CESTAT Green Signals Use of CA Certificate, Validating The Non-Transfer of tax liability to another, as Evidence
It has been ruled that the Certificate of Chartered Accountant that categorically declares that the tax liability has not been turned over to another can be used as an evidence to prove the same, by the Customs Excise and Service Tax Appellate Tribunal (CESTAT), Chennai.
The ruling is the consequence of the case associated with M/s. Modern Systems India Pvt. Ltd – a trading firm deals in furniture items and engaged in the installation of modular kitchens on customer’s premises.
The case remained unresolved between the appellant and the commissioner of GST & CE and was finally ruled by a bench of CESTAT consisting of Hon’ble Smt. Sulekha Beevi C.S, Member (Judicial).
The GST department contended that the installation of the modular kitchen would be categorised as ‘Competition of Finishing Services’.
When the Appellant received the Show-cause notice & its adjudication, he remitted the interest, penalties and demand, of which, the demand was overruled by the Tribunal, noticing that installation of the modular kitchen on client’s premises does not draw imposition of any service tax. However, the refund claim was not approved by the GST authorities as the appellant did not have any evidence which can prove that the tax burden has not been transferred to another.
Clarification was made by the appellant that they acted just as traders and did not collect any service tax from their customers. A Chartered Accountant’s Certificate was also presented by them to show that they themselves have paid the service tax and has not passed it on their customers.
However, the evidence of the Chartered Accountant’s Certificate, to prove that the tax has not been passed on to another, was rejected by the GST authorities on the grounds of sole evidence. So the ruling in the case of M/s. Shoppers Stop Ltd., Vs Commissioner of Customs (Exports), Chennai reported in 2018(8) G.S.T.L.47 (Mad.,) was not turned out in favour of M/s. Shoppers Stop Ltd.
Taking into account the decision of M/s. Shoppers Stop, the Tribunal concluded that the Chartered Accountant’s Certificate endorses that the amount has been displayed as Receivables in the balance sheet but did not reflect that tax burden has been given up to the customers. So, the criterion is irrelevant to the case.
It was noticed by the Tribunal that the appellants carried out their business just as traders and so they were not eligible to charge service tax from their clients. In this way, it was concluded that the ruling is not just & fair with the appellant and GST department must return back the amount remitted by the Appellant.
FULL TEXT OF THE CESTAT JUDGEMENT
Brief facts are that the appellants were traders in furniture items and are registered with the department under GTA Services. They were engaged in providing Modular Kitchen in the premises of customers and the department was of the view that such activity would fall under the category of ‘Completition of Finishing Services’. Show-cause notice was issued to the appellant demanding payment of service tax under Completition of Fnishing Services, which after adjudication, culminated in confirmation of demand, interest and penalties. The matter reached upto the Tribunal and vide Final Order No.41993/2018, dated 04.07.2018, the Tribunal set aside the demand observing that the said activity does not attract levy of service tax. Meanwhile, after the Order-in-Original was passed, the appellants had deposited the entire amount of service tax along with interest and also the penalties. Consequent to the final order passed by the Tribunal, the appellants filed refund claim for refund of Rs.1,41,636/- being the tax paid along with interest and 25% penalty as confirmed by Order-in-Original. The said refund claim was rejected by the adjudicating authority alleging that the appellant has not produced evidence to show that the tax burden has not been passed on to another. Although, they appealed against this before the Commissioner (Appeals), the order of rejection of refund was sustained by Commissioner (Appeals). Aggrieved, the appellant is now before the Tribunal.
2. The learned counsel Shri B. Jayagopi appeared and argued the matter for the appellants. It is submitted that service tax was not collected from customers. He submitted that the appellants had paid the amount only after the confirmation by the original authority. They had, however, contested the matter before the Tribunal and the demand was set aside allowing the appeal filed by the appellant. He adverted to para 8 of the Order-in-Original and submitted that the appellant is only a trader. They produced a Chartered Accountant’s Certificate showing that they have not passed on the service tax to the customers and have paid it from their pocket. In spite of such certificate, the authorities below have rejected the refund.
3. The learned Authorised Representative Ms. Sridevi T, JC (AR) reiterated the findings made by the Commissioner (Appeals). She relied upon the decision in the case of M/s. Shopper’s Stop Ltd., Vs Commissioner of Customs (Exports), Chennai reported in 2018(8) G.S.T.L.47 (Mad.,) to argue that Chatered Accountant’s Certificate cannot be the sole evidence to conclude that the incidence of tax has not been passed on to another.
4. Heard both sides.
5. The refund has been rejected on the ground that it is hit by unjust enrichment. It is undisputed fact that the appellants are traders and this being so, it is not possible for them to collect service tax by issue of invoices. Further, the Chartered Accountant’s certified to the effect that they have not passed on the burden of service tax, interest or the penalties to their customers. In the decision of M/s. Shopper’s Stop (supra) relied upon by learned Authorised Representative, the certificate issued by the Chatered Accountant certified that the amount has been shown as Receivables in the balance sheet. The certificate did not state that the burden of tax has not been passed on to customers. For this reason, the Hon’ble High Court had held that such certificate of Chartered Accountant cannot be the sole evidence for concluding that the burden of tax has not been passed on. In the present case, the Chartered Accountant’s Certificate has categorically certified that the burden has not been passed on to another. These documents show that VAT has been collected. There is no collection of service tax. All these facts establish that the burden of tax has not been passed on to another. For these reasons, I am of the view that the conclusion arrived at by the authorities below that the appellant has not passed the test of unjust enrichment cannot sustain. The impugned order is set aside. Appeal is allowed with consequential reliefs, if any.
(Dictated and pronounced in the open court