Service tax refund allowed for cancelled transactions where no service was ultimately provided to buyers

CESTAT Hyderabad allowed the appeal for refund of service tax paid on cancelled transactions in the post-GST era. The tribunal followed a coordinate bench decision from Delhi, holding that where no service was ultimately provided due to cancellation and refunds were made to buyers, the assessee was entitled to credit under Rule 6(3) of Service Tax Rules read with Section 142(3) of CGST Act. The original rejection order was set aside as erroneous, and the authority was directed to grant refund with interest within 45 days.

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Issues Involved:
The judgment involves the issue of whether the claim of refund under Rule 6(3) of Service Tax Rules read with Sec 142(5) of CGST Act has been rightly rejected.

Details of the Judgment:

Issue 1: Refund Claim Rejection
The appellant, engaged in construction and sale of units, collected advances from customers and registered units upon full payment and construction completion. A customer cancelled a booking, leading to return of the amount with service tax and GST. The refund claim was rejected citing non-submission of agreement copy, lack of invoice, unreported advance payments, and time bar.

Issue 2: Adjudication and Appeal
The Adjudicating Authority rejected the refund claim based on non-disclosure of advance payments and time bar. The Commissioner (Appeals) upheld this decision. The appellant appealed, arguing they rightly paid tax on received instalments, returned the amount with service tax upon cancellation, and were entitled to refund under Rule 6(3) of ST Rules and Sec 142(5) of CGST Act.

Issue 3: Tribunal Decision
The Tribunal found in favor of the appellant, citing a similar case precedent. It held that the appellant was entitled to credit under Rule 6(3) of ST Rules read with Sec 142(5) of CGST Act due to the change in tax regime. The impugned order was set aside, directing the Adjudicating Authority to grant the refund within 45 days with interest.

Conclusion:
The Tribunal allowed the appeal, setting aside the impugned order and directing the refund of the disputed amount within a specified time frame.

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