Refund claim of service recipient can not be withheld

By | August 29, 2015
(Last Updated On: August 29, 2015)

Refund claim of service recipient can not be withheld due to non furnishing of NOC from service provider

Q  Can the Refund claim of service recipient be withheld due to non-furnishing of NOC from service provider ?

Facts of the Case : 

Appellant, a buyer of flat, made security deposit with builder on 10-12-2007 towards contingent service tax liability . Department recovered same from builder on 18-6-2009

Vide Circular, CBEC clarified that service tax was not leviable and activity became taxable only from 1-7-2010 Thereupon, appellant-buyer filed refund claim.

Department denied refund on ground that assessee failed to furnish NOC from builder but later granted refund on 8-7-2013. Appellant demanded interest on delayed refund

Decision

Department could not show provision under which appellant-buyer (service recipient) was asked to obtain NOC from builder and/or provision under which revenue withheld refund . Hence, rejection of refund was bad and therefore, appellant was entitled to interest at notified rate from 18-6-2009 to 8-7-2013 without any formal application [Paras 4 and 5]

CESTAT, MUMBAI BENCH

Chandrakant G. Dhere

v.

Commissioner of Central Excise, Pune-III

ANIL CHOUDHARY, JUDICIAL MEMBER

FINAL ORDER NO. A/1333/2014-WZB/C-IV(SMB)
APPEAL NO. ST/265/2011-MUM

SEPTEMBER  15, 2014

N.N. Prabhudesai, Suptt. for the Respondent.

ORDER

1. This appeal arises from Order-in-Appeal No. P- III/VM/363/2010, dated 20-12-2010 passed by the Commissioner of Central Excise (Appeals), Pune-III.

2. The appellant is a buyer of flat from one M/s. Joshi and Associates (Builder), holder of Service Tax registration. The appellant has deposited Rs. 2,70,000/- with the Builder on 10-12-2007 as security deposit against payment of Service Tax, if it becomes payable. The Service Tax on the said services (construction of residential complex) was made effective w.e.f. 1-7-2010. The Board had issued a Circular No. 108/02/2009-S.T., dated 29-1-2009, issued directions clarifying that whereunder any agreement of purchase/sale as per the provisions of Transfer of Property Act, does not by itself create any interest in or charge on such property between the proposed buyer (assessee) or the builder, in such case, the property remains under ownership of seller/builder and it is only after completion of the construction and full payment of agreed sum that the sale deed is executed and possession handed over resulting in transfer of ownership of the property. Thus, there is no service involved in such transaction and no Service Tax is accordingly exigible. Based on such clarification, the appellant filed refund claim which was rejected by the Assistant Commissioner vide Order-in-Original dated 7-7-2010 for the reason that the appellant had not submitted the NOC from the builder and also in view of the letter of the builder requesting the Revenue not to refund the amount to the appellant in view of some pending cases between builder and appellant before the Consumer Disputes Redressal Commission for the same matter. Being aggrieved, the appellant filed appeal before the Commissioner (Appeals), which was rejected by the impugned order upholding the rejection.

3. Being aggrieved, the appellant has filed the present appeal before this Tribunal. During pendency of this appeal, the Revenue completed its investigation in the case of the builder, M/s. Joshi & Associates and had also collected the amount deposited with builder by way of security deposit towards the contingent liability of Service Tax, if payable, and such amounts were deposited with the Revenue on 18-6-2009. The Revenue further issued a Public Notice dated 22-1-2013, which directed all the concerned who had paid such deposit to the concerned builder to file the application for refund under Section 73(3) of the Finance Act, 1994 with the Dy. Commissioner (Refund) of Central Excise, Pune- III Commissionerate. In response to the Public Notice, the appellant applied again for refund which was sanctioned and disbursed to the appellant vide Order-in-Original dated 8-7-2013. In response to the notice of hearing, the appellant has confirmed that he has received the refund on 8-7-2013 vide his letter addressed to this Tribunal, but at the same time has also prayed for allowing of interest from the date of deposit of the amount by the builder with the Revenue till the date of disbursement of the amount by the Revenue i.e. from 18-6-2009 to 8-7-2013.

4. Heard learned AR Shri N.N. Prabhudesai, Supdt., for the Revenue. On query raised by the Bench that where it is the condition mentioned for obtaining NOC from the builder, as admittedly the amount was paid by the appellant and same was found to be refundable and under which Section the Revenue could not have refunded the amount, on objection of the builder, to which no answer could be given by the learned AR.

5. Having considered the facts on record and as per the report dated 19-5-2014 received through the learned AR from the Assistant Commissioner (Refund), I find that the rejection of the refund claim vide order dated 7-7-2010 is bad in law and on fact and accordingly, I allow the interest to the appellant from the date on which the Revenue received the amount i.e. 18-6-2009 to the date of disbursement i.e. 8-7-2013 at such rate notified under the Rules. Such refund shall be disbursed to the appellant within a period of four weeks from the receipt of the order without waiting for any formal application for refund from the appellant. Thus, the appeal stands allowed in the above terms.

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