/12/2014-15 was entered into before 1 March 2015 so as to fall within section 102(1)(c); (iii) whether interest paid on delayed service tax, which itself became refundable, was also refundable.

Issue (i): Whether service tax paid through utilisation of Cenvat credit was refundable under the retrospective exemption contained in section 102 of the Finance Act, 1994, and whether Rule 6 or Rule 11 of the Cenvat Credit Rules, 2004 required reversal or barred such refund.

Analysis: The exemption under section 102 was treated as a complete refunding provision for service tax collected during the relevant period, without drawing any distinction between tax paid in cash and tax paid by utilisation of valid Cenvat credit. The credit had been taken when the output services were taxable and was validly utilised under Rule 3 and Rule 3(4)(e) of the Cenvat Credit Rules, 2004. Rule 6 was held inapplicable on the facts, and the Commissioner (Appeals) had already recorded that separate accounts were maintained. Rule 11 also did not apply because it addresses unutilised credit and does not create a mechanism for clawback of credit already validly taken and utilised when the service was taxable. The principle that credit eligibility is to be tested at the time of receipt of input service, and that subsequently arising exemption does not nullify valid credit absent a specific machinery provision, was applied.

Conclusion: The refund of service tax paid by utilising Cenvat credit was admissible, and denial on the ground of double benefit was unsustainable.

Issue (ii): Whether the contract for project B-2/12/2014-15 was entered into before 1 March 2015 so as to fall within section 102(1)(c).

Analysis: The relevant tender was opened on 28 January 2015 and the appellant was declared the successful bidder, with no separate contract or agreement subsequently executed. The work order dated 16 March 2015 was treated only as a procedural step to commence work and not as the date of contract. The condition in section 102(1)(c) required the contract to have been entered into before 1 March 2015, and the reference to stamp duty applied only where stamp duty was otherwise applicable.

Conclusion: The project satisfied the contractual-date requirement under section 102(1)(c), and the rejected refund amount was payable.

Issue (iii): Whether interest paid on delayed service tax, which itself became refundable, was also refundable.

Analysis: The interest was paid only because the underlying service tax had been paid during the relevant period. Once that tax became refundable under section 102, the interest attached to that non-payable tax could not be retained by the revenue. The interest was treated as ancillary to the refundable tax liability.

Conclusion: The interest amount was also refundable.

Final Conclusion: The appellant succeeded on all substantive issues, and the refund claim including the amount paid through Cenvat credit, the project-specific amount, and the related interest was held admissible.

Ratio Decidendi: Where a retrospective exemption statute mandates refund of tax collected for a past period, valid Cenvat credit utilised for payment of that tax cannot be denied refund merely because the tax was not paid in cash, unless the statute or rules expressly provide a reversal mechanism.

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