Refund of service tax on cancelled bookings preserved under transitional GST provisions and cannot be denied on limitation grounds.

Refund claims under the erstwhile service tax regime were held admissible where service tax had been paid on booking amounts and the bookings were later cancelled with the consideration returned. The Tribunal held that refund claims arising under section 142(5) of the CGST Act must be examined under the existing law, and the limitation in section 11B of the Central Excise Act cannot be used to reject them. It also held that once the underlying taxable service ceased on cancellation, the amount retained the character of a refundable deposit rather than tax lawfully due, and transitional provisions preserved the assessee's accrued refund right. Retention by the department was inconsistent with article 265.

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Issues: (i) Whether the refund claims filed by the assessee were admissible and the refund ought to be granted. (ii) Whether service tax paid on booking amounts later refunded on cancellation of flats could be retained by the department in the absence of a provision for such refund under the GST regime.

Issue (i): Whether the refund claims filed by the assessee were admissible and the refund ought to be granted.

Analysis: The refund applications were examined in the context of the erstwhile service tax regime and the transitional framework under the Central Goods and Services Tax Act, 2017. The Tribunal held that refund claims arising under section 142(5) of the Central Goods and Services Tax Act, 2017 are to be considered with reference to the existing law and that the limitation under section 11B of the Central Excise Act, 1944 cannot be invoked to reject such claims. It also noted that the assessee had paid service tax on booking amounts and, upon cancellation of bookings, had refunded the amounts to the allottees.

Conclusion: The refund claims were admissible and could not be rejected on limitation grounds.

Issue (ii): Whether service tax paid on booking amounts later refunded on cancellation of flats could be retained by the department in the absence of a provision for such refund under the GST regime.

Analysis: The Tribunal held that service tax is leviable only where a taxable service exists, and once the booking is cancelled and the consideration is returned, no service survives for tax purposes. Amounts paid in such circumstances are treated as a deposit rather than tax lawfully due. The Tribunal further held that the accrued right to refund is protected by section 174 of the Central Goods and Services Tax Act, 2017, and that section 142(5) specifically accommodates refund of taxes paid under the erstwhile law. Retention of such amount by the department would be inconsistent with article 265 of the Constitution of India.

Conclusion: The department could not retain the amount, and refund was payable to the assessee.

Final Conclusion: The appeals succeeded, and the assessee was held entitled to refund of the service tax amount with consequential relief in accordance with law.

Ratio Decidendi: Where consideration received for a taxable service is subsequently refunded on cancellation of the underlying transaction, the tax so paid ceases to retain the character of tax and becomes refundable, and transitional provisions preserving vested rights must be applied to grant relief.

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