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September 2016

2016 (43) STR 301 (Tri.-Bang.) Kirthi Constructions vs. CCE. & ST., Mangalore

By Puloma Dalal, Jayesh Gogri, Mandar Telang; Chartered Accountants
Reading Time 1 mins
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Even if refund of service tax is on account of mistake of law, provisions of “time bar” and ‘unjust enrichment’ would apply.

Facts
Refund of service tax paid on construction services was claimed as it was not leviable to service tax. Appellants contested that since service tax was paid by mistake of law and it was not collected from buyers, refund claim cannot be held as time barred. Revenue demanded service tax as it was not a case of self-service, service tax was collected from buyers and in any case, the refund was time barred.

Held
Since the typical arrangement was that the Appellants were first selling the plot of land and then the buyer was appointing the Appellant for construction, it was covered by the exclusion clause of construction services. Accordingly, no service tax was payable. Relying on Hon’ble Supreme Court’s decision in case of Mafatlal Industries Ltd. vs. UOI (1997 (89) ELT 247 (SC)), it was held that all refund claims except unconstitutional levies have to pass the test of limitation of one year (time bar) and non-passing of service tax burden to buyers (unjust enrichment).

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