UPDATE REGARDING REFUND OF SERVICE TAX FOR CANCELLATION OF FLAT IN GST ERA:- 136/202

UPDATE REGARDING REFUND OF SERVICE TAX FOR CANCELLATION OF FLAT IN GST ERA:- 136/2020-21

As we all know that construction of flats involve considerable time and it is possible that there is cancellation of the flat after implementation of GST regime which was booked in a project for construction of flats that started in service tax regime. The question arises is whether the prospective flat buyer cancelling the booking in GST regime will be eligible to claim refund of service tax from the department? This issue was considered recently by the Commissioner Appeals, Mumbai in the case of HARESH V KAGRANA (HUF) while passing Order in Appeal No. NA/GST/A-III/MUM/84/2020-21 dated 06.12.2019 which is the subject matter of discussion in our present update.

This appeal was filed by the prospective flat buyer who had cancelled his booking on 19.02.2019 and has filed refund claim on 19.08.2019 as the service tax amount was not refunded to him by the builder. The refund claim was filed under section 142(5) of the CGST Act, 2017 by the flat buyer which was rejected on the grounds of limitation under section 11B of the Central Excise Act, 1944 also made applicable to service tax vide section 83 of the Finance Act, 1994 by contending that the booking date was 28.12.2015 whereas the time limit for filing refund claim is 1 year from the date of payment of tax to the government. The learned Commissioner Appeals held that refund claim cannot be rejected merely on the grounds that the assessment has become final, particularly when it is clear that no service was provided to the appellant by the builder. The provision contained in section 142(5) of CGST Act, 2017 was minutely analysed which reads as follows:-
(5) Every claim filed by a person after the appointed day for refund of tax paid under the existing law in respect of services not provided shall be disposed of in accordance with the provisions of existing law and any amount eventually accruing to him shall be paid in cash, notwithstanding anything to the contrary contained under the provisions of existing law other than the provisions of sub-section (2) of section 11B of the Central Excise Act, 1944.

The learned Commissioner Appeals concluded that the non-obstante clause is very crucial in the provision as it frees the refund claims filed under section 142(5) of the CGST Act, 2017 from the fetters of limitation which is provided under sub-section (1) of section 11B. The only thing that is not overridden is the requirement of fulfilment of unjust enrichment clause as provided in sub-section (2) of section 11B.

It was further held that as no service was provided to the appellant, the service tax paid is in the nature of deposit and so the provision regarding time limit of one year is not applicable. The learned Commissioner Appeals also held that even if the payment is in the nature of service tax, the date of cancellation of flat will be considered as the relevant date for calculating the time limit of one year as the event that lead to refund of taxes is the cancellation by the buyer. In this context, reliance was placed on the decisions given in the following cases:-

· CCE, PUNE VERSUS ISPAT PROFILES INDIA LTD. [2007 (220) E.L.T. 218 (TRI.-MUMBAI)]

· SS AGRO INDUSTRIES VS C. CUS, AIR CARGO (EXPORT), NEW DELHI [2014 (309) E.L.T. 334 (TRI.-DEL)]

Therefore, it was held that refund is admissible and the appeal was allowed.

The above decision will be very helpful for all the service receivers who have cancelled their contracts in the GST era and have paid service tax for which they wish to obtain refund as it was held that limitation of section 11B does not apply in cases where refund claim is filed under section 142(5) of the CGST Act, 2017. It is worth mentioning that we have also received favourable order in case of our client, M/s Ridhi Sidhi Developer by Final Order No. 51209-51210/2019 dated 02.08.2019 passed by Hon’ble Delhi Tribunal wherein refund of service tax on project which was subsequently closed was granted by considering the limitation to start from the cause of action for filing refund being the date when the project was abandoned.

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UPDATE REGARDING REFUND OF SERVICE TAX FOR CANCELLATION OF FLAT IN GST ERA:- 136/2020-21

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