Service Tax Refund to buyers of individual flats - CESTAT Orders Refund
IN a recent landmark order, the Bangalore Bench of the Tribunal held that builders were not liable to pay Service Tax on individual flats sold to individual buyers prior to 1.7.2010. The Tribunal disposed of 121 appeals, mostly from individual buyers who had paid Service Tax to the builders. The Tribunal allowed the refund claims. Tribunal held that prior to 1.7.2010, only residential complex service was taxable and not a residential flat. Construction of residential flats for an individual entered into the taxability area only after the introduction of explanation toclause (zzzh). In the explanation, complex as well as part of the complex have been covered.
Tribunal emphatically held that this explanation had no retrospective effect.
Is the limitation under Section 11B applicable for such refunds? It was vehemently argued that when the levy itself was illegal, there was no question of applying the provisions of Section 11B but Tribunal was not impressed. As held by a High Court, if assessee wants to make a claim under Limitation Act, the forum is not the concerned authority empowered to sanction refund under Section 11B of the Act, but some other forum. The remedy lies in approaching the Civil Court or the High Court under writ jurisdiction rather than approaching department for refund claim. The Tribunal observed, "central excise officers cannot sanction any refund under any provision of any other law. The question of not applying the provisions of Section 11B for refunds even if filed not under Section 11 B but under other enactment, would not arise at all in view of this provision. When the statutory provision bars a person from sanctioning refund, he cannot exercise such authority."
The Tribunal held, "even if the claim was made under Limitation Act or even if there are decisions of the High Court or Supreme Court taking a view that the levy is illegal and refund has to be paid, a Central Excise officer exercising the powers under Section 11B of the Act, could not have and cannot have and should not have sanctioned the refund."
What is the relevant date for claiming refund by the buyer of the flat? The Tribunal held, "as and when the purchaser made the payment for the service received and submits bill/invoice/other document received by him which shows the service tax element separately and he has discharged the same, that was the relevant date and that has to be treated as date of purchase for the purpose of calculating limitation under Section 11B of the Act."
Will the Service Tax collected by the builders come under the purview of Section 73A (Service Tax collected from any person to be deposited with Central Government) ? No precedent decisions were cited by either side. Therefore, the presumption is that this is the first time that this Section is coming up for consideration in a case of refund claim filed under Section 11B of the Act or otherwise. The Tribunal noted that Section 73A is corresponding to Section 11D of Central Excise Act, 1944. The provisions of Section 11D was brought into the statute to ensure that amount collected as tax is paid to the Government. This is another way of ensuring that nobody gets unjustly enriched by collecting amount as tax and not pay to Government on the ground that such tax is not payable. It is difficult to accept the fact that this would apply to all cases where tax is not payable or tax is collected in excess by an assessee. In these cases, the service providers have collected the tax after doing an assessment in accordance with law. In the normal course, there is no revised assessment at all. There is no reassessment also. The practice of departmental officers assessing returns and finding out whether the tax has been paid correctly has been discontinued from 1997 (probably) altogether. Therefore, it is totally self-assessment in the case of Central Excise and Service Tax. Therefore, it cannot be said that when the tax was paid by the service provider, he had collected the amount from the customers or buyers in these cases in excess of amounts payable or the amount was not at all payable to Government.
The Tribunal held: Therefore the provisions for refund in section 73A of 1994 Act cannot be applicable to the situation where a service tax is collected in a legal manner in accordance with law and paid to the Government in accordance with law under a wrong assumption that service tax was liable to be paid.
We bring you this judgement today.