Refund of Swatch Bharath Cess
“Taxation department thrives on interpretation”. Here is an current example to prove the said quotation.
The government of India vide Chapter VI (Section 119) of the Finance Act, 2015 introduced a new levy called Swachh Bharath Cess.
In this context, the relevant Chapter of the Finance Act, 2015 is reproduced below:-
SWACHH BHARAT CESS
119. (1) This Chapter shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint.
(2) There shall be levied and collected in accordance with the provisions of this Chapter, a cess to be called the Swachh Bharat Cess, as service tax on all or any of the taxable services at the rate of two per cent. on the value of such services for the purposes of financing and promoting Swachh Bharat initiatives or for any other purpose relating thereto.
(3) The Swachh Bharat Cess leviable under sub-section (2) shall be in addition to any cess or service tax leviable on such taxable services under Chapter V of the Finance Act, 1994, or under any other law for the time being in force.
(4) The proceeds of the Swachh Bharat Cess levied under sub-section (2) shall first be credited to the Consolidated Fund of India and the Central Government may, after due appropriation made by Parliament by law in this behalf, utilise such sums of money of the Swachh Bharat Cess for such purposes specified in sub-section (2), as it may consider necessary.
(5) The provisions of Chapter V of the Finance Act, 1994 and the rules made thereunder, including those relating to refunds and exemptions from tax, interest and imposition of penalty shall, as far as may be, apply in relation to the levy and collection of the Swachh Bharat Cess on taxable services, as they apply in relation to the levy and collection of tax on such taxable services under Chapter V of the Finance Act, 1994 or the rules made thereunder, as the case may be.”
Further vide Notification No. 21/2015 ST and Notification No. 22/2015 ST both dt 06.11.2015 wherein the effective date of levy (15.11.2015) and effective rate of S B Cess (0.5%) have been notified. The said cess left out of cenvat chain inasmuch as rule 3 of the Cenvat Credit Rules, 2004 wherein the types of duties/taxes eligible for cenvat credit is listed out, the “S B Cess” does not find place and hence no cenvat credit is available on the “S B Cess.
Now let us discuss the on going dispute in the department regarding the eligibility of the said “S B Cess” as refund under Section 11B of the Central Excise Act, made applicable to service tax vide section 83 of the Finance Act, 1994 and also under Notfn No. 41/2012 ST dated 29.06.2012 as amended.
A plain reading of the para 5 of section 119 of Chapter VI of the Finance Act, 2015, wherein it is mentioned that “the provisions of Chapter V of the Finance Act, 1994 and the rules made thereunder, including those relating to refunds and exemptions from tax, interest and imposition of penalty shall, as far as may be, apply in relation to the levy and collection of the Swachh Bharat Cess on taxable services, as they apply in relation to the levy and collection of tax on such taxable services under Chapter V of the Finance Act, 1994 or the rules made thereunder, as the case may be” and hence it is very clear that “S B Cess” is available as refund to the eligible claimants except the claims filed under rule 5/5A/5B of the Cenvat Credit Rules, as no cenvat credit can be availed on the said “S B Cess”.
Further Notification No. 12/2013 ST dated 01.07.2013 which provides exemption to service receivers under the category SEZ developers /units and alternatively provides “ab initio” exemption to service providers got amended vide Notification No. 02/2016 dt 03.02.2016 vide insertion of clause (ba) including SB Cess paid as eligible for refund.
As CBEC did not expect any dispute to arise in respect of refund of SB Cess, the “FAQ” issued by them in respect of “S B Cess” does not contain any question answer regarding refund of the same.
However divergent views are taken by the department in dealing with such refund claims and the following reasons are cited for rejecting the Claim of S B Cess paid as refund.
(i) S B Cess is out of cenvat chain
(ii) There is no specific mention about the refund of S B Cess in the “FAQ” issued by the CBEC
(iii) No amendment has been made in the Notfn . No. 41/2012 ST dated 29.06.2012 to include SB Cess like the amendment made in respect of Notfn No.12/2013 ST 01.07.2013 (services to SEZ) and 39/2012 ST dated 20.06.2012 (rebate of duty paid)
Field formations find many reasons as cited above for rejecting the refund but there exists one reason for sanctioning the refund that is para 5 of section 119 of Chapter VI of the Finance Act, 2015 which makes “the provisions of Chapter V of the Finance Act, 1994 and the rules made thereunder, are applicable to S B Cess.
Though the department is looking forward for GST and field formations have been instructed to adjudicate pending cases as early as possible, a new bunch of litigations started propelling in the form of rejecting the S B Cess refunds. May the CBEC issue instructions in this regard to in the form of clarification to settle things right.