Refund — Service tax paid subsequently found not payable due to threshold exemption — Refund denied on the ground that nothing was indicated about service tax exemption in the invoice — Held, refund cannot be denied.

In the given case, service tax was demanded from the appellant on the ground that the appellant had exceeded the limit provided for exemption. The appellant immediately paid service tax along with interest. Subsequently, it was discovered that the appellant was within the limits of threshold exemption and therefore the tax was not payable. Consequently, the appellant claimed refund. The claim was rejected by the Dept. on the ground that the fact of exemption was not mentioned in the invoice, and therefore, the value indicated in the invoice was inclusive of service tax element. The Department in support of its claim also stated that since service tax paid had been debited to Profit and Loss account, therefore it had to be held that service tax liability had been included in the value of services charged in the invoice.

 Held:

The Tribunal held that the view taken by the Department is not appropriate. How can the appellant mention the amount of tax when the appellant was exempt? Moreover, mere non-mention of service tax exemption on the invoice does not mean that the appellant has collected any amount of service tax. Also, the fact that service tax paid was booked as expenditure does not mean the appellant was in fault. The order rejecting the refund claim of the appellant was held to be non-sustainable.