The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), Ahmedabad Bench ruled that the Government can not retain interest paid on service tax which is refundable.
The appellants, Shanti Construction Co have provided works contract service to various Government Departments. The appellant have also availed the input services in the nature of works contract service from various sub- contractors as well on which the sub contractor have discharged the service tax and same was availed as Cenvat credit by the appellants. The said Cenvat credit was utilised for discharging the service tax liability by the appellant. During the period the appellants paid the total service tax of Rs 2,78,07,833/- on their works contract service. Out of the sum of Rs 2,78,07,833/- the appellants discharged the service tax by utilizing the Cenvat credit of Rs 1,82,16,059/- of service tax paid to their sub contractors.
The central government inserted section 102 of Finance Act, 1994 giving retrospective exemption to the service provided by the appellant to various government departments for the period 01.04.2015 to February 29, 2016 .
Mr. Jigar Shah, counsel appearing on behalf of the appellant submits that the Central Government introduced the Section 102 in the Finance Act, 1994 to grant retrospective exemption by way of refund to such services. As can be seen from the language of section 102 Finance Act 1994 that it is complete code in itself. The section 102 itself provides the mechanism for claiming the refund and restoring the exemption for payment of service tax. Further Section 102 grants refund of the entire amount of service tax collected by the central government during the period 01.04.2015 to 29.02.2016 irrespective and further classification whether the same was paid through cash or by utilization of Cenvat credit. Therefore he submits that denial of refund claim on the ground that Retrospective exemption has been granted and if the refund is granted to the appellant would result in double benefit to the appellant is bereft of any logic much less supported by any statutory provisions. He submits that the finding of Learned Commissioner (Appeals) is devoid of any merits and liable to be set aside on this ground itself.
The appellant also claimed refund of interest amount of Rs 3,77,629/- which was paid due to delay in payment of service tax during the relevant period. The lower authorities have rejected the refund of this amount on the ground that section 102 provides the refund of service tax and not of interest.
On the other hand, Me. H.K Jain Assistant Commissioner appearing on behalf of the revenue reiterates the findings of the impugned order.
The coram of Judicial Member Ramesh Nair and Technical Member, Raju held that interest was paid on the service tax which is refundable under Section 102. When there is no levy of service tax the government cannot retain the interest paid on such non levy therefore, even though it is not specifically provided under Section 102. The interest paid on the service tax which is to be refundable is nothing but a piggy back of refundable service tax. Hence, the same is eligible for the refund to the appellant.
The CESTAT found that the Adjudicating Authority while denying the refund of this amount also noted that there is no evidence of payment of stamp duty on the contract. The Adjudicating Authority has missed the term “wherever applicable”. In the present case payment of stamp duty is not applicable. Therefore, the condition whether stamp duty was paid or otherwise cannot be applied in the present case. Only aspect to be considered is whether the contract is of prior to 01.03. 2015 or post that date. As discussed above the date of opening of tender and acceptance thereof is the date of contract which is 28.1.2015. The appellant’s claimed is squarely covered by section 102 and accordingly, they are eligible for the refund for this amount also.
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