Unreported Decisions – ST – November 2019

By Vinay Jain & Sachin Mishra, Advocates

1. Whether the provisions of Section 73A is applicable in case the amount is returned to the customer subsequent to issuance of the show cause notice?

Facts and Pleading: RVS Hospitality & Development Private Limited (hereinafter referred to as ‘Appellant) is engaged in providing renting of immovable property service. During the disputed period, the Appellant had rented its property to one of its customers and had issued monthly rental invoices along with service tax. However, while making payment of service tax, the Appellant had claimed the benefit of Notification 24/2007 i.e. reduction of property tax from value of service. Since benefit of said notification was availed and the same was not passed on to the customer, department issued show cause notice under Section 73A for recovery of service tax amount collected from customers.

The department argued that Section 73A is rightly invoked inasmuch as at the time of claiming the benefit of the notification the Appellant had not passed on the benefit of service tax to its customers. Also, there was possibility of availment of excess CENVAT Credit by the customers and under such circumstances, if the amount could not be recovered under Section 73A, the Appellant would be unjustly enriched in context of Section 11D.

The Appellant argued that the benefit claimed was subsequently passed on to the customers and the same was recorded in the adjudicating order as well. Thus, when the Appellant had refunded the amount to its customers, the provisions of Section 73A shall not be applicable for recovery of amount. Reliance was placed on the judgement of Hon’ble Supreme Court in case of Ajit Mills Ltd. [1977 4 SCC 98] and decision of Tribunal in case of Vinayak Agrotech Ltd. [2012 (284) ELT 237].

Judgment: The Hon’ble Tribunal held that in the present case it was not disputed that the amount in question was paid back to the customers subsequent to issuance of the show cause notice. Thus, under such circumstances it cannot be said that the provisions of Section 73A should be applicable considering the same as a collection of excess service tax from the customer. The Hon’ble Tribunal further relied on the decision of Vinayak Agrotech Ltd. (supra).

M/s. RVS Hospitality & Development Private Limited vs. CCE, CESTAT Mumbai decided on 16-9-2019 vide Final Order No. A/86809/2019.

M/s. RVS Hospitality & Development Private Limited

2. Whether the assessee is eligible for refund claim of tax borne on works contract service received from sub-contractors for providing works contract service to JNPT which was subsequently exempted by Notification 9/2016 with retrospective effect. Whether the certificate issued on letterhead of the port and authenticated by Deputy Secretary in Ministry of Shipping suffices as compliance of the condition of exemption?

Facts and Pleading: Bharat Mumbai Containers Terminals Private Limited (hereinafter referred to as ‘Respondent’) had provided service in the nature of works contract to Jawaharlal Nehru Port Trust (hereinafter referred to as ‘JNPT’). The Appellant had subcontracted the work to two other contractors who had charged service tax on services provided to the Respondent. The works contract service provided to ports was exempted by Notification 25/2012 which was withdrawn by Notification 6/2015 and subsequently restored later by Notification 9/2016. By incorporation of Section 103, the exemption was given a retrospective effect. Since the Appellant was entitled to the retrospective exemption accorded to the activity rendered in a works contract awarded by JNPT, the Appellant filed refund claim on 30.08.2016, of the amount of service tax paid on the invoices of subcontractors as ‘person’ who had borne the incidence of tax. The original authority and the first appellate authority, examined the eligibility for application of retrospective exemption vis-à-vis Section 103 and sanctioned the refund claim. Aggrieved by the decision, the department filed the appeal before the Tribunal.

The department argued that the appellate authority while upholding the refund, failed to examine the existence of claim, if any, filed, or benefit availed, by the subcontractors consequent upon restoration of exemption. Furthermore, the appellate authority failed to ascertain if the Respondent had concurred with JNPT to include the tax component in the capitalization to avail higher depreciation. Also, the Respondent had not complied with the certification requirement under Section 103 and the notification as the certificate was issued on the letterhead of the Port Trust, was attested by the Deputy Secretary in the Ministry of Shipping. Further the department relied on the decision of Hon’ble Supreme Court in case of CC vs. Presto Industries [2001 (128) ELT 321 (SC)] and the Tribunal in case of Mars Plastics & Polymers [2003 (156) ELT 941] to contend that the applicant of refund claim is required to establish eligibility for benefit of any exemption notification.

The Respondent submitted that there was no amortization, or capitalization, of the said amount and on contrary, the amount of refund claim was reflected in the books as ‘dues from government’. It was also clarified that the suggested accounting treatment is nothing but a statement of intent of amortization upon commencement of commercial operation. Commencement of commercial operation took place in March 2018 and hence, in view of refund claim having been filed, the amortization had not taken place. Therefore, the apprehension of amortization, or any other downstream benefit of capitalization will not arise.

Judgment: The Hon’ble Tribunal held that the order cannot be assailed for non-compliance with the certification prescribed in the exemption notification as the certificate furnished, though issued on the letterhead of the Port Trust, has been attested by the Deputy Secretary in the Ministry of Shipping. The exemption notification has not prescribed the form or manner in which the certificate of the Ministry is to be authenticated. Attestation of the certificate signed by Chairman, JNPT by the competent authority in the Ministry of Shipping, therefore suffices as compliance. The issue of whether any claim for refund has been preferred by the two sub-contractors who included the tax in the invoice raised on the Respondent or had availed benefit is too vague and merely based on apprehensions. Also, under the scheme of operation of major ports, it is the tariff authority of ports which determines the contract rates and adequate safeguards exist for excluding amount that are not costs. Thus, the Respondent had clearly borne the incidence of tax and is eligible for refund.

CCGST vs. Bharat Mumbai Container Terminals Private Limited, CESTAT Mumbai decided on 3-9-2019 vide Final Order No. A/86588/2019.

Bharat Mumbai Container Terminals Private Limited