Service Provider & Receiver must act in harmony for filling Refund claim of Service tax paid on non-taxable Service

CA Bimal Jain

Facts of the case are that, Srinivasa Enterprises (‘the Petitioner’ or ‘the Assessee’) rented out its property to State VAT Department and collected Service tax thereon and paid same to Service Tax Department. Later on, the Assessee and State VAT Department came to know that renting of immovable property to State Government (VAT Department) was not taxable.

Therefore, VAT Department issued letter to the Assessee deducting wrong payment of Service tax from out of rent payable to Assessee and advising Assessee to file refund claim. Assessee argued that Service recipient viz. VAT Department should file refund claim for Service tax wrongly paid by it. While, VAT Department submitted that since Service tax was paid by the Assessee, refund claim should be filed by the Assessee and it would co-operate with the Assessee.

The Hon’ble Karnataka High Court held that both the Assessee and VAT Department shall make appropriate representation addressed to Service Tax Department and Service tax would be refunded, if it is found to have been wrongly paid.