By TIOL News Service

AHMEDABAD, JAN 12, 2015: THIS is a Revenue appeal against an order passed by the Commissioner(A), Bhavnagar.

The facts are that the respondent entered into works contract with M/s. Pipavav Energy Pvt. Limited ('PEPL') and received mobilization advance of Rs.4.83 crores in July-August, 2010 upon execution of bank guarantee.

They paid service tax @ 4.12% of a total amount of Rs.19,11,331/-, on the said mobilization advance, under Works Contract Composition Scheme. The said work contract was terminated by M/s. PEPL on 24.11.2011 and mobilization advance was recovered by M/s. PEPL by encashing the bank guarantee on 16.5.2012, for the service not provided.

Resultantly, the respondent filed an application on 25.10.2012 for refund of service tax paid by them on the advance amount received from M/s. PEPL, which, as mentioned, was subsequently recovered on termination of contract without providing any services to their client.

The adjudicating authority rejected the refund claim on the grounds of limitation. It was held that the service tax was deposited on 23.8.2010, 06.9.2010 and 06.10.2010 but the refund claim was filed on 25.10.2012 i.e. after a span of two years& which is beyond the limitation period prescribed u/s 11B of the CEA, 1944.

The Commissioner(A) allowed the appeal and, therefore, the Revenue is before the CESTAT.

The AR submitted that the service tax paid by the Respondent has to be considered as "duty" and not as deposit and hence time bar of Section 11B of the CEA, 1944 will be applicable.

The respondent inter alia took the support of the following case laws to argue that where no service was provided no tax is liable and hence amounts paid have to be considered as a "deposit" to which time bar of Section 11B is not applicable-

+ K.V.R Constructions 2010-TIOL-68-HC-KAR-ST

+ Natraj and Venkat Associates 2010-TIOL-67-HC-MAD-ST

+ Addition Advertising - 2003-TIOL-124-HC-AHM-ST

+ Jyotsana D. Patel 2014-TIOL-2048-CESTAT-MUM

The Bench inter alia observed –

++ 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.

++ 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.

Holding that there is no reason to interfere with the order passed by the first appellate authority, the Revenue appeal was rejected.

(See 2015-TIOL-87-CESTAT-AHM)