2023 (8) TMI 706 - AT - Service Tax

Appellant granted refund for service tax paid in 2008, tribunal deems rejection unsustainable.

The Tribunal allowed the appellant's appeal against the rejection of a refund claim for service tax paid in 2008. The rejection was deemed unsustainable ... Rejection of Refund claim - refund application rejected on the ground that the receipt voucher indicates only the amount paid to the builder towards service tax but the ledger filed with the claim does not show any entry regarding the payment of service tax - Rule 4A of Service Tax Rules, 1994 - HELD THAT:- As per the finding in Para 9 of the impugned Order-In-Appeal it is admitted that the document furnished by the appellant is sufficient to prove that appellant are ultimate purchaser of the apartments from the builder. Though the detail Final Order in JOSH P JOHN AND OTHERS [2014 (9) TMI 597 - CESTAT BANGALORE] issued by this Tribunal in similar matter was not available before the Adjudication Authority at the time of issue of impugned Order-In-Original, appeal was considered by the learned Commissioner (Appeals) on 29.09.2015 and said order was available with Commissioner (Appeals). Thus Commissioner (Appeals) ought to have considered the guidelines issued by this Tribunal when considering the appeal filed by the appellant. Moreover one of the finding given by the Adjudication/Appellate Authority is that the refund application is premature on the ground that appellant is not barred by any law for time being in force from disposing the property and for that reason, appellant is not eligible for refund filed. Such finding is nothing but rejecting an eligible claim only on flimsy and vague ground. If the Adjudication Authority/Appellate Authority have reasons to believe that tax payers like appellant is not barred by disposing the property by law, service tax collected by them can be obtained, such finding is illegal and unsustainable. The appellant is eligible for refund of Rs.55.284/- erroneously collected from the appellant with interest. Appellant is also eligible to get interest 3 Months after filing the refund claim i.e. from 05.09.2009 - Appeal allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether a purchaser is entitled to refund of service tax collected by a builder and remitted to the Department where the service tax was charged on construction of a residential unit later held to be outside taxable ambit. 2. Whether the doctrine of unjust enrichment precludes refund where the claimant may potentially resell the property or otherwise recoup the paid amount. 3. Whether absence of invoice/bill/challan issued by the builder (as mandated by rule) is a ground to reject the refund claim when other documentary evidence is produced. 4. When interest on an allowed refund becomes payable (timing of interest commencement) in circumstances where the refund claim was filed after statutory clarifications. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Entitlement to refund where tax was collected and remitted though service later held non-taxable Legal framework: Refund of erroneously collected/paid tax is governed by the statutory refund provisions requiring proof that tax was borne by the claimant and was not payable under law; relevant interpretive guidance includes Board circulars clarifying scope of taxability for construction of residential complexes and the temporal point at which service tax liability arises. Precedent treatment: The Tribunal has previously considered analogous situations and issued guidelines specifying the nature of documentary proof sufficient to establish that the purchaser bore the service tax obligation and that the service provider was a registered taxable person who remitted the tax. Interpretation and reasoning: The adjudicating authority itself found that the builder had assessed, collected and remitted service tax and filed periodic returns. The Tribunal reasons that when statutory/administrative clarifications establish that the activity was not taxable in the circumstances, an amount collected and remitted in error constitutes an overpayment and is refundable. The focus is on substantive entitlement (whether the tax was in fact payable) rather than formal defects, provided adequate evidence shows tax was collected and remitted and the claimant is the ultimate purchaser who has borne the charge. Ratio vs. Obiter: Ratio - A purchaser from whom tax was collected and which the builder remitted is entitled to refund where later clarification shows no tax liability, subject to proof that the purchaser bore the burden. Obiter - Observations on broader policy of refunds not discussed in detail. Conclusion: The claimant is entitled to refund of the erroneously collected service tax once it is established that the builder remitted the tax and the purchaser is the ultimate bearer of the charge. Issue 2 - Applicability of unjust enrichment where purchaser may resell or recover amount later Legal framework: Unjust enrichment is a defense to refund where the claimant has been restored to the position they were in prior to payment or has otherwise been compensated; refund may be withheld if claimant stands to be reimbursed by a subsequent transaction. Precedent treatment: Authorities require concrete evidence of enrichment or reimbursement to sustain a plea of unjust enrichment; hypothetical or speculative possibilities of future recoupment do not suffice. Interpretation and reasoning: The adjudicating authority rejected the refund as premature on the basis that the claimant was not barred from selling the property and might recoup the service tax from a subsequent buyer. The Tribunal finds this reasoning speculative and legally insufficient: potential future events do not negate present entitlement where tax was erroneously collected and remitted. Absent evidence that the claimant has in fact been reimbursed or otherwise enriched, unjust enrichment cannot be invoked to deny refund. Ratio vs. Obiter: Ratio - Mere possibility of future recoupment is not a valid basis to deny a refund; actual enrichment must be shown. Obiter - Comments on taxpayer conduct or wider policy are not essential to decision. Conclusion: The doctrine of unjust enrichment does not bar refund in the absence of evidence that the claimant was reimbursed or otherwise enriched by the tax amount. Issue 3 - Effect of absence of invoice/bill/challan on refund claim when other documents produced Legal framework: Rules require registered taxable persons to issue prescribed invoices/bills/challans; statutory refund provisions, however, require proof that the claimant bore the tax and did not pass it on. Administrative rules on invoicing are procedural, while the substantive question is proof of payment and incidence of tax. Precedent treatment: Tribunal guidance in prior matters has held that strict absence of a bill/invoice should not be definitive if other credible documentary evidence shows tax was charged, paid/remitted by the service provider, and that the claimant is the ultimate purchaser; evidence may include sale deed, receipt vouchers, declarations from developer, ST-3 return details, property tax receipts and registration details of service provider. Interpretation and reasoning: The appellate authority rejected the refund for lack of an invoice as mandated by the invoicing rule. The Tribunal reasons that procedural non-compliance alone should not defeat a substantive refund claim where the claimant has produced sufficient documents to demonstrate (i) that the service provider was a registered person, (ii) that service tax was collected and remitted, and (iii) that the claimant was the ultimate purchaser who bore the charge. The procedural requirement to issue invoices is not a jurisdictional bar to refund where alternate proof satisfies the statutory requirement of showing borne incidence. Ratio vs. Obiter: Ratio - Absence of a formal invoice does not automatically disentitle a claimant to refund if credible alternative documentary proof establishes the claim. Obiter - Recommendations on the preferred set of documents to be produced for administrative convenience. Conclusion: The claim cannot be rejected solely for lack of invoice/bill; sufficient alternative evidence of payment and incidence permits refund consideration. Issue 4 - Commencement of interest on allowed refund Legal framework: Statutory provision for interest on refunds applies from a specified period after filing of refund claim or from such date as provided by law/notifications; administrative practice and tribunal precedent guide computation start date when claim is found allowable. Interpretation and reasoning: The Tribunal awards interest commencing three months after filing of the refund application, consistent with established practice that interest on refund accrues after a defined statutory or prescribed lapse following claim submission where the claim is ultimately allowed. Ratio vs. Obiter: Ratio - Interest is payable from three months after filing of the refund claim in the circumstances of delayed adjudication leading to allowable refund. Obiter - None significant. Conclusion: Interest on the allowed refund is payable from three months after the date of filing of the refund claim (specific date identified in the record), and consequential relief follows. Overall Disposition Where the service tax was collected by the builder, remitted to the Department, and documentation establishes that the claimant was the ultimate purchaser who bore the tax, the refund claim cannot be denied on slender grounds of prematurity or absence of formal invoice; unjust enrichment must be established by evidence of reimbursement; accordingly the refund is allowable with interest from the prescribed post-filing period.