Delay in filing Service Tax Refund Application not Condonable in Absence of Proper Explanation: CESTAT [Read Order]

In a recent case, the New Delhi bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has held that delay in filing a service tax refund application is not condonable in the absence of proper explanation.

NSC Projects Pvt. Ltd, the respondent assessee are registered with Service Tax Delhi under the categories of Construction services other than residential complex including commercial/industrial buildings or civil structures, 'Construction of Residential Complex Service, 'Works Contract Services’.

The 'Works Contract Service in respect of Construction of Government Buildings for which contracts were entered prior to 15th March, 2015 were exempted from payment of service tax in terms of Notification No, 06/2015-ST. Subsequently special provision of exemption in certain cases for construction of Government Building was promulgated vide Section 102 on 14.05.2016 with retrospective effect dated of 01st April 2015.

But the appellant was paying service tax hence an application was filed on 10.02.2017 for refund of service tax amounting to Rs. 5,92,77,253/-. The refund claim was initially rejected vide Refund Order No. 40/2016-17-R dated 02.05.2017 on the ground of limitation. Being aggrieved the respondent has preferred an appeal before Commissioner (Appeals).

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The Commissioner (Appeals) has held that refund is not rejectable on the ground of limitation and remit the issue back to the adjudicating authority to decide the admissibility of refund claim on remaining issues other than issue of limitation.

The authorized representative for the department submitted that the present appeal filed by the department is based on the sole ground that the impugned refund claim is time barred as it was not filed the within six months from the enactment of Finance Act, 2016 as per Section 102(3) of the Finance Act, 1994.

The section has been inserted in the Chapter VA of the Finance Act, 1994, by the Finance Act, 2016, with effect from 14.05.2016 retrospectively, which provides that no service tax shall be levied or collected on the specified construction service provided to the Government during the period 01.04.2015 to 29.02.2016 under the contract entered into before 01.03.2015.

Since the refund claim was filed on 10.2.2017, it was beyond six months from 14.05.2016. Hence it is liable to be set aside as being barred by time. The order is accordingly, prayed to be set aside and appeal be accordingly allowed.

While rebutting these submissions, learned counsel for respondent submitted the chronology of dates to clarify that the services were provided to the Government of India which were declared non-taxable retrospectively vide Section 102(3) as got incorporated vide Finance Act, 2016. The amount in question no more remained, the amount of tax in nature.

Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here

Hence Government is not allowed to retain the amount collection whereof is/becomes without authority of law. Principle of limitation will not apply to such amount. Refund of said amount has rightly been allowed.

It was evident that the refund claim was earlier rejected on grounds of limitation still the adjudicating authority has sanctioned the refund without quoting any reason which falsifies the applicability of six months period of limitation specifically prescribed in Section 102(3) of Finance Act, 2016.

It was observed that the amount in question became refundable pursuant to Notification No. 6/2015 dated 14.5.2016 with reference to Section 102(3) of the Finance Act, 2016. The notification itself prescribes time limit of six months w.e.f. 14.05.2016. Admittedly, the refund claim is filed beyond said six months. Still has been sanctioned contrary to the mandate of said notification.

In Zaigham Enterprises Vs. Commissioner of Custom has held that notification requiring filing of refund application within six months from date of Finance Bill, 2016 receiving assent of President. Court has no jurisdiction to enlarge limitation period provided under a notification which required to be strictly interpreted. Delay in filing refund application not condonable.

A two member bench of Dr. Rachna Gupta, Member (Judicial) and P.V. Subba Rao, Member (Technical) viewed that irrespective the delay in filing the refund claim is a procedural lapse but there is no reasonable explanation for the occurrence of said delay. A litigant is required to be diligent. The Commissioner (Appeals) has failed to follow the judicial discipline.

The tribunal set aside the order under challenge and both the appeals filed by department is allowed.

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