21.03.2022 – Relevant Date For Refund Would be the Date Of Return Of Amount To Customer On Cancellation Of Flat- CESTAT Ahmedabad

The Hon’ble CESTAT, Ahmedabad vide its order dated 22nd February 2022 in the matter of Pramukh Realty Vs. C.C.E. & S.T. – Daman in Service Tax Appeal No. 12327 of 2019, held that relevant date for computing the limitation in case of cancellation of the agreement of sale of flat would be the date when the refund of the amount was made to the customers.

Facts:

  • The appellant being engaged in sale of flats paid service tax on Construction of residential complex however later on the sale of flats was cancelled and the appellant returned the amount collected from the customers along with service tax.
  • Thereafter the appellant for the amount of service tax paid filed a refund claim which was duly sanctioned by the adjudicating authority.
  • The department being aggrieved of the aforesaid order of adjudicating authority preferred an appeal before the Ld. Commissioner (Appeals), who after considering the submissions rejected the refund on the ground of time bar.

Appellants Plea: –

  • It was submitted on behalf of the appellant that the service tax payment was finalized only when the customers decided to cancel the sale of flats.
  • The whole amount collected has been returned to the customers along with service tax in terms of clause (eb) of Section 11B.
  • The Appellant relying on the tribunal judgment of M/s Ramesh Kumar Agarwal final order No. 51646/2021 dated 25.06.2021, submitted that date of refund of the amount to the customer shall be considered as the relevant date and the refund claim was filed well within one year from that date.

Revenue Plea: –

  • On the other hand, the authorized representative appearing on behalf of the revenue reiterating the findings of the impugned order, submitted that there is no exception provided in Section 11B with regard to time limit of one year and the refund in the present matter is time-barred as filed after one year.
  • The authorized representative further relied on Bosch Electricals Drive India P. Ltd – Interim Order No. 40019/2021-LB, Bosch Electricals Drive India P. Ltd – Interim Order No. 40012/2021-SM, Ajni Interiors – High Court of Gujarat in SCA No. 10435/2018, Ajni Interiors-Supreme Court of India in SLP (Civil) Diary No.3952/2020, and submitted that the refund has been rightly denied by the Ld. Commissioner (Appeals).

Held:

  • The Hon’ble CESTAT after considering the submissions from the both sides, noticed that the refund in dispute has attained finality on merits however the same is time barred or not, is to be decided.
  • The Hon’ble Bench after considering the facts of the case observed that the service was not completed and the sale of flats was cancelled, due to which the appellant subsequently returned the amount collected to the customers along with service tax.
  • As the amount collected including service tax was returned to the customers, ‘the date of Finalization’ should be taken as relevant date for computing limitation under Section 11B.
  • The Hon’ble Bench after perusal of law stated in Section 11B observed that where the service tax payment needs to be adjusted at the later stage, the date of adjustment has to be considered for the purpose of computing the limitation.
  • Lastly the Hon’ble Bench referring to the judgment of M/s Ramesh Kumar Agarwal relied on by the appellant, wherein the similar issued was decided in favor of the assessee/appellant by the tribunal, held that the appellant refund claim is not time barred.

The Hon’ble CESTAT with the above findings allowed the appeal and set aside the impugned order and upheld the order in original.

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