India: Refund Cannot Be Claimed Once The Amount Of Service Tax Is Paid And No Show Cause Is Issued Thereafter

SECTION 73(3) OF THE FINANCE ACT, 1994

"(3) Where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded, the person chargeable with the service tax, or the person to whom such tax refund has erroneously been made, may pay the amount of such service tax, chargeable or erroneously refunded, on the basis of his own ascertainment thereof, or on the basis of tax ascertained by a Central Excise Officer before service of notice on him under sub-section (1) in respect of such service tax, and inform the Central Excise Officer of such payment in writing, who, on receipt of such information shall not serve any notice under sub-section (1) in respect of the amount so paid:

Provided that the Central Excise Officer may determine the amount of short payment of service tax or erroneously refunded service tax, if any, which in his opinion has not been paid by such person and, then, the Central Excise Officer shall proceed to recover such amount in the manner specified in this section, and the period of "one year" referred to in sub-section (1) shall be counted from the date of receipt of such information of payment.

Explanation 1 . - For the removal of doubts, it is hereby declared that the interest under section 75 shall be payable on the amount paid by the person under this sub-section and also on the amount of short payment of service tax or erroneously refunded service tax, if any, as may be determined by the Central Excise Officer but for this sub-section.

Explanation 2.- For the removal of doubts, it is hereby declared that no penalty under any of the provisions of this Act or the rules made there under shall be imposed in respect of payment of service tax under this sub-section and interest thereon."

The aforesaid provision very clearly lays down that the amount of tax, if any, which has not been paid or has been short-paid is ascertained by the Departmental officer and paid before the service of notice, no notice requires to be issued to the assessee. The provisions of sub-section further are very clear that if no notice is issued to the appellants under Section 73(1) of the Finance Act, 1994, it would mean that the tax liability discharged by the appellants would be the tax as accepted and paid by him.

On similar grounds, the Hon'ble CESTAT Mumbai recently in the case of Nukay Nufit Nakshtra V Commissioner of Central Excise Pune reported in 2015-TIOL-607-CESTAT-MUM, held that "when the appellants themselves had discharged the tax liability, there cannot be any refund of the amount as the issue is considered as 'closed' by the revenue authorities."

The facts of the case are that the the officers of the Directorate General of Central Excise Intelligence, Regional Unit, Pune gathered an intelligence that three companies NUKAY, NAFIT and NAKSHTRA were providing services of erection of modular kitchen and other services, which was brought under the tax ambit w.e.f 16th June, 2005. Post investigation, the company was directed to pay service tax as determined by the departmental representatives. All the companies paid the said amount so determined along with filing an application u/s 73(3) of the Finance Act, 1994.

Subsequently, all the three companies were of the view that the said amount of tax was not payable by them as the tax liability came into effect later, hence all of them filed refund claims. All such claims were rejected by the adjudicating authority. Even the first appellate authority after granting them an opportunity for personal hearing, rejected the said appeals.

The Hon'ble CESTAT, Mumbai after going through the provisions of S. 73(3) and hearing the contentions from both the sides observed that there was no dispute that companies themselves had paid the amount of tax not paid and filed a declaration u/s 73(3) that the case may be closed. In such scenario, there can be no chance that any refund can be claimed.

CONCLUSION:

Looking at the judgment above, it is crystal clear that once the Assesee pays the amount of tax determined by the Department and gives an intimation thereof u/s 73(3) of the Finance Act, the Officer shall not serve a notice and the Assessee cannot claim a refund of the said amount, as the issue stands closed.

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