The Mumbai Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that a refund claim filed after the introduction of GST for a service that was never provided must be considered under Section 142(5) of the CGST Act. It directed payment of the refund with applicable interest within two months.
The bench of Judicial Member Dr Suvendu Kumar Pati held that, in the circumstances of this claim, the dispute over whether the one-year period began on the date of tax payment or the date of cancellation did not determine the outcome. The Tribunal relied on Section 142(5) of the Central Goods and Services Tax Act, 2017, which addresses certain refund claims relating to services that were not provided under the pre-GST tax regime.
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The appellant/assessee booked a flat in January 2017. According to the order, the developer cancelled the booking on 14 September 2020 and returned the amount collected from them, except for the service tax component.
The buyers applied for a refund of that component on 12 February 2021. The refund sanctioning authority rejected the application, and the Commissioner (Appeals) upheld that decision in an order dated 17 February 2022. Both authorities proceeded on the basis that the claim had been filed beyond the one-year limitation period under Section 11B of the Central Excise Act, 1944.
Makarand P. Joshi, the counsel for the buyers, argued that their right to seek a refund arose only when the booking was cancelled on 14 September 2020. Counting from the tax payment made in 2017, they submitted, would mean the refund period expired before the cancellation that gave rise to their claim.
The department opposed the appeal. It argued that the authorities were bound by the statutory limitation provisions and that cancellation of a booking was not a specified “relevant date” under Section 11B. On that basis, it maintained that the Commissioner (Appeals) had correctly rejected the application.
The Tribunal noted that the buyers had filed their refund application after the introduction of GST. It also recorded that both lower authorities had recognised that Section 142(5) of the CGST Act applied to the claim and that it had to be dealt with by reference to the provisions of the earlier law.
Reading that provision in the context of tax paid for a service that was ultimately not provided, the Tribunal held that the authorities’ exercise of choosing between the date of payment and the date of cancellation for limitation purposes was irrelevant to disposing of this refund application. The order also referred to the statutory provision for payment of an amount found due in cash, subject to the applicable requirement concerning unjust enrichment.
The Tribunal therefore allowed the appeal and set aside the Commissioner (Appeals)’ order. It directed the jurisdictional Commissioner to pay the refund with applicable interest as per law within two months of receiving the Tribunal’s order.
The decision turns on the treatment of a pre-GST service tax refund claim made after GST began, where the underlying service was not provided. It does not state the amount of the refund.
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