By TIOL News Service

BANGALORE, SEPT 15, 2014: SERVICE TAX - Construction of Residential Complex service - Prior to 1.07.2010 Builder/ Developer not liable to pay service tax on construction services provided to individuals who purchased flats/residential units in Residential Complex- because the definition did not include the nature of services provided by the builder/developer to the individual purchasers of flat in a complex-matter remanded for sanction of refund of tax collected.

Prior to 01.07.2010, what was liable to be taxed was only the construction of a residential complex service. Construction of residential flats for an individual entered into the taxability area only after the introduction of explanation in clause(zzzh) of Finance Act,1994 - with insertion of explanation even construction of part of the Residential Complex brought under Service Tax net. (para 14)

When the construction of individual apartments/residences itself is not covered by the definition at all prior to 1/07/2010, the question of who acquires the ownership/the date of ownership/nature of interest would not be relevant.What is required to be considered is when the builder/developer enters into an agreement with the individual, can it be called as an agreement for construction of a residential complex or a construction of a flat/residence (part of the complex).It is quite sure nobody would call it as construction of a residential complex for an individual. (para 14)

The explanation inserted in clause (zzzh) cannot have retrospective effect and therefore services provided to individual purchasers of flat cannot be held as taxable prior to 1.07.2010: As observed by the High Court, “In absence of any indication in the amendment to make it either retrospective or explanation being merely declaratory or clarificatory in nature, such statutory change cannot be made applicable to the long past events.” (Para 16.1)

Refund of service tax - limitation under Section 11B applicable even when the levy is illegal and tax is collected without sanction of law - This would mean that central excise officers cannot sanction any refund under any provision of any other law. The question of not applying the provisions of Section 11B for refunds even if not filed under Section 11 B but under other enactment, would not arise at all in view of this provision. When the statutory provision bars a person from sanctioning refund, he cannot exercise such authority. (Para 28)

Refund of service tax-Section 11B- it is sufficient if the buyer shows that he has paid the service tax to the registered service/goods suppliers/providers and there is evidence to the effect that the service tax has been collected from him by the registered service provider- No evidence required to show the tax has been deposited with the Government. Nowhere we find the word ‘government' in relation to the refund claim made by a buyer under the section and Section does not provide that only when there is evidence to show that tax has been paid to the Government refund would be admissible to the buyer of the goods/services. (Para 33)

Refund of service tax - provisions of Section 73A (Tax collected to be deposited with the Government - corresponding to Section 11D of Central Excise Act) of Finance Act, 1994 not applicable where tax is paid on self-assessment. No precedent decisions were cited by either side. Therefore, the presumption is that this is the first time that this Section is coming up for consideration in a case of refund claim filed under Section 11B of the Act or otherwise. Section 73A is corresponding to Section 11 D of Central Excise Act, 1944. This Section was inserted in the Finance Act on 18.4.2006 and prior to this, Provision of Section 11D was applicable to the service tax matters also. The provisions of Section 11D was brought into the statute to ensure that amount collected as tax is paid to the Government. This is another way of ensuring that nobody gets unjustly enriched by collecting amount as tax and not pay to Government on the ground that such tax is not payable. It is difficult to accept the fact that this would apply to all cases where tax is not payable or tax is collected in excess by an assessee. In these cases, the service providers have collected the tax after doing an assessment in accordance with law. In the normal course, there is no revised assessment at all. There is no reassessment also. The practice of departmental officers assessing returns and finding out whether the tax has been paid correctly has been discontinued from 1997 (probably) altogether. Therefore, it is totally self-assessment in the case of Central Excise and Service Tax. Therefore, it cannot be said that when the tax was paid by the service provider, he had collected the amount from the customers or buyers in these cases in excess of amounts payable or the amount was not at all payable to Government. (Para 35 to 40)

Refund of service tax - Was it pre-deposit? at the time when the amount was collected, the service provider had collected the amount by resorting to what is known as assessment in the law. He had classified the service as residential complex service, he had found out the rate of tax and he had taken the value and assessed the quantum of amount payable. Therefore whatever was collected from the buyers was collected after a proper assessment as recognized by law and deposited with Government in the manner in which it was required to be deposited. That being the position to call it a pre-deposit and change the nature of payment post facto is not correct. Therefore, unable to accept the proposition that the amount has to be considered as pre-deposit and therefore the time limit prescribed under law would not be applicable for accepting the same. (Para 44)

(See 2014-TIOL-1753-CESTAT-BANG)