2021 (6) TMI 947 - AT - Service Tax

Tribunal Grants Refund on Service Tax Appeals, Emphasizes Retrospective Exemption

Tarang Constructions, Shyam Construction Co and Standard Buildcon Versus C.C.E. & S.T. -Rajkot

The Tribunal allowed the appeals, granting the refund of service tax paid through Cenvat Credit and the interest on delayed service tax payments. It was ... Refund of service tax paid - effect of subsequent exemption - denial on the ground that since the output services are exempted in terms of Rule 6, the appellant is not entitled for refund on the Service Tax paid by utilizing Cenvat Credit on input services - principles of natural justice - HELD THAT:- In the exactly identical issue, this Tribunal has considered the case of SHANTI CONSTRUCTION CO VERSUS C.C.E. & S.T. -RAJKOT [2021 (6) TMI 673 - CESTAT AHMEDABAD] where it was held that in the present case there is no dispute in availment of Cenvat credit at the time of receipt of input service. Therefore, subsequent exemption by virtue of section 102 of Finance Act, 1994 will not make disentitle the appellant from the said Cenvat credit. Principles of unjust enrichment - HELD THAT:- It is established that the appellant themselves have discharged the liability of Service Tax and the same has not been passed on to any other person. Therefore, the refund has passed through the test of unjust enrichment. Appeal allowed - decided in favor of appellant. Issues Involved:1. Entitlement to refund of service tax paid through Cenvat credit.2. Applicability of Rule 6 of Cenvat Credit Rules, 2004.3. Impact of Section 102 of the Finance Act, 1994 on refunds.4. Consideration of unjust enrichment in refund claims.5. Refund eligibility for interest paid on delayed service tax payment.6. Determination of contract dates for exemption eligibility under Section 102(1)(c).Issue-wise Detailed Analysis:1. Entitlement to Refund of Service Tax Paid Through Cenvat Credit:The appellant provided Works Contract Service to various government departments and availed input services from sub-contractors, utilizing Cenvat Credit for service tax payments. The Central Government, through Section 102 of the Finance Act, 1994, retrospectively exempted these services for the period from 01/04/2015 to 29/02/2016 and provided for refunds of the service tax paid. The learned Commissioner (Appeals) initially agreed on the refund's admissibility but rejected it, arguing that the appellant was not entitled to a refund on the service tax paid using Cenvat Credit. The Tribunal found that the appellant had maintained separate accounts and utilized Cenvat Credit only for taxable output services, thus the reversal of Cenvat Credit under Rule 6 of the Cenvat Credit Rules, 2004, would not arise.2. Applicability of Rule 6 of Cenvat Credit Rules, 2004:The Tribunal held that Rule 6, which pertains to the reversal of Cenvat Credit when providing exempted services, was not applicable in this case. The Commissioner (Appeals) had already determined that Rule 6 was not applicable, and this finding was not challenged by the revenue, making it final. The Tribunal emphasized that the Cenvat Credit utilized had taken the color of service tax paid and was refundable under Section 102 of the Finance Act, 1994.3. Impact of Section 102 of the Finance Act, 1994 on Refunds:Section 102 provided a retrospective exemption for specific services and mandated refunds of the service tax paid during the exempted period. The Tribunal noted that the legislature was aware that service tax on construction services was paid using both cash and Cenvat Credit. Therefore, the refund should be granted irrespective of whether the tax was paid in cash or through Cenvat Credit.4. Consideration of Unjust Enrichment in Refund Claims:In the case of Tarang Construction, the Commissioner (Appeals) concluded that the refund was not affected by unjust enrichment. For Standard Buildcon, the Tribunal found that the service recipient (MES and Okha Nagarpalika) did not pay the service tax, and the appellant bore the tax liability, supported by Chartered Accountant certificates and affidavits. Similarly, in Shyam Construction, the Tribunal determined that the service tax incidence was not passed on to the service recipient, as evidenced by accounting records, Chartered Accountant certificates, and affidavits.5. Refund Eligibility for Interest Paid on Delayed Service Tax Payment:The Tribunal held that the interest paid on the service tax, which was refundable under Section 102, should also be refunded. The interest was considered a piggyback of the refundable service tax, and the government could not retain it when the principal tax was not leviable.6. Determination of Contract Dates for Exemption Eligibility Under Section 102(1)(c):The Tribunal addressed the issue of contract dates for exemption eligibility. In one case, the contract was deemed to have been entered into on the date the tender was opened and accepted (28.01.2015), rather than the work order date (16.03.2015). The Tribunal clarified that the absence of a separate contract/agreement after the tender acceptance indicated the tender date as the contract date. Additionally, the Tribunal noted that the requirement for stamp duty payment was not applicable in this case.Conclusion:The Tribunal allowed the appeals, granting the refund of service tax paid through Cenvat Credit and the interest on delayed service tax payments. The Tribunal also determined that the provision of unjust enrichment did not apply in these cases, and the appellants were entitled to refunds based on the retrospective exemption provided by Section 102 of the Finance Act, 1994.