Service Tax Refund cannot be denied to any Person who has Borne the Incidence of Tax: CESTAT [Read Order]

The Delhi bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that a service tax refund cannot be denied to any person who has borne the incidence of tax.

M/s Quality Builders & Contractor, the appellant challenged the order in appeal dated 28.07.2016 passed by the Commissioner (Appeals) upholding the rejection of the refund claim by the original authority. 

M/s Quality Builders & Contractor, Jodhpur applied for a refund of service tax of Rs. 1,88,463/- on 02.06.2014 paid on services provided by them because excess tax was deposited by them.  

The appellant was issued on show cause notice dated 20.08.2014 for rejecting the refund on merits. The adjudicating authority rejected the refund claim for Rs. 1,88,463/-. The Commissioner (Appeals) rejected the appeal.

It was submitted that they had constructed multi-stories buildings as per work orders (No. 100 dated 20.04.2022) given by the Rajasthan Housing Board, which is a taxable service under the category of ‘works contract service’.

The work involves both goods and services as is evident from copies of work orders and is covered under works contract services and is liable to service tax @ 4.94%. Further, such works contracts are also covered under the reverse charge mechanism as per Notification No. 30/2012-ST dated 20.06.2012 according to which Rajasthan Housing Board was liable to deposit 50% of the tax payable i.e. 2.472% (tax payable is 4.944%) on such services and that the appellant was liable to deposit the remaining 50% i.e. 2.472%.  However, the appellant deposited the entire tax payable @ 4.944% instead of 2.472% and RHB has also deducted 2.472%.

The appellant applied for a refund of Rs. 5,46,865/- on 29.05.2014 and submitted a copy of the work order, TDS certificate, VAT-41, certificate of deduction of service tax by RHB, and the copy of challan evidencing deposit of above tax.

The Commissioner (Appeals) has upheld the rejection of the refund claim by the original adjudicating authority on the ground that the amount claimed as a refund is not substantiated. Further, he also held that the said refund claim was hit by the clause of unjust enrichment. 

A two-member bench comprising Justice Dilip Gupta, President and Ms Hemambika R Priya, (Technical) observed that Rajasthan Housing Board has also deducted the service tax payable by them by reverse charge mechanism in the bills raised by the appellant. Further held that the appellant who has borne the incidence of tax and refund cannot be denied to any person who has borne the incidence of tax. 

The CESTAT set aside the impugned order and allowed the refund.

To Read the full text of the Order CLICK HERE

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