By TIOL News Service

MUMBAI, DEC 21, 2018: THE petitioner is engaged in the business of developing and operating the Port at Dharamtar. In the course of its activity, the petitioner had availed services of construction from one Paresh Constructions and Foundation Pvt. Ltd. These services fall under the head "Construction of Port Services" which were exempt from service tax by virtue of exemption Notification No. 25/2012-ST dated 20.06.2012 and in particular, Entry No.14 therein.

By Notification 6/2015-ST dated 01.03.2015 (w.e.f 01.04.2015), the words "airport" and "port" were omitted from the said Entry No.14 of the Notification dated 20.06.2012. Thus, the exemption of the construction, erection, commission or installation of works pertaining to airports and ports was withdrawn w.e.f. 01.04.2015. Accordingly, the service providers would levy service tax on such services starting from 01.04.2015. The petitioner discharged service tax liability to the tune of Rs.102.53 lakhs for the period between 01.04.2015 to 31.12.2016.

Subsequently, Section 103 was inserted in the Finance Act, 1994 by virtue of Section 159 of Finance Act, 2016 w.e.f. 14.05.2016. This newly inserted Section 103 granted retrospective exemption in respect of services of construction, erection, commissioning or installation of original works pertaining to airports and ports for the period between 01.04.2015 to 29.02.2016.

The refund of the tax already paid would be granted subject to certain conditions contained in the said section 103 and which is that the application for claim of refund is made within six months from the date on which the Finance Bill received the assent of the President. It is not in dispute that the Bill received the assent of the President on 14.05.2016.

The petitioner applied for such certificate to Ministry of Shipping on 17.10.2016. The Ministry granted the certificate on 31.01.2017. The petitioner applied for refund on 27.06.2017. And so is the case with the other petitioners who applied for certificate on 17.10.2016 and received it on 31.01.2017 and refund claims were filed on 31.03.2017.

All the refund applications were rejected on the ground that they were time barred.

The petitioners have challenged these orders of rejection and also challenged the vires of Section 103 of the Finance Act, 1994.

The Bombay High Court extracted section 103 (supra) and inter alia observed -

+ One thing becomes clear that the respondents cannot link the requirement of refund application being made within the period of limitation envisaged in sub-section (3) of Section 103 with the condition of production of certificate from the Ministry that the contract had been entered into before 01.03.2015.

+ Both these conditions namely; production of certificate as well as making the applications within the period of limitation have to be fulfilled, but the assessee cannot be expected to fulfill the condition of making the refund application within limitation, at the same time, produce a certificate of the Ministry within the time envisaged under the section.

+ In other words, if the concerned Ministry consumes substantial time in issuing certificate, the assessee cannot be non-suited on the ground that the refund application was not filed within the period of limitation. Any other view would expose this provision to the vice of arbitrariness. Thus read, we need not hold the provision unconstitutional.

+ Reading down a statutory provision in order to save it from the vice of unconstitutionality is a well know interpretative technique often times employed by the Court. Even otherwise, the interpretation that we have adopted is reasonable. No person can be expected to perform a task beyond his control.

+ On one hand, the statute requires the certificate of the concerned Ministry before exemption from duty can be claimed, at the same time, the statute mandates that the refund application must be made within a certain time frame. We are, therefore, of the opinion that the time consumed by the ministry in processing and granting certificate, as referred to in subsection (1) of Section 103, must be ignored for the purpose of computing the limitation for making refund application under subsection (3) of Section 103 of the Finance Act, 1994.

+ Nonetheless, the High Court observed that inspite of the above conclusion, none of the petitioners would be able to claim the refund because even after ignoring the entire period that the Ministry had consumed in granting the certificate, none of the refund applications of the petitioners' would come within the period of six months from 14.05.2016.

The High Court also observed -

++ Section 103 of the Act is thus a complete mechanism for recognition of exemption, refund of the tax so exempted with retrospective effect and the mechanism for claiming such refund. Such limitation period cannot be interpreted as merely directory, particularly when subsection (3) in addition to providing the period of limitation, overrides any other provisions of the chapter, which may be to the contrary.

Placing reliance on the decisions in ALD Automotive Pvt. Ltd. -   2018-TIOL-385-SC-VAT  and Willowood Chemicals Pvt. Ltd. Vs. Union of India  -  2018-TIOL-21-HC-AHM-GST, the High Court concluded -

++ Section 103 contains a self contained code, a complete mechanism for claiming refund. For claiming refund under the said provision, limitation period prescribed elsewhere cannot be adopted ignoring the period prescribed in subsection (3) of Section 103.

The petitions were disposed of accordingly.

(See 2018-TIOL-2644-HC-MUM-ST)