Tribunal directs refund of Rs. 12,74,883 with interest

The Tribunal allowed the appeal, directing the Adjudicating Authority to grant a refund of Rs. 12,74,883 along with interest within 45 days from the receipt of the order.

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Issues:
Refund claim of service tax filed by the appellant on cancellation of booking.

Analysis:
The appellant, a developer of residential flats, filed a refund claim of service tax after the cancellation of bookings for 7 flats in their project. The appellant had entered into an 'Agreement of Sale' prior to the GST regime and received advance payments from buyers. The cancellation occurred before the occupancy certificate was obtained in 2021. The appellant issued credit notes to buyers and refunded the deposit along with service tax through bank transfers. The appellant applied for a refund of the service tax paid on cancellations made before the GST regime transition. The refund claim was rejected on grounds of limitation and unjust enrichment by the Adjudicating Authority and Commissioner (Appeals).

The appellant contended that they had refunded the amount received from buyers along with service tax and argued that the amount became refundable post-cancellation. The appellant cited a CBIC circular supporting their entitlement to service tax credit on cancellation of bookings. The appellant also argued that the retention of service tax without tax liability violates Article 265 of the Constitution of India. The Tribunal noted the appellant's compliance with refund requirements and entitlement to the refund under Section 142(3) of the CGST Act.

After considering the arguments, the Tribunal found no dispute on facts regarding booking, cancellation, and refunds made by the appellant. The Tribunal held that the appellant was entitled to a refund due to the unavailability of Cenvat credit and satisfied the unjust enrichment requirement. Consequently, the Tribunal allowed the appeal, directing the Adjudicating Authority to grant a refund of Rs. 12,74,883 along with interest within 45 days from the receipt of the order.

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