2026 (1) TMI 1075 - AT - Service Tax

Refund of service tax on resurfacing services at defence station upheld; remitted for decision after impleading service recipient

Refund claim under Sections 102 and 103 of the Finance Act concerned refund of service tax charged for resurfacing and allied works at a defence airfield ... Rejection of the refund claim filed by the appellant in view of the provisions of Section 102 and 103 of the Finance Act, 1994 - services of resurfacing and allied work at an Air Force Station - non-payment of service tax in view of the exemption under Sl. No. 12(a) of N/N. 25/2012-ST dated 20.06.2012 - applicability of principles of unjust enrichment - amount was merely a deposit or duty - HELD THAT:- There is no dispute that the said services were provided by the appellant to the Air Force Station, MES even prior to 01.04.2015 and no service tax was paid in view of the exemption under the existing Entry 12(a) of the Exemption N/N.25/2012 dated 20.06.2012. The Department never raised any objection to the applicability of the said exemption on the services rendered by the appellant. The exemption under Sl No. 12(a) was omitted w.e.f. 01.04.2015 vide N/N. 6/2015 dated 01.03.2015 and as a result the appellant paid the service tax. The exemption was reintroduced under Sl No. 12A of N/N. 9/2016 dated 01.03.2016. Except for the last part of Sl. No.12A providing for exemption in respect of contract, which has been entered into prior to 1st March, 2015 and on which appropriate stamp duty, where applicable, had been paid prior to such date, the contents of both the entries are absolutely same. There is no distinction in the nature of services prescribed in the two entries which are similarly worded and, therefore, the services which were eligible under Sl.No.12(a) continue to be eligible under Sl. No. 12A. It is not the case of the Revenue that the services provided by the appellant when Sl. No.12(a) was prevalent has undergone any change. Sub-rule (ii) of Rule 2A has been couched very liberally so as to include all types of additions and alterations to abandoned or damaged structures that make them workable. Applying the same, the necessary conclusion would be that resurfacing and relaying of the runway would amount to additions and alterations to the damaged runway - The services being rendered to MES, a Department of Ministry of Defence which is responsible for the security and safety of the nation, the requirement under Section 102(a) that services are meant predominantly for use other than for commerce, industry, or any other business or profession is satisfied. The relevant clause in Section 102 reads as, “on which appropriate stamp duty, where applicable, had been paid before that date”. The fallacy in the argument of the Revenue is that they have completely ignored the words, “where applicable”, the simple interpretation of which is, where stamp duty is not applicable, the said requirement will not be enforced. In the present case the service recipient which is the Ministry of Defence, Government of India, were not required to pay stamp duty on such agreements. Having held that Section 103 contains a self-contained code, a complete mechanism for claiming refund, the High Court rejected the contention that sub-section (3) of Section 103 retains the period of limitation of one year prescribed in the Excise Act and is aimed to protect such a refund application which cover the period beyond such period and concluded that for claiming refund under the said provision, limitation period prescribed elsewhere cannot be adopted ignoring the period prescribed in sub-section (3) of Section 103. Thus the applicability of the provisions of Section 11B are completely ruled out. The contention of the Revenue that the refund cannot be allowed because of the bar in terms of unjust enrichment for claiming refund would not apply to the refunds sought under Section 102/103, where the only requirement is that the assessee satisfies the mandatory conditions provided therein. The principle of unjust enrichment as provided in Section 11B(2) of CEA will also not be applicable for the reason that in the refund claim, the appellant had categorically prayed that the amount of Rs.3,40,58,797/- be refunded directly to the account of the service recipient who have reimbursed the said amount to the appellant - the appellant cannot be said to have passed on the burden of tax to any other person - there are no reason to justify that the principle of unjust enrichment can be applied in this case. Whether amount was merely a deposit and not duty? - HELD THAT:- The Tribunal is concurred with the view taken by the Tribunal in M/s. Amit Rishabh [2025 (10) TMI 1350 - CESTAT NEW DELHI] that the amount of service tax cannot be considered to be merely a deposit as Section 102 (2) makes it clear that refund shall be made of all such service tax which has been collected but which would not have been so collected had sub-section(1) been in force all material times. Further, sub-section (3) also makes it clear that an application for the claim of refund of service tax shall be made within a period of six months - logically the amount in question cannot be construed as deposit. The appellant is entitled to the refund as claimed, however, the same shall be decided by the Assistant Commissioner, on MES being impleaded as a co-applicant in the refund application. The appeal is, accordingly allowed by way of remand. Issues: (i) Whether the services of resurfacing and allied work at an Air Force Station fall within the exemptions under Section 102 and/or Section 103 of the Finance Act, 1994 (as inserted by Section 159 of the Finance Act, 2016); (ii) Whether the requirement of payment of stamp duty ('where applicable') and certification by the appropriate Ministry is mandatory and was complied with; (iii) Whether the principle of unjust enrichment / applicability of Section 11B of the Central Excise Act bars the refund; (iv) Whether the refund claim procedure and locus (including modification of returns and impleadment of MES) affects entitlement to refund.Issue (i): Whether the services rendered (resurfacing, relaying, demolition and reconstruction of runway and allied works) qualify as services in relation to a 'civil structure' or 'original works' under Section 102/103.Analysis: The notification entries and Section 102 use the terms 'civil structure' and 'original works' which cover construction, repair, maintenance, renovation or alteration. The services performed include demolition, rigid overlay, resurfacing, relaying and allied civil engineering works normally falling within civil engineering and airport infrastructure activities. The appellant produced sanction/clarification from the competent Government authority (MES/Ministry of Defence) and there was no change in the nature of services from the period when the earlier exemption applied.Conclusion: In favour of the Assessee. The services fall within the scope of 'civil structure' or 'original works' for the purposes of Section 102/103.Issue (ii): Whether stamp duty payment 'where applicable' and certification by the relevant Ministry are mandatory preconditions and, if mandatory, whether they were met.Analysis: Section 102/103 require stamp duty payment only 'where applicable' and Section 3 of the Indian Stamp Act, 1899 exempts instruments executed by or in favour of the Government from stamp duty. The work was awarded by MES/Ministry of Defence and the evidence showed stamp duty was not leviable in the circumstances. Section 103 requires certification by the appropriate Ministry; where another Ministry (e.g., Defence) is the contracting authority, the legislative phrase 'or as the case may be' contemplates certification by the relevant Ministry.Conclusion: In favour of the Assessee. The stamp duty condition does not apply where stamp duty is not leviable on Government instruments; certification must be from the appropriate Ministry (here Defence) as applicable.Issue (iii): Whether unjust enrichment (Section 11B of CEA) or the characterisation of the amount as a mere deposit prevents refund under Sections 102/103.Analysis: Sections 102/103 create a separate, self-contained refund mechanism for the retrospective exemption. Pre-existing Section 11B principles are not applicable to refunds under these special provisions. The appellant demonstrated that the bulk of tax was reimbursed by MES and requested refund be credited to the service recipient. Statutory language of Sections 102/103 treats the amounts as collected service tax subject to refund rather than a mere deposit.Conclusion: In favour of the Assessee. Unjust enrichment and Section 11B do not bar refund under Sections 102/103 where conditions of those sections are satisfied; the amount is not merely a deposit for the purpose of denying refund.Issue (iv): Whether procedural matters (modification of ST-3 returns, impleadment of MES, locus to file refund) affect the refund determination.Analysis: The statutory refund scheme under Sections 102/103 is distinct from Section 11B procedures; prior modification of returns is not a precondition under Sections 102/103. However, where the tax was reimbursed by MES, MES is the proper party to pursue the refund or to be impleaded so that entitlement and direction for refund to the service recipient can be addressed. Precedent indicates remand for opportunity to implead the service recipient and examine refund to service recipient account.Conclusion: Partly in favour of the Assessee. The appellant is entitled to refund in principle, but the matter is remitted for consideration by the Assistant Commissioner after MES is impleaded as co-applicant and given opportunity to be heard.Final Conclusion: The impugned rejection is set aside; the appellant is entitled to refund under Sections 102/103 subject to procedural compliance and the Assistant Commissioner is to decide the refund claim after impleading and giving opportunity to MES to be a co-applicant.Ratio Decidendi: Section 102 and Section 103 provide a self-contained retrospective refund mechanism for specified construction/repair services to Government; where stamp duty is not leviable on Government instruments the 'where applicable' stamp duty condition does not apply, unjust enrichment under Section 11B is not a bar to refunds under these special provisions, and refund claims may require impleadment of the service recipient when the tax was reimbursed to determine proper beneficiary of the refund.