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ST – s.102 of FA, 2016 – Exemption relating to construction of Government buildings – in view thereof, tax paid is refundable and even though there is no specific provision in the s.102, yet once tax is not payable then interest paid on such tax also becomes refundable: CESTAT

2019-TIOL-2456-CESTAT-AHM

IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH, AHMEDABAD

Appeal Nos. ST/12314-12316/2018-SM

Arising out of OIA-RAJ-EXCUS-000-APP-084-088-2018-19, Dated: 22.05.2018
Passed by Commissioner (Appeals) Commissioner of Central Excise, Customs and Service Tax-RAJKOT

Date of Hearing: 01.01.2019
Date of Decision: 11.01.2019

M/s SHREE GURUKRUPA CONSTRUCTION COMPANY

Vs

COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX
RAJKOT

Appellant Rep by: Shri S J Vyas, Adv.
Respondent Rep by: Shri T K Sikdar, AR

CORAM: Ramesh Nair, Member (J)

ST – As regard the issue that whether the assessee’s refund can be restricted by the amount of cenvat credit attributed to the output service which became non leviable to service tax as per Section 102 of FA, 2016 – The service was retrospectively exempted for period April 2015 to February 2016 – During said period, the cenvat credit was availed – Though the parliament vide Section 102 of Finance Act provided that the construction service provided to Government department during period April 2015 to February 2016 is not leviable to service tax but by retrospective amendment, the service for the said period become non taxable – Therefore, any cenvat credit availed on input service used in such output service is also not admissible to the assessee – Therefore, the facts of M/s Ashok Iron & Steel Fabricators and in the present case are totally different, the ratio of said judgment is not applicable – The submission of assessee that since there is no specific provision for non availment of cenvat credit under Section 102 of Finance Act, the same cannot be reduced from the total refundable duty which was paid – Even though there is no specific provision in Section 102 but Rule 6 clearly provides that the cenvat credit is not allowed in respect of input service which was used in non taxable/exempted service – Therefore, the cenvat credit availed on input service attributable to the non taxable output service is required to be reduced from the total service tax paid on the output service, accordingly, the refund should be restricted by the amount of cenvat credit on input service attributed to not taxable output service – As regard refund of interest paid on the service tax, the service tax was admittedly refundable which is not in dispute even by department – Therefore, even though there is no specific provision in the Section 102 but once service tax is not payable than the interest paid on such service tax also become refundable – The issue of refund of interest on the service tax is decided in favour of assessee – The refund claim is to be restricted by amount of cenvat credit in respect of input service attributed to non taxable construction service – The assessee is entitled for the refund of interest paid on service tax on the output service: CESTAT

Appeal partly allowed

Case law cited:

M/s Ashok Iron & Steel Fabricators 2003 (156) ELT 8202 (SC)… Para 2

FINAL ORDER NOS. A/10102-10104/2019

Per: Ramesh Nair:

The following issues involved in the present case:-

1) Whether the appellant’s refund claim can be restricted by the amount of cenvat credit availed on input service attributed to output service which is not taxable by virtue of Section 102 of Finance Act, 2016.

2) Whether the appellant is entitled for refund of interest paid on service tax when the service tax is refundable in terms of Section 102 of Finance Act, 2016 which does not provides specifically refund of such interest.

2. Sh. S.J. Vyas Ld. Counsel appearing on behalf of the appellant submits that Section 102 though provide for non levy of service tax on the construction service provided to Government department but it does not provide for reversal of cenvat credit in respect of input service attributed to said non taxable service. He submits that at the time of taking credit, the credit was legally availed. The output construction service was become non taxable only at a later stage by retrospective amendment under Section 102 of Finance Act, 2016. He takes support of the judgment of Larger Bench in the case of M/s Ashok Iron & Steel Fabricatorswhich was upheld by Hon’ble Supreme Court reported as 2003 (156) ELT 8202 (SC), therefore, when the output service either become exempted or become non taxable at a later stage. The cenvat credit availed at a time the service was taxable, reversal of cenvat credit cannot be insisted upon, accordingly, the total refund is payable to the appellant without putting any restriction on account of availment of cenvat credit. As regard, the second issue that whether the appellant is entitled for the interest paid on service tax which subsequently become non taxable with retrospective effect. He submits that this very issue has been decided in favour of assessee by this Tribunal in the case of M/s Shanti Structure Pvt. Ltd Vs. CCE & ST- Rajkot vide this Tribunal order No. A/12894-12903/2018 dated 14.12.2018, therefore, the appellant is entitled for the refund of interest paid on service tax.

3. Sh. T.K. Sikdar Ld. Assistant Commissioner (AR) appearing on behalf of the Revenue reiterates the findings of the impugned order.

4. I have carefully considered the submissions made by both the sides and perused the records. As regard first issue that whether the appellant’s refund can be restricted by the amount of cenvat credit attributed to the output service which became non leviable to service tax as per Section 102 of Finance Act, 2016. I find that the service was retrospectively exempted for the period April 2015 to February 2016. During the said period, the cenvat credit was availed. Though the parliament vide Section 102 of Finance Act provided that the construction service provided to the Government department during the period April 2015 to February 2016 is not leviable to service tax but by the retrospective amendment, the service for the said period become non taxable. Therefore, any cenvat credit availed on the input service used in such output service is also not admissible to the appellant. As regard heavy reliance made by the Ld. Counsel on the Larger Bench judgment in the case of M/s Ashok Iron & Steel Fabricators (Supra), I find that in the said judgment, unutilized cenvat credit was lying on the date when goods were exempted, whereas in the present case, due to retrospective amendment during the currency of said period, the service was held to be non leviable to service tax. Therefore, the facts of M/s Ashok Iron & Steel Fabricators (Supra) and in the present case are totally different, the ratio of the said judgment is not applicable. The submission of Ld. Counsel that since there is no specific provision for non availment of cenvat credit under Section 102 of Finance Act, the same cannot be reduced from the total refundable duty which was paid. I find that even though there is no specific provision in Section 102 but Rule 6 clearly provides that the cenvat credit is not allowed in respect of input service which was used in non taxable/exempted service. Therefore, the cenvat credit availed on the input service attributable to the non taxable output service is required to be reduced from the total service tax paid on the output service, accordingly, I agree with the lower authority that the refund should be restricted by the amount of cenvat credit on the input service attributed to not taxable output service.

5. As regard refund of interest paid on the service tax, the service tax was admittedly refundable which is not in dispute even by the department. Therefore, even though there is no specific provision in the Section 102 but once service tax is not payable than the interest paid on such service tax also become refundable. This issue has been considered by this Tribunal in the Order No. A/12894-12903/2018 dated 14.12.2018 in the case of M/s Shanti Structure Pvt. Ltd (Supra) wherein following order was passed:

“4. On careful consideration of the submissions made by both the sides and perusal of the records, I find that as per Section 102 of Finance Act, 2016, the service tax is not leviable on the construction services provided to the government department during the period 01.04.2015 to 29.02.2016. Accordingly, during the said period, the service tax itself was not leviable. Admittedly, the appellant paid the service tax during the said period and wherever there was delay, they had paid interest also. Since, the interest is a piggy-back of service tax when service tax itself was not payable, the interest was also not payable. Since it was charged and paid by the appellant, it is refundable. Accordingly, I do not find any reason why the interest could not be refunded to the appellant when refund of service tax was sanctioned by the department.

Accordingly, the impugned orders with regard to rejection of interest are set aside. Appeals are allowed.”

6. As can be seen from the above order, the issue of refund of interest on the service tax is decided in favour of the assessee. As per my above discussion, I hold that the refund claim is to be restricted by the amount of cenvat credit in respect of input service attributed to non taxable construction service. The appellant is entitled for the refund of interest paid on service tax on the output service. Accordingly, the appeal is partly allowed in the above terms.

(Pronounced in the open court on 11.01.2019)

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