The Mumbai Bench of the Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ) allowed the refund of service tax on cancelled bookings of flats.
Facts of the case in brief are that the Appellant is in the business of providing construction of residential complex service. The Appellant have received booking in respect of the apartments being constructed by it. The Appellant had accordingly collected the booking amount and had discharged the applicable Service Tax in respect of such booking amount so collected. Subsequently, due to various reasons, 29 allottees decided to cancel their respective bookings with the Appellant.
Pursuant to the refund applications filed by the Appellant, it was issued deficiency memo cum Show Cause Notice proposing rejection of refund claims on various grounds such as absence of documents, substantiating the proof of payment of tax, copy of agreement entered into with the customers, details of booking and subsequent cancellation by the customers, proof of remittance of service tax to the customers. Subsequently, by a consolidated adjudication order, the refund claims were rejected.
Being aggrieved by the same the Appellant filed appeals before the learned Commissioner (Appeals) which came to be rejected vide the common order impugned before the Tribunal. Hence, the present appeals.
The advocate for the appellant submitted that the impugned order has erred in recording the case laws and circulars relied upon by the Appellant pertains to the issue originating prior to the introduction of the negative list, and therefore, the same are not applicable to this case.
It was also submitted that Section 67 of the Finance Act which governs the valuation of taxable services for charging/levy of tax emphasises that only the gross amount ‘charged’ by the service provider shall be liable to service tax. Therefore, where the amount has been refunded back to the customers, then it can be construed that no amount is charged by the service provider and no tax is leviable on the same.
A Single Bench of PK Choudhary, Judicial Member observed that “I find that the credit/refund of the excess service tax paid by the Appellant was a right that had accrued in favour of the Appellant and therefore, as per Section 174 of the CGST Act, 2017, such right of the Appellant ought to be upheld and protected. Further, Section 142(5) of the CGST Act, 2017 contemplates the very situation as in the present appeals and accordingly, provides for refund of taxes paid under the erstwhile Laws.”
“The cancellation of booking coupled with the fact of refunding the booking amount along with service tax paid would mean as if no booking was made and if that is so, then there was no service at all. If there is no service then question of paying any tax on it does not arise and the Department can’t keep it with them. No law authorises the Department to keep it as tax” the Tribunal held.
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