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 where exemption under Entry 12(a) (later 12A) applied; the exemption remained applicable to such services and stamp duty requirement is inapplicable where stamp duty is not leviable. Section 103 was held to be a self-contained refund code excluding reliance on other limitation or unjust enrichment provisions; unjust enrichment did not bar refund because the appellant sought direct refund to the service recipient. The matter was remitted for fresh adjudication after impleading the service recipient.

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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.

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