Appellant wins refund on service tax for residential houses, not a complex. Unjust enrichment principle rejected.

The Tribunal allowed the appellant's claim for a refund of service tax paid on the construction of individual residential houses, determining that the houses did not fall under the taxable category of "residential complex." The Tribunal also ruled that the principles of unjust enrichment did not apply as the appellant bore the tax burden. Consequently, the Tribunal set aside the Commissioner (Appeals)'s order and granted the appellant's refund claim.

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Issues Involved:
1. Entitlement to refund of service tax on construction of individual/independent residential houses.
2. Applicability of the principles of unjust enrichment.

Issue-wise Detailed Analysis:

1. Entitlement to Refund of Service Tax on Construction of Individual/Independent Residential Houses:

The appellant, M/s Quality Builders & Contractor, constructed individual/independent residential houses as per work orders from the Rajasthan Housing Board. The appellant claimed that these houses were mistakenly subjected to service tax and sought a refund. The Commissioner (Appeals) denied the refund, stating that post-July 01, 2012, the construction of such houses, even as part of a gated community, was taxable under service tax laws. The Commissioner emphasized that the new definition of "residential complex" included row houses, villas, or individual houses within a gated community, making them taxable.

The Tribunal examined the legal position prior to and post-July 01, 2012. It noted that under Section 65(105)(zzzh) of the Finance Act, 1994, "taxable service" included services related to the construction of a complex. A "residential complex" was defined as a building or buildings with more than twelve residential units. The Tribunal found that individual residential houses, each with separate entry and utilities, did not meet this definition and were not taxable.

The Tribunal referenced several judgments, including:
- Macro Marvel Projects Ltd. v/s Commissioner of Service Tax, Chennai: This case clarified that construction of residential complexes with not more than twelve units was not taxable.
- Beriwal Constructions Co. vs Commissioner of Central Excise & Service Tax-II, Agra: It reiterated that construction of individual residential units was not intended to be taxed.
- Shri A.S. Sikarwar vs CCE, Indore: This case supported the view that service tax applies only to buildings with more than twelve residential units.

The Tribunal concluded that the appellant constructed individual residential houses, which did not fall under the taxable category of "residential complex" as defined. Therefore, the appellant was entitled to the benefit of the Exemption Notification dated June 20, 2012, and the service tax paid was refundable.

2. Applicability of the Principles of Unjust Enrichment:

The Commissioner (Appeals) also rejected the refund claim on the grounds of unjust enrichment, arguing that the appellant had passed on the tax burden to the Housing Board. However, the Tribunal found that the work orders explicitly stated that service tax was to be borne by the appellant. The Allahabad High Court in Indian Farmers Fertilizers Coop. Ltd. held that a refund could be claimed by the person who bore the tax incidence. The Tribunal noted that 50% of the tax paid by the Housing Board under the reverse charge mechanism was deducted from the appellant's payment, indicating that the appellant bore the tax burden.

The Tribunal concluded that the principles of unjust enrichment did not apply in this case as the appellant had borne the tax incidence. Consequently, the appellant was entitled to a refund of the service tax paid.

Conclusion:

The Tribunal set aside the order dated June 25, 2018, passed by the Commissioner (Appeals) and allowed the appellant's claim for a refund of the service tax paid, in accordance with the law. The appeal was pronounced in the open court on September 05, 2022.

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