Whether refund can be claimed on the service tax deposited on ‘construction’ of individual/ independent ‘residential’ houses? CESTAT answers
Customs, Excise and Services Tax Appellate Tribunal (CESTAT): The coram of Dilip Gupta (President) and Subba Rao (Technical Member) allowed an appeal holding that appellant is entitled to claim refund of the service tax deposited by the appellant on construction of individual/independent residential houses. The appeal was filed assailing the order by the Commissioner (Appeals) where he had upheld the order of adjudicating authority rejecting the refund claim of Rs. 21,33,490/-.
The main issues to be decided were whether the appellant was entitled to claim refund of the service tax deposited by the appellant on construction of individual/independent residential houses and whether the refund was hit by the principles of unjust enrichment.
The appellant constructed individual/independent residential houses as per the work order given by the Rajasthan Housing Board. According to the appellant, service tax was deposited by the appellant on such constructed houses by mistake and even the Housing Board deposited 50% of the service tax under reverse charge mechanism. The appellant further claimed that construction of the individual/ independent residential houses was not subject to levy of service tax prior to 01-07-2012 and even after 01-07-2012 it was exempted under the Exemption Notification dated 20-05-2012. The Commissioner (Appeals) had denied the refund of service tax paid and rejected the refund claim on the ground of unjust enrichment.
Chartered Accountant appearing for the appellant submitted that the appellant was clearly entitled to exemption under the Exemption Notification since individual/independent houses were constructed by the appellant and levy of service tax was exempted under the Exemption Notification.
The Tribunal firstly examined the position regarding levy of service tax as it existed prior to 01-07-2012 and discussed the definition under Finance Act, 1994 of “Construction of complex” under Section 65(30a),”taxable service” under section 65(105)(zzzh), “residential complex” under section 65(91a). It was noted that the definition of a “residential complex” leaves no manner of doubt that it would be a complex comprising of a building or buildings, having more than twelve residential units. In other words, a complex may have a building having more than twelve residential units or a complex may have more than one building each having more than twelve residential units. Independent buildings having twelve or less than twelve residential units would not be covered by the definition of “residential complex”. The Tribunal considered the appellant’s contention that independent residential houses were built, each having a separate entry with separate electricity and water connection and a single building did not have more than twelve residential units which is why houses constructed by it for the Rajasthan Housing Board will not be covered by the definition of a “residential complex” and, therefore, would not be taxable also relying on the judgment of Macro Marvel Projects Ltd. v. Commr. of Service Tax, 2008 (12) STR 603 (Tri-Chennai), Lakhlan & Qureshi Construction Company v. Commissioner of Central Excise and Service Tax, 2019 SCC OnLine CESTAT 6884, A.S. Sikarwar v. CCE, Indore, 2012 SCC OnLine CESTAT 1098.
The Tribunal allowed the appeal and held that w.e.f 01-07-2012 “construction of complex” is a declared service, but the Exemption Notification exempts services by way of construction, erection, commissioning or installation of original works pertaining to a single residential unit otherwise than as a part of a residential complex have been exempted. It was further held that the Commissioner (Appeals) was also not justified in holding that the refund was hit by the principles of unjust enrichment. As per the work orders, service tax was to be borne by the appellant and the Commissioner (Appeals) has also found, as a fact, that the contract awarded by the Housing Board to the appellant mentions that service tax shall be borne by the contractor.
[Quality Builders & Contractor v. Commr. of CG&ST, Service Tax Appeal No. 53481 of 2018, decided on 05-09-2022]
Advocates who appeared in this case :
O.P. Agarwal, Chartered Accountant, for the Appellant;
Ravi Kapoor, Authorised Representative of the Respondent.
*Suchita Shukla, Editorial Assistant has reported this brief.