Custom, Excise & Service Tax Tribunal
Lancor Holdings Ltd vs The Commissioner Of Gst &Amp Central ... on 8 September, 2020
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
CHENNAI
REGIONAL BENCH - COURT NO. I
Service Tax Appeal No. 41825 of 2019
(Arising out of Order-in-Appeal No. 329/2019 (CTA-I) dated 22.10.2019 passed by the
Commissioner of G.S.T. & Central Excise (Appeals-I), 26/1, Mahatma Gandhi Road,
Nungambakkam, Chennai - 600 034)
M/s. Lancor Holdings Limited, : Appellant
VTN Square, 2nd Floor,
No. 58, G.N. Chetty Road,
T. Nagar, Chennai - 600 017
VERSUS
The Commissioner of G.S.T. and Central Excise : Respondent
Chennai North Commissionerate,
26/1, Mahatma Gandhi Road,
Nungambakkam, Chennai - 600 034
APPEARANCE:
Shri. S. Gokarnesan, Advocate for the Appellant
Shri. Arul C. Durairaj, Authorized Representative (A.R.) for the Respondent
CORAM:
HON'BLE MR. P. DINESHA, MEMBER (JUDICIAL)
FINAL ORDER NO. 40783 / 2020
DATE OF HEARING: 12.02.2020
DATE OF DECISION: 08.09.2020
By this appeal, the assessee is challenging the
denial of refund.
2.1 Brief facts leading to the present litigation inter alia
are that M/s. Lancor Sriperumbudur Developments
Limited („M/s. LSDL‟ for short) had entered into a
construction service agreement with M/s. Lancor
Guduvancherry Developments Limited („M/s. LGDL‟ for
short); that both the above two entities subsequently
merged with M/s. Lancor Holdings Limited vide
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Appeal. No.: ST/41825/2019-SM
amalgamation order of the Hon‟ble High Court of Madras;
that at the time of signing the construction service
agreement, M/s. LSDL had paid the consideration
including Service Tax of Rs. 48,11,244/- to the service
provider i.e., M/s. LGDL; the said receipt was declared in
M/s. LGDL‟s ST3 return for the half-yearly period October
2013 to March 2014; that the above payment and receipt
was duly recorded/accounted in the books of account of
both the entities; that no service could be provided as
agreed since the amalgamation took place, with no
service provider-service recipient, and also since the
same amounted to providing service to the self; that
subsequent to the merger, the amount shown in M/s.
LSDL‟s account as advance given to M/s. LGDL was
adjusted against the amount shown as advance received
from M/s. LSDL, as required by the accounting principles
(squared off); that pursuant to merger, both the entities
have become part of the Amalgamated Company and the
service, for which advance was originally given,
automatically got cancelled since the same could not be
proceeded with, etc.
2.2 This prompted the Amalgamated Company to claim
refund of the above amount paid as advance since there
was absolutely no service provided. Accordingly, they
filed the refund claim on the grounds that since service
did not materialize, they are entitled for refund in terms
of Rule 6 (3) of the Service Tax Rules, 1994; that when
an agreement is cancelled or no service provided, the tax
paid originally becomes a deposit and the amount would
lose the identity of Service Tax and hence, for claiming
refund of such amount, Section 11B of the Central Excise
Act, 1944 would not apply.
3. A Show Cause Notice dated 22.03.2019 was issued
proposing inter alia to reject the appellant‟s claim on
limitation under Section 11B ibid., to which the appellant
filed a detailed reply explaining that the provisions of
Section 11B ibid. would not apply and also relied on
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Appeal. No.: ST/41825/2019-SM
various case-laws in their support. However,the
Adjudicating Authority after hearing the appellant, vide
Order-in-Original No. 03/2019 (R) dated 21.05.2019,
rejected the refund claim holding that the appellant‟s
claim was hit by the limitation under Section 11B ibid.
The Adjudicating Authority has inter alia referred to the
fact of the Hon‟ble High Court passing the order of
amalgamation on 03.01.2017 whereas the application for
refund was made on 09.07.2018, which was beyond the
one-year time prescribed under Section 11B ibid. The
appellant having not met with success in its first appeal
before the Commissioner of G.S.T. and Central Excise
(Appeals-I), Chennai, who vide impugned Order-in-Appeal
No. 329/2019 (CTA-I) dated 22.10.2019 having rejected
the same, has filed the present appeal before this forum.
4. Heard Shri. S. Gokarnesan, Learned Advocate
appearing for the assessee and Shri. Arul C. Durairaj,
Learned Superintendent (Authorized Representative)
appearing for the Revenue. I have gone through the
documents placed on record and also various decisions
relied on during the course of arguments.
5. The only issue that arises for consideration is,
when advance amount is paid for a service and such
service could not be provided due to amalgamation,
whether Section 11B ibid. applies when refund of the
above amount is claimed?
6. I find, on going through the orders of both the
lower authorities, that there is no dispute as to the
eligibility or otherwise for refund except the claim being
rejected as barred by limitation. There is also no dispute
that both the service provider and the service recipient
having merged into a single entity, there was no service
provider or service receiver. Hence, the service for which
the agreement was signed could not be provided also
since the same would have amounted to providing a
service to the self. Further, even Rule 3 of the Point of
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Appeal. No.: ST/41825/2019-SM
Taxation Rules, 2011 will have no role since the same
would not apply to the case of service to the self. Section
66B of the Finance Act, 1994, which is the charging
Section, requires the levy of Service Tax on the value of
services other than the services specified in the Negative
List, provided or agreed to be provided, by one person to
another. Subsequent to the amalgamation in this case,
there remained only one person for having provided
service to himself/itself.
7.1 Rule 6 (3) of the Service Tax Rules, which is relied
upon by the Learned Advocate for the appellant, reads as
under :
"RULE 6. Payment of service tax. --
.
.
.
(3) Where an assessee has issued an invoice, or received any payment, against a service to be provided which is not so provided by him either wholly or partially for any reason, [or where the amount of invoice is renegotiated due to deficient provision of service, or any terms contained in a contract] the assessee may take the credit of such excess service tax paid by him, if the assessee -
[(a) has refunded the payment or part thereof, so received for the service provided to the person from whom it was received; or]
(b) has issued a credit note for the value of the service not so provided to the person to whom such an invoice had been issued.]"
7.2 This, in my view, would take care of a situation where an agreed service could not be provided either wholly or partially; that the above Rule, in such a situation, permits the assessee to take credit of such excess Service Tax paid which falls under a separate category by itself, as a deposit and hence, loses the characteristics of "tax", for which reason provisions of Section 11B ibid. are not attracted. There is also no 5 Appeal. No.: ST/41825/2019-SM dispute that even the ST-3 return itself recognizes this aspect by providing a separate column for taking credit without any time-limit and without even any reference to cash or credit, thereby enabling the taxpayer to set off the credit so taken against any tax liability.
8. As observed by me in the earlier paragraphs, the Revenue has not alleged unjust enrichment. When the amount loses the character of Service Tax, it could only be treated as a deposit, as held in innumerable precedents, which becomes an item for adjustment in terms of Rule 6 (3) ibid., since no service could ever be provided. Thus, the provisions of Rule 6 (3) would only apply and not the provisions of Section 11B ibid.
9. On going through the various decisions/orders relied upon by the Learned Advocate for the appellant, I find that they are in support of my above views, in principle.
10. For the above reasons, the rejection of refund is not in order and hence, the same is unsustainable and consequently, the impugned order is set aside.
11. The appeal is allowed with consequential benefits, if any, as per law.
(Order pronounced in the open court on 08.09.2020) Sd/-
(P. DINESHA) MEMBER (JUDICIAL) Sdd