$~63
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Decided on: 07.09.2016
+ SERTA 26/2016, C.M. APPL.32831/2016
MERA BABA REALTY ASSOCIATE (P) LTD. ..... Appellant
Through : Sh. Ruchir Bhatia, Advocate.
Versus
COMMISSIONER OF SERVICE TAX, DELHI ..... Respondent
Through : Sh. Pramod Kumar Rai, Sr.Standing
Counsel with Sh. Deepak Anand, Jr. Standing
Counsel.
CORAM:
HON'BLE MR. JUSTICE S. RAVINDRA BHAT
HON'BLE MS. JUSTICE DEEPA SHARMA
MR. JUSTICE S. RAVINDRA BHAT (OPEN COURT)
%
1. Following question of law arises for consideration:
"Did the Tribunal fall into error in holding that the refund claim
made by the appellant was not maintainable?"
2. Admit.
3. Issue notice. Sh. Pramod Kumar Rai, Advocate accepts notice.
4. The facts of the case are that the appellant is a builder engaged in
construction activity. The levy of Service Tax was imposed by an
amendment in the Finance Act, 1994 with effect from 01.07.2010. However,
prior to that, apparently, the Service Tax Department had issued a Circular
dated 16.02.2006, the effect of which was to advise all construction
companies to pay Service Tax. The appellant complied and started
depositing amounts for the periods in question, i.e. from 2006 onwards. On
24.04.2007, the appellant protested, contending that the amounts paid by
SERTA 26/2016 Page 1
them were not covered by the levy and that they had to be refunded the said
amounts. The said letter reads as follows:
"To,
The Superintendent,
Service Tax Division I
Delhi.
Sub: Payment of service tax in protest as per the Judgment
dated 23.07.2007 in Revised Civil Mis. Writ Petition No.997 of
2006 decided by Allahabad High Court in case OF ASSOTECH
REALITY PVT. LTD. VS. STATE OF U.P.
Sir,
We are paying Service Tax as a builder a lieu of decision
of K. Reheja Development Corporation case. The Allahabad
High Court has turned down the said Judgment in Revised Civil
Misc. Writ Petition No.997 of 2006 decided on 23.03.2007 in
case of Assotech Reality Pvt. Ltd. Vs. State of U.P. Accordingly
being a builder, we are not liable to pay the service tax.
However, we are depositing the service tax in protest with the
condition that in case it is decided in favour of builder, the same
would be refunded to us.
It is further submitted that, it is not applicable to the case
at hand in as much as this decision was rendered on the facts of
its own case, in our case, the company has not undertaken any
construction work for and on behalf of proposed customer and
the title, in the property so constructed, passes to the customer
only on the execution of sale deeds and registration thereof.
Until the time the sale deed is executed, the title and interest,
including the ownership and possession in the construction
made, remain with the company. The payment made by
prospective purchasers, in instalments are aimed at facilitating
purchase of the property by these probable purchasers so that
they may not be required to pay whole of the price at a time.
SERTA 26/2016 Page 2
Form the above, it cannot be inferred that the company us
making construction for and on behalf of the probable
customers.
In view of the position explained above, you are
requested to look into the matter and refund the service tax.
Thanking you,"
5. The appellant filed a refund claim on 26.02.2009, disclosing all the
particulars, in the prescribed format, i.e. Form-R under Section 11B of the
Central Excise Act, 1944. This claim was rejected in its entirety. The order-
in-original observed as follows:
"ORDER
In view of the above discussions & findings, I reject the
refund claim of Rs.72,21,075/- (including interest amount
Rs.47,633/-) being time barred and inadmissible, and also reject
the rest of the amount Rs.32,67,569/- being inadmissible out of
total refund claim amount Rs.1,04,88,644/- filed on 26.02.2009
under Section 11B of the Central Excise Act, 1944, which is also
made applicable in the Service Tax matters by virtue of Section
83 of the Finance Act, 1994."
Sd/-
(SAHIL INAMDAR)
ASSISTANT COMMISSIONER"
6. The primary adjudicating authority was of the opinion that the
application was time-barred. He took into account the fact that the assessee
had voluntarily obtained registration and deposited amounts without protest
and much later claimed that such amounts were not leviable. The order-in-
original further observes that in the circumstances, there is no question of
any amount being refunded. The first appellate authority took note of
SERTA 26/2016 Page 3
previous orders of Central Excise and Service Tax Appellate Tribunal
(CESTAT), notably in M/s. Rubberwood India Pvt. Ltd. v. Commissioner of
Customs 2006 (206) ELT 536 and other decisions to say that the levy should
be calculated from the date when the refund claim was originally filed and
not from the date when the refund claim is subsequently filed in proper
format before the appropriate authority. The appellate authority also noted
that since the services in question, i.e. "construction" did not exist prior to its
inclusion in Sections 65(105)(zzq) and (zzh) of the Finance Act, 1994 with
effect from 01.07.2010, the amounts could be recovered only prospectively
and not from a prior period. To this end, the CESTAT relied upon the
decision reported as Union Bank of India v. M/s. Martin Lottery Agency Ltd.
2009-TIOL-60-SC-ST; Indian National Shipowners' Association v. UOI
2009 (14) STR 289 (Bom) etc. The appellate authority also took into
consideration the Central Board of Excise and Customs Circular
No.108/02/2009-ST dated 29.01.2009 and then concluded as follows:
"The Hon'ble Bombay High Court vide judgment in the case of
Indian National Shipowners' Association Vs. Union of India
2009 (14) STR 289 (Bom) and specifically held as under:-
"38....Introduction of new entry and inclusion of certain
services in that entry would presuppose that was no earlier
entry covering the said services. Therfore, prior to introduction
of entry (zzzz), the services rendered by the members of the 1 st
petitioner were not taxable. Creation of new entry is not by way
of amending the earlier entry. It is not a carve out of the earlier
entry. Therefore, the services rendered by the members of the 1 st
petitioner cannot be brought to tax under that entry.
In view of the above explanations inserted in the Section
65(105)(zzq) and (zzzh) w.e.f. 01.07.2010 and clarifications
given by CBEC vide Letter D.O.F. No.334/03/2010-TRU dated
SERTA 26/2016 Page 4
1-7-2010, it is amply clear that if an agreement is entered into
or any payment is received, for sale of complex or apartment in
residential complex, service tax will be leviable on such
transaction since the builder provides the construction service
w.e.f. 01.07.2010 only in terms of principle laid down in the
above mentioned judgments that Service Tax levied by virtue of
new entry and explanation would be applicable prospectively
only. In view of the above, I hold that the activities undertaken
by the appellants were chargeable to Service Tax w.e.f.
01.07.2010 by virtue of Explanation inserted Section
65(105)(zzq) and (zzzh) on 01.07.2010 and were not taxable
during the period prior to 01.07.2010 and the Service Tax paid
by them during the period prior to 01.07.2010 was liable to be
refunded to the appellants in terms of provisions of Section 11B
of the Central Excise Act, 1944 as made applicable to like
matters of Service Tax by virtue of Section 83 of the Finance
Act, 1994.
8. In view of the above, I set aside the impugned order and
allow the appeal with consequential relief.
Sd/-
(V.K. SINGH KUSHWAH)
COMMISSIONER (APPEALS)
CENTRAL EXCISE, DELHI-I"
6. The revenue appealed to the CESTAT which was of the opinion that
since the appellant continued to deposit the amounts with the Service Tax
Department after lodging protest, per se no question of refund of amounts for
the prior period, i.e. payments made before 24.04.2007 arose. It, however,
remitted the matter for calculation of amounts, and refund in respect of the
period after the refund particulars had been made over in Form-R, i.e. after
24.04.2007.
7. It is contended on behalf of the appellant that the amounts deposited
SERTA 26/2016 Page 5
prior to 24.04.2007 were covered by the refund claim and that the letter of
the appellant made it clear that the amounts deposited in the past and payable
thereafter were also under protest. It was submitted that since there is no
denial of the fact that the levy was imposed for the first time by the
amendment to the Finance Act, 1994 with effect from 01.07.2010, the
amounts collected under the colour of a lawful expression could not be
retained by the Service Tax authorities on the ground that the time for
claiming the refund had expired. Learned counsel relied upon the second
proviso to Section 11B and stated that if a protest is lodged, then the time
period of one year provided for by Section 11 would be inapplicable.
8. Learned counsel for the respondent, on the other hand, contended that
the impugned order of the CESTAT should not be interfered with since it
had merely corrected the first appellate authority's order. That the appellant
had made a refund claim in the appropriate form for the first time in 2009 is
not denied. That it had also deposited and continued to deposit service tax
amounts despite its understanding and claim that they were not liable is also
not disputed. In the circumstances, there was no question of applicability of
proviso to Section 11B and refund claim ought to have been made within the
time prescribed. Since the refund claim here was neither in appropriate
format nor unequivocal about the disclaimer of liability, the assessee was not
entitled to refund of amounts for the period prior to 24.04.2007.
9. This Court is of the opinion that the CESTAT clearly fell into error of
law. The proviso to Section 11B clearly indicates that if the amounts are paid
under protest (in this case, the protest was filed before the expiry of one
year) - the limitation prescribed by the main portion, i.e. Section 11B(1)
would not apply. Even otherwise, once it is admitted that the levy itself came
SERTA 26/2016 Page 6
into force with effect from 01.07.2010 per se, amounts collected without
authority of law fall beyond the imprint of expression or expropriation under
pretence of authority of law. In these circumstances, the fundamental
question of the appellant or any other assessee seeking recourse being
restricted by the period of limitation under the statute authorising levy and its
recovery should not arise. Furthermore, even if that reasoning were to be
perused, the fact remains that the protest was lodged within reasonable time
of the appellant becoming aware that the amounts were not recoverable as
Service Tax. That is sufficient to attract proviso to Section 11B(1).
10. In the circumstances, we are of the opinion that the order of the
CESTAT to the extent that it remitted the matter for calculation of only part
of the amounts to be paid, is accordingly set aside. The order of the first
appellate authority Commissioner (Appeals) dated 06.05.2011 is restored.
The appeal is allowed in the above terms.
S. RAVINDRA BHAT
(JUDGE)
DEEPA SHARMA
(JUDGE)
SEPTEMBER 7, 2016
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