The Decision has been taken by THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH, AHMEDABAD In the matter of COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX, BHAVNAGAR Vs M/s MADHVI PROCON PVT. LTD.
Crux of the Decision:
No service tax can be leviable on the amount of advances received by the assessee under the works contract if that works contract gets terminated and the assessee have to pay that amount back to its clients. It means no service tax is payable if no service is rendered, hence, the amount of service tax already deposited by the assessee have to be considered as deposit to which time barred provision of section 11B, of CEA, 1944 are not applicable and refund of it can be claimed even after time span of 2 years.
“Whether the service tax is chargeable on the amount of advances received by the assessee under a work contract, if that work contract gets terminated and the assessee has to pay back the amount of the advance received to its clients? And if, the assessee cannot claim the refund of the amount paid as service tax on the advance received within the period of 2 years , then whether the provision of time barred under section 11B, of CEA,1944 will be applicable on it.”?
Decision of the Bench:
Heard both sides and perused the case records. The issue involved in the present proceedings is as to whether amount of Rs.19, 11,331 /- paid by the Respondent should be considered as payment of ‘duty’ or an amount paid as ‘deposit’. From the facts available on records service tax was paid on the amount of advances received by the Respondent but ultimately no service could be provided as the said works contract got terminated. In the case of Addition Advertising vs. UOI (supra) jurisdictional Gujarat High Court has, inter-alia, held that if no service is provided then there is no service tax. It means that once service is not rendered then no service tax is payable. Similarly Karnataka High Court in the case of CCE, Bangalore vs. Motorola Private Limited (supra) held that any duty paid by mistake cannot be termed as ‘duty’. Similar view has been taken in the other case laws relied upon by the Respondent. In view of the above, it has to be held that the amounts paid by the Respondent cannot be termed as payment of duty but has to be considered as a ‘deposit’ to which provisions of Section 11B of the Central Excise Act, 1944 will not be applicable. Accordingly, there is no reason to interfere with the order dated 23.7.2013 passed by the first appellate authority.
From the plain reading of the above decision it can be easily concluded that since the assessee paid the service tax on the amount of the advances received , but no service could be provided as the said work contract got terminated, they are eligible to get the refund of the same amount paid as service tax. It means no service tax is payable if no service is rendered. In view of the above decision it can also be concluded that payment of service tax by the assessee, on the services which was ultimately not provided, is not a payment of duty therefore, the assessee can apply for their refund even after a time span of two years.