Retrospective exemption in Service Tax - What if case is already settled under VCES?
THIS year's budget provided some retrospective beneficial amendments. One such instance is exemption provided to the Services provided by way of construction, erection, maintenance, or alteration etc. of canal, dam or other irrigation works provided to entities set up by Government but not necessarily by an Act of Parliament or a State Legislature. The JSTRU letter explains this amendment as follows:
K. Service Tax exemption to canal, dam or other irrigation works with retrospective effect:
+ Definition of Governmental authority was amended with effect from 30.01.2014 so as to exempt services provided by way of construction, erection, maintenance, or alteration etc. of canal, dam or other irrigation works provided to entities set up by Government but not necessarily by an Act of Parliament or a State Legislature. However, services provided prior to 30.01.2014 to such bodies remained taxable. The benefit of exemption is proposed to be extended to the said services provided during the period from the 1st July, 2012 to 29.01.2014.
+ Refund of Service Tax paid on the said services during the period from the 1st July, 2012 to 29.01.2014 shall also be allowed in accordance with the law including the law of unjust enrichment. Application for refund may be allowed to be filed within a period of six months from the date on which the Finance Bill, 2016 receives the assent of the President.
[New section 101 is being inserted in the Finance Act, 1994] (Clauses 156 of the Finance Bill, 2016 refers)
Now, what will happen if an assessee has already settled his case under VCES 2013 in respect of liability up to December 2012? Can he get refund of the Service Tax paid for the period from July 2012 to December 2012? As per the provision of VCES, (Sec 109 of the Finance Act 2013) any amount paid in pursuance of a declaration made under sub-section (1) of section 107 shall not be refundable under any circumstances. But how could an assessee predict in 2013 that the Government would exempt his service retrospectively in 2016? This issue needs to be clarified as the assessee have to file the refund claims within six months from the date of enactment of the Finance Bill, 2016.