Denial of refund of service tax paid under protest without verifying the fact that the same was collected from the service recipient is not proper.

PJ/Case Law/2013-14/1857

Case:- ALSTOM PROJECTS INDIA LTD. Versus C.C., C.EX. & S.T., COIMBATORE

Citation:- 2013 (29) S.T.R. 618 (Tri.- Chennai)

Brief facts:- The appellant has filed this appeal against the impugned order wherein the refund claim of Rs. 4,24,763/- has been disallowed by the lower authorities. The facts of the case are that the appellants (herein) provided service to their foreign clients and received commission as remuneration for the service rendered to their foreign clients in convertible foreign exchange to the tune of Rs. 46,17,120/-. The Revenue is of the view that as the appellant is provided these services in India although the service recipient is located outside India, therefore, they are required to pay Service Tax under the reverse charge mechanism. Therefore, proceedings were initiated against the appellant and the appellants paid a sum of Rs. 4,76,754/- as Service Tax under protest. The same was confirmed in the adjudication order. The appellant preferred an appeal before the Commissioner (Appeals) who held that the appellant is not required to pay the Service Tax as the activity undertaken by them qualifies under the export of Service Tax Rules. Consequent to the said order, the appellant filed refund claim before the adjudicating authority who held that the amount of refund is to be treated as cum-service tax and therefore he gave the benefit of cum-service tax. Though sanctioned the appellant’s refund claim, but the adjudicating authority retained a sum of Rs. 4,24,763/- as the same may be value of the Service Tax recovered by the appellant from their foreign clients as by giving the benefit of cum-service tax. The said order was challenged before the Commissioner (Appeals) who also confirmed the adjudication order. Hence the appellant filed appeal before this Tribunal.

Appellant’s Contention:- The Appellant submitted that in this case they have paid Service Tax of Rs. 4,76,754/- under protest and also produced invoices issued to their clients which indicates the amount of commission received by them. Before the lower authorities, while considering, whether they are liable to pay Service Tax or not, it was the prayer that they are not liable to pay Service Tax but alternatively without prejudice, it was also submitted that if it is held that they are liable to pay Service Tax then the amount of service provided be treated as cum-service tax.

Respondent’s Contention:- The Respondent submitted that as per Section 73A(2) of the Finance Act, 1994 if any person who has collected any amount, it is not required to be collected, from any other person, in any manner as representing Service Tax, such person shall forthwith pay the amount so collected to the credit of the Central Government. Therefore, as they have admitted that the amount of Service Tax be treated as cum-tax, therefore they are not entitled to the refund claim.

Reasoning of Judgment:-After considering the records and hearing both the sides, it is held that it is a case where the investigating agency find that the appellants are liable to pay Service Tax under the category Business Auxiliary Service under the reverse charges mechanism, therefore the appellant paid the Service Tax under protest. When the Service Tax has been paid under protest and as per invoice raised by the appellant shows that no Service Tax has been collected from their foreign clients, the appellant is entitled for refund of entire Service Tax paid by them under protest. Further, in this case, taxability of the Service Tax has already been decided. Tribunal finds that it is the alternate plea taken by the appellant before the lower authorities at the time of deciding the issue of taxability of service that if at all the appellant is liable to pay Service Tax the same shall be treated as cum-service tax. The issue taxability of Service Tax has been settled in favour of the appellant by holding that the appellant is not required to pay Service Tax. Therefore, the alternate plea taken at the time of issue taxability of service has no relation while considering refund claim. The invoices produced before Tribunal clearly shows that the appellant has not collected any Service Tax. Therefore, the arguments advanced by the ld. DR that as per Section 73A(2) of the Finance Act, 1994 that when the tax has been collected by the assessee, the same is to be deposited with the Treasury is not sustainable as the appellant has not collected any Service Tax and also are not required to pay Service Tax. As discussed above, the facts before Tribunal is only whether the appellant is entitled to refund claim or not? The issue of taxability of service has already been decided. Therefore, the appeal is maintainable before the Single Member Bench as there is no issue of valuation or classification or Service Tax involved. With this observation, it was held that the appellant are entitled for refund of Rs. 4,76,754/- which was paid under protest, therefore Tribunal do not find any merit in the impugned order and the same is set aside. Appeal is allowed with consequential relief.

Decision:- Appeal allowed.

Comment:-The essence of this case is that the assessee can claim refund of service tax paid under protest and the same cannot be simply denied on the basis of alternative plea of treating the receipts as cum-tax made by the assessee to oppose the taxability of the service.

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PJ/Case Law/2013-14/1857

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