Whether non-submission of BRC can be reason to deny refund claim?

PJ/Case Law /2016-17/3252

Case:- WIN MEDICARE PVT. LTD. VERSUS COMMISSIONER OF SERVICE TAX, DELHI

Citation:-2016 (42) S.T.R. 555 (Tri-Del.)

Brief Facts:-The brief facts of the case are that the appellant is registered with Service Tax Department for providing taxable service namely, “Business Auxiliary Service”. The appellant had entered into an agreement with M/s. MNB Company, Bermuda, for carrying out various activities for their clients located outside India, for which, the appellant paid service charges to the overseas service providers. Under the reverse charge mechanism, the appellant in the capacity of a recipient of taxable service, had deposited the service tax amount of Rs. 14,13,268/- into the Central Government Account, attributable to the taxable service provided during the period from 1-1-2005 to 17-4-2006. Subsequently, in terms of C.B.E. & C. Instruction No. 276/8/2009-CX-8A, dated 26-9-2011, the appellant had filed the application before the jurisdictional Service Tax authorities on 18-11-2011, claiming refund of service tax amount erroneously paid by it. The refund application was adjudicated vide order dated 23-1-2004, wherein refund of Rs. 7,76,818/- was allowed and the balance claimed amount of Rs. 6,34,450/- was rejected on the ground of non-submission of documentary evidences such as, Bank Realisation Certificates (BRC). In appeal, the ld. Commissioner (Appeals) vide the impugned order has upheld rejection of the refund claim. Hence, this present appeal before this Tribunal.
The issue involved in the present case for consideration by this Tribunal is as to whether service tax paid inadvertently, can be retained by the Govt. Exchequer on the ground of non-submission of BRC, especially in the contest of specific observations made by lower authorities that the appellant was not liable to pay service tax under Reverse Charge Mechanism.

Reasoning of Judgment:-Heard the ld. counsel for both the sides and perused the records.
For rejection of the refund application of the appellant, the Assistant Commissioner of Service Tax, New Delhi vide Paragraph 3 in the adjudication order, dated 23-1-2014, has recorded the following findings :-
“... In view of the above, I find that the services of ‘all the export orders procured, accepted, executed and payments realized’ rendered from an overseas agent and received by the party during the period from 1-1-2005 to 17-4-2006 were not taxable services during the relevant period and hence there was no service tax liability on the party under reverse charge mechanism against the payments of commission paid by the party for such services. The service tax liability under Section 66A on reverse charge basis became effective only from 18-4-2006, hence, I find that refund claim of service tax including interest paid by the party under Section 66A vide Challan No. 00037, dated 28-6-2011 against the services received by them during 1-1-2005 to 17-4-2006 from overseas agent, is legally tenable. But in absence of documentary evidences such as BRC’s in respect of the 75 entries of the statement as discussed in para (d) above, an amount of refund claim of Rs. 6,36,450/- in respect of the said 75 entries are not admissible and liable to be deducted from the claim amount. Accordingly, admissible claim amount is worked out to Rs. 7,76,818/- (Rs. 14,13,268 - Rs. 6,36,450).”
On perusal of the above observations of refund sanctioning authority, it reveals that the services were received by the appellant from its overseas clients during the period from 1-1-2005 to 17-4-2006, on which no service tax was payable under Reverse Charge Mechanism, since the concept of fixing the liability for payment of tax by the service receiver was inserted in Section 66A of the Finance Act, 1994 w.e.f. 18-4-2006. During the period of receipt of service from the overseas clients, since the appellant was not statutorily required to discharge any service tax liability, payment of tax inadvertently made, is required to be refunded. Retention of such amount by the Govt. Exchequer is without the authority of law. Rejection of refund claim for non-submission of BRC’s is not at all a defensible ground, inasmuch as, the requirement of the same arises only in case of refund of service tax paid on input services, which were exported. In the present case, since the authorities below have specifically recorded the findings that the refund claim of service tax including interest paid by the appellant under Section 66A vide Challan No. 00037, dated 26-6-2011 against the services received during 1-1-2005 to 17-4-2006 from overseas agent is legally tenable, then rejection of refund claim on the ground of non-submission of BRC’s is not supported by any provisions of law.
In view of above, Tribunal do not find any merits in the impugned order, and thus, the same is set aside and the appeal is allowed in favour of the appellant, with consequential benefit of refund.

Decision:- Appeal allowed.

Comment:-The crux of the case is that since the appellant was not statutorily required to discharge any service tax liability, payment of tax inadvertently made, is required to be refunded. Retention of such amount by the Govt. Exchequer is without the authority of law. Rejection of refund claim for non-submission of BRC’s is not at all a defensible ground, inasmuch as, the requirement of the same arises only in case of refund of service tax paid on input services, which were exported.

Prepared by:- Bharat Chouhan

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PJ/Case Law /2016-17/3252

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