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ST – Modification of the scheme of ensuring that there is no unjust enrichment laid down in Section 11B, if modified by officers, can have far reaching, disastrous consequences: CESTAT

2019-TIOL-2463-CESTAT-HYD

IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
REGIONAL BENCH, HYDERABAD
COURT NO. I

Service Tax Appeal No. 31080 of 2017

Arising out of Order-in-appeal No. HYD-SVTAX-000-APP-0150-17-18-ST, Dated: 27.07.2017
Passed by Commissioner (Appeals) GST & Central Excise Hyderabad

Date of Hearing: 09.04.2019
Date of Decision: 15.05.2019

M/s D E C INFRASTRUCTURE AND PROJECTS INDIA LTD
2-1-434/1/1/STREET NO. 4, NALLAKUNTA
HYDERABAD – 500044

Vs

COMMISSIONER OF CENTRAL EXCISE AND GST
7TH FLOOR, GST BHAVAN, LB STADIUM ROAD
BASHEERBAGH, HYDERABAD-500004

Appellant Rep by: Shri Ch Nageshwara Rao & Mr S Sunil Advs.
Respondent Rep by: Shri Arun Kumar, AR

CORAM: Anil Choudhary, Member (J)
P Venkata Subba Rao, Member (T)

Service Tax – Assessee rendered the services under category of “works contract services” to the Government Authorities (CPWD, MES and JNTU) and avails the exemption under Sl. No. 12 of Notfn 25/2012-ST for construction for philanthropic purposes, education (non-commercial purposes) – They filed a refund application under Section 11B of CEA, 1944 made applicable to Service Tax under Section 83 of FA, 1994 – The Assistant Commissioner after due process sanctioned the refund under Notfn 25/2012-ST r/w Section 102 of Finance Act 2016, to the assessee with a condition that the assessee should submit the documentary evidence towards proof that the refund amount was passed on to the Government authorities.

Held: Section 102 of FA, 1994 prevails over the general provisions of Section 11B to the extent of inconsistency, i.e., to the extent of granting an extra window for filing the refund claim – However, the remaining part of Section 11B have not been modified – The form of applying for refund, the eligibility of refund on merits as well as the concept of unjust enrichment apply – There is no dispute regarding the merits or the time limit – It is not in dispute that the burden has been passed on to the customer – The Assistant Commissioner, in his O-I-O, replaced this scheme provided for by the Parliament in Section 11B with his own scheme, viz., despite passing on the burden to the customers, refund will be granted and after taking the refund, you may return it to the customers within 30 days – There is clearly no provision for such a scheme and the Assistant Commissioner cannot arrogate to himself the powers of the Parliament and modify such a scheme – Correctly, the First Appellate Authority set aside such an order – However, he has not ordered recovery of the amount so refunded – The judgement of High Court of Gujarat in case of Ranjeet Singh Choudhary 2018-TIOL-887-HC-AHM-IT was in a different factual matrix – The assessee or any other person in his place could have, after undertaking to reimburse the refunded amount to their customers, not done so – The modification of the scheme of ensuring that there is no unjust enrichment laid down in Section 11B if modified by the officers can have far reaching, disastrous consequences – Undisputedly, assessee not only received the refund but also gave it back to the customers – Both sides agree that there is no net loss to the exchequer or gain to the assessee: CESTAT

Appeal allowed

Case law cited:

Ranjeet Sigh Choudhary Vs UOI – 2018-TIOL-887-HC-AHM-IT… Para 3

FINAL ORDER NO. 30460/2019

Per: Anil Choudhary:

Appellant rendered the services under the category of “works contract services” to the Government Authorities (CPWD, MES and JNTU) and avails the exemption under Sl. No. 12 of Notification No. 25/2012-ST dated 20.06.2012 for construction for philanthropic purposes, education (non-commercial purposes). The Budget-2015 the above said exemption had been withdrawn as a result the appellant has become liable to pay service tax on the works executed to the Government Authorities under the category of “Works Contract Service.” The Budget-2015 the above said exemption had been withdrawn as a result the appellant is became liable to pay service tax on the works executed to the Government authorities under the category of “Works contract Service” (vide Notification No. 06/2016-ST dated 01.03.2015; Accordingly, the appellant collected the service tax from the Government authorities and deposited and also declared the same in the ST-3 returns for the period 2015-16; However, the Budget-2016 the Government had restored the exemption to the “works contract services” rendered to the Government authorities with retrospective effect i.e. from 2015-16; (vide Notification No. 9/2016-ST dated 01.03.2016); Accordingly, special provisions Section 102 of Finance Act 2016 are inserted in the Finance Act; In according to the Special Provisions of Section 102 of Finance Act, 2016 the exemption of service tax to the service provider under the category of Works Contract Services for the works executed to the Government Authorities by way of refund within 6 months from the date of enactment of Finance Act, 2016; The appellant filed a refund application under Section 11B of the Central Excise Act, 1944 made applicable to Service Tax under Section 83 of the Finance Act, 1994, before the Assistant Commissioner of Service Tax Division-II of Service Tax Commssionerate, Hyderabad based on the disclaimer certificates and authorisations and also undertakings received from the respective Government Authorities stating that they are not claiming any refund from the Service Tax Department as they do not have any records i.e. ST-3 returns and GAR-7 Challans as proof documents to claim the refund and advised the appellant to claim the refund under Section 102 of Finance Act 2016 and pass on the same; The Assistant Commissioner of Service Tax, Divisions-I of Hyderabad Service Tax Commissionerate after due process sanctioned the refund for an amount of Rs 9,60,67,682/- under Notification No. 25/2012-ST dated 20.06.2012 read with Section 102 of the Finance Act 2016, to the Appellant with a condition that the appellant should submit the documentary evidence towards proof that the refund amount was passed on to the Government authorities, within 30 days from the receipt of the refund sanction order: OIO dated 28.11.2016, with the refund. Based on the above condition the Appellant submitted a letter dated 09.01.2017 along with detailed statement to the Assistant Commissioner of Service Tax Division-II of Service Tax Commissionerate, Hyderabad towards disbursement of refund of an mount of Rs 9,60,67,682/- to the Government authorities i.e. service recipients; After submitting the proof of disbursement of refund amount to the Government authorities by the appellant, the revenue reviewed the OIO dated 28.11.2016 and filed an appeal before the Commissioner (Appeals-II) Hyderabad on the ground that the Assistant Commissioner has not considered the unjust enrichment clause, in its letter and spirit. The appeal filed by the revenue was allowed and the Commissioner (Appeals) set aside the OIO dated 28.11.2016.

2. Aggrieved with the Commissioner (Appeals-II) OIA No HYD-SVTAX-000-APP-0150-17-18 ST dated 27.07.2017, appellant filed an appeal before the CESTAT with a prayer to consider the following grounds:

1. The refund application under Section 11B of Central Excise Act, 1944 made applicable to Service Tax under Section 83 of the Finance Act, 1994 towards retrospective exemption for the period 2015-16 by way of refund under Section 102 of Finance Act, 2016, under the category of works contract services rendered to the Government authorities, is proper and correct as per law: and when the amount of refund Rs 9,60,67,676 (for retrospective exemption under special provisions vide Section 102 of Finance Act, 2016) had been passed on to the government authorities i.e. service receivers and evidence filed not found untrue, therefore in the facts and circumstances of the appeal, the burden of “unjust enrichment” stands discharged.

3. The impugned order-in-appeal is in the teeth of order of Hon’ble Gujarat High Court in Ranjeet Sigh Choudhary Vs UOI (2018(15)GSTL 192) 2018-TIOL-887-HC-AHM-IT .

4. The learned D.R. have relied on the impugned order. The Commissioner (Appeals) have acknowledged the fact that the service provider-appellant have passed on the benefit of refund to the service recipients. Further urges that under section 11B of the Central Excise Act, refund is to be claimed by the person, who have borne the incidence of tax.

5. Section 102 of the Finance Act, 1994 prevails over the general provisions of Section 11B to the extent of inconsistency, i.e., to the extent of granting an extra window for filing the refund claim. However, the remaining part of Section 11B have not been modified. The form of applying for refund, the eligibility of refund on merits as well as the concept of unjust enrichment apply. There is no dispute regarding the merits or the time limit. The only dispute is regarding the provisions of unjust enrichment. Parliament has made a specific provision under Section 11B to ensure that the unjust enrichment does not take place by making a rebuttable presumption that the burden of tax has been passed on to the customer and hence the same needs to be credited to the consumer welfare fund. In this case, it is not in dispute that the burden has been passed on to the customer. The Assistant Commissioner, in his order-in-original, replaced this scheme provided for by the Parliament in Section 11B with his own scheme, viz., despite passing on the burden to the customers, refund will be granted and after taking the refund, you may return it to the customers within 30 days. There is clearly no provision for such a scheme and the Assistant Commissioner cannot arrogate to himself the powers of the Parliament and modify such a scheme. Correctly, the First Appellate Authority set aside such an order. However, he has not ordered recovery of the amount so refunded. The judgement of the Hon’ble High Court of Gujarat in the case of Ranjeet Singh Choudhary (supra) was in a different factual matrix. CPWD, who were the recipients of the service unfairly withheld the payments of the appellant in that case on the ground that he can get refund from the Revenue under Section 102 of the Finance Act, 1994 but the refund was not paid to him by Revenue but credited to Consumer Welfare Fund. Thus, he lost on both sides. Hon’ble High Court set aside the order and directed a co-application to be filed by both the appellant and CPWD with a direction that CPWD should pursue the refund. Evidently, CPWD bore the burden of tax and hence could have claimed the refund.

6. The appellant or any other person in his place could have, after undertaking to reimburse the refunded amount to their customers, not done so. The modification of the scheme of ensuring that there is no unjust enrichment laid down in Section 11B if modified by the officers can have far reaching, disastrous consequences.

7. In this particular case, events have overtaken this appeal. Undisputedly, the appellant not only received the refund but also gave it back to the customers. Both sides agree that in this particular case, there is no net loss to the exchequer or gain to the appellant. In view of this, we allow the appeal setting aside the impugned order. We would like to make it clear that this is an exceptional case and cannot be precedent for any officer to modify the law or procedures laid down in the Act and Rules.

(Order pronounced in open court on 15.05.2019)

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