Refund service tax paid, which was not actually payable: HC

Vasudha Bommireddy Vs Assistant Commissioner of Service Tax (Telangana High Court)

Conclusion: Assessee was entitled to claim refund of service tax on composite contract of immovable property including value of land as merely because assessee made the payment, it would not partake the character of ‘service tax’ and the department could not retain the amount paid by assessee which was in fact not payable by them. Since the application for refund was filed on 19.08.2016, barely two months after the decision of the Delhi High Court in Suresh Kumar Bansal’s case ( supra), it could not be said that there was any inordinate delay in the assessee’s seeking refund of the tax paid by them to the department.

Held:

Assessee under a registered Sale Deed dt. 09.05.2014, had purchased office space ad measuring 20,101 sft along with undivided share of land. Department of Service Tax in addition to the consideration agreed upon, also demanded and received from assessee an amount of Rs.33,77,539/- as service tax payable in respect of the sale of the said property in their favour on the ground that such an activity was considered ‘commercial and industrial construction’ service covered by Section 65(105)(zzq) of Finance Act,1994 (as amended from time to time). Assessee was initially under a bonafide belief that the said sale and purchase of the commercial property including the undivided share of land was exigible to service tax however, subsequently they came to know that in respect of the composite contracts, service tax could not be levied on composite price as per the provisions of the Act, inasmuch as the said statute did not contain any mechanism to segregate/bifurcate the value of goods and the cost of land from the gross value for determining the value of service, on which service could be levied. They relied upon the decision of the High Court of Delhi in the case of Suresh Kumar Bansal v. Union of India¹. Assessee contended that the said transaction would be clearly outside the purview of the service tax regime as contained in the Act, therefore, he filed an application on 19.08.2015 seeking refund of the said amount of Rs.33,77,539/-. Department declined the refund claim as the same was barred by limitation; assessee did not furnish documents to prove that the said service tax amount had actually been deposited with the Central Government and merely because no rules were framed for computation, it did not follow that no tax was leviable. It was held the bar of limitation prescribed under sub-Section (1) of Section 11B applies only to “any person claiming refund of any duty of excise and interest”. It therefore held that the claim of assessee for refund could be entertained by the High Court as there was no dispute about the fact that no service tax was payable by assessee on the transaction in question and what was paid by them was not therefore service tax. Assessee had filed along with the reply affidavit in this Writ Petition, proof of payment of service tax by the department collected from assessee to the Central Government, in relation to the property sold to assessee under the sale deed dt. 09.05.2014. The above both grounds could not be accepted. It the instant case, there were no disputed questions of fact, which need to be gone into for deciding the claim for refund and since the claim for refund was based on the decision of the Delhi High Court in Suresh Kumar Bansal’s case (supra)  which was decided on 19.06.2016, and since the application for refund was filed on 19.08.2016, barely two months after the decision of the Delhi High Court in Suresh Kumar Bansal’s case ( supra), it could not be said that there was any inordinate delay in the assessee’s seeking refund of the tax paid by them to the department. Thus, refund  was allowable to assessee with interest @ 9% per annum.

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