Customs, Excise and Services Tax Appellate Tribunal (CESTAT),Mumbai: While dealing with the issue whether service tax should be refunded back to Credence Property Developers Pvt. Ltd. (‘appellant') after the cancellation of two flats booked by the buyers, Ajay Sharma (Judicial Member) held that the Commissioner (Appeals-III), GST and Central Excise, Mumbai (‘Adjudicating Authority') was not justified in denying the refund and allowed the appeal preferred by the appellant.

The appellant challenged the order passed by the Adjudicating Authority which had rejected its refund claim for the Service Tax amount under Section 11 B of the Central Excise Act, 1944 and Section 83 of the Finance Act, 1994 which it had returned to the buyer after the cancellation of bookings of two flats booked by him.. The Adjudicating Authority rejected the refund claim on the grounds that the appellant had not paid any excess Service Tax and that there was no provision for refund of Service Tax.

The Tribunal stated that Service Tax was to be paid on only those services which were taxable under the statute. For that purpose, rendering services is a pre-condition. Therefore, the Tribunal held that the amount deposited by the appellant with the exchequer would be considered as a ‘deposit' and keeping of the said amount with the department would be violative of Article 265 of the Constitution of India.

The Tribunal stated that Service Tax, in issue, received by the Authority concerned was not backed by any authority of law.

The Tribunal stated that since the buyer cancelled the booking of the flat and the appellant duly refunded the booking amount along with the Service Tax, it would be considered equivalent to no booking made resulting into rendering no service after all. While concluding the Order, the Tribunal held that no service had been provided by the appellant as the service contract got terminated and the consideration for service had been returned.

The Tribunal further held that as per Rule 66E(b), Service Tax Rules, 1994 in construction service, Service Tax was required to be paid on amount received from buyers towards booking of the flat before the issuance of completion certificate by the competent authority. However, the booking can be cancelled by the buyer at any time before taking the possession of the flat. Once the buyer cancels the booking and the consideration for services had been returned, therefore, the service contract got terminated. Once it is established the no service was provided, then refund of Service Tax for such service becomes admissible.

The Tribunal therefore, concluded that, the appellant was entitled to a refund, and the appeal was accordingly allowed.

[Credence Property Developers Pvt. Ltd. v. Commissioner of CGST & Central Excise, 2023 SCC OnLine CESTAT 4 decided on 05.01.2023]

Advocates who appeared in this case :

For the appellant- Chartered Accountant Anand Desai

For the respondent- Superintendent S.B.P. Sinha

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