Order Date: 5 September 2022

Facts-

• The Appellant, Quality Builders & Contractor 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 claimed refund of the Service tax deposited as also the Housing Board since the Housing Board had awarded the contract in favor of the appellant for a gross amount, inclusive of all taxes and 50% of the Service tax paid by the Housing Board was deducted from the amount payable to the appellant by the Housing Board.
• The Commissioner (Appeals) has rejected the refund claim inter-alia on the ground of unjust enrichment.
• The appellant has submitted that they are clearly entitled to exemption under the Exemption Notification since individual/independent houses were constructed by the appellant and levy of service tax is exempted under the Exemption Notification.
• The Department has, however, supported the impugned order and submitted that the appellant was not entitled to claim benefit of the Exemption Notification dated June 20, 2012.

Issue-

• Whether the appellant is entitled to claim refund of the service tax deposited on construction of individual/independent residential houses and whether the refund is hit by the principles of unjust enrichment?

Order-

• The Tribunal observed that 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 12 or less than 12 residential units would not be covered by the definition of “residential complex”.
• A Division Bench of the Tribunal in AS SIKARWAR VERSUS COMMISSIONER OF CENTRAL EXCISE, INDORE  also observed that Service tax can be demanded only if the building concerned has more than 12 residential units in the building and such levy will not apply in cases where one compound has many buildings, each having not more than 12 residential units.
• Further, w.e.f. July 01, 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. Hence, the Commissioner (Appeals) was not justified in holding that the appellant would not be entitled to the benefit of the Exemption Notification.
• The Allahabad High Court in COMMISSIONER OF CUSTOMS CENTRAL EXCISE & SERVICE TAX VERSUS M/S. INDIAN FARMERS FERTILIZER COOPERATIVE LTD. held that a refund can be claimed by a person who has borne the incidence of tax. Even in accordance with the Exemption Notification dated June 20, 2012, 50% of the tax to be deposited by the Housing Board under the reverse charge mechanism was deducted by the Housing Board from the amount payable to the appellant. The Commissioner (Appeals) was, therefore, not justified in rejecting the refund claim of the appellant on the ground of unjust enrichment.
• The Tribunal held that the order passed by the Commissioner (Appeals), therefore, cannot be sustained and is set aside. The appellant would be entitled to refund in accordance with law and the appeal is allowed.