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Judgment
This appeal is directed against the order in appeal No PUN-EXCUS-001-APP-90/2018-19 dated 08.06.2018 of the Commissioner (Appeals-I), Central Tax, Pune. By the impugned order, the Commissioner (Appeals) has upheld the order in original No PI/ Talegaon Divn/ref-ST/234/17-18 dated 08.01.2018 of the Assistant Commissioner, Talegaon Division rejecting the refund claim filed by the Appellant claiming refund of Rs 4,43,827/-.
2.1 The appellant has also filed a miscellaneous application for change of name of the proprietor. The same is dismissed as infructuous.
2.2 Appellant holds service tax registration for providing taxable services (under the category of Renting of Immovable Property Services).
2.3 Appellant preferred a refund claim for an amount of Rs 4,43,827/- (Rupees Four Lakh Forty Three Thousand Eight Hundred and twenty Seven only) in respect of the service tax paid by them during 2016-17 in respect of the services erroneously classified by them under the category of Renting of Immovable Property Services, whereas the services provided by them actually were "Service by Hostel for residential/ lodging purpose, having declared tariff of a unit of accommodation less than one thousand rupees day or equivalent" exempted as per Notification No 25/2012-ST dated 20.06.2012.
2.4 Assistant Commissioner sought a verification report on the refund claim from the jurisdictional range Superintendent and thereafter proceeded to reject the refund claim filed by the Appellant without issuing any notice but after granting them hearing.
2.5 Aggrieved by the order of the Assistant Commissioner, appellant preferred an appeal before the Commissioner (Appeals) which was dismissed by the Commissioner (Appeals).
2.6 Hence this appeal.
3.1 We have heard Shri S V Nair, Consultant for the appellant and Shri Nitin Ranjan, Deputy Commissioner, Authorized Representative for the revenue.
3.2 Arguing for the appellant, learned Consultant submits that:
Ø Appellant is running a girls hostel after obtaining necessary permissions for the same from local municipality.
Ø They under mistaken notion discharged service tax on these activity under the taxable category of Renting of Immovable Property during the period 2016-17, without claiming the exemption available to them in terms of S No 18 of the exemption Notification No 25/2012-ST dated 20.06.2012.
Ø Subsequently they filed this refund claim, claiming the benefit of this exemption.
Ø The refund claim was rejected by the Assistant Commissioner and also Commissioner (Appeal) holding that the benefit of this notification was not admissible in respect of the services of hostel.
Ø There is no difference in terms of the services provided by them, and by those specifically mentioned in the notification. The scope of entry has been widened by use of the phrase "by whatever name called".
Ø dictionary meaning of the various terms used in the notification and the word "hostel" used by them in the contract entered by them with the educational institutions, clearly establish that "hostels" are covered by the entry 18 of the said notification.
ØSince the benefit of exemption is admissible to the "hostel" the impugned order cannot be sustained and their appeal be allowed.
3.3 Arguing for the revenue, learned authorized representative reiterated the findings recorded by the Commissioner (Appeal) in the impugned order. He submits that-
Ø Benefit of Sl No 18 of exemption notification is not available, as "Hostels" do not qualify as per the terms used in this entry.
Ø Hostel is a very specific term used in relation to the educational institutions. The services provided by or to the educational institutions are exempted vide entry at Sl No 9 of the notification No 25/2012-ST. However the services of Hostel do not figure in the said entry.
Ø The refund claim has been rightly rejected by the authorities below denying the benefit of the exemption claimed by the appellants.
Ø Even if the refund claim is held to be admissible, then also same cannot be made without Assistant Commissioner recording his satisfaction to effect that burden of the tax paid has not been passed on by the appellants to the service recipients.
4.1 We have considered the impugned order along with the submissions made in appeal and during the course of arguments.
4.2 The Sl No 18 of the notification No 25/2012-ST dated 20.06.2012 reads as follows:
"18. Services by a hotel, inn, guest house, club or campsite, by whatever name called, for residential or lodging purposes, having declare tariff of a unit of accommodation below one thousand rupees per day or equivalent."
Impugned order for denial of the benefit of exemption claimed in terms of this entry of notification states as follows:
"7.3 Hence, I find that we Appellant, seeks to classify themselves in the category of Hotel, Inn, Guest House, Club etc. They have also emphasized that the words "By whatever name called" would extend the meaning of Hotel, Inn, Guest House to the Hostel being run for students of a Medical college. I do not agree to the said argument of the Appellant. The Appellant is bound by the agreement and is required to provide the hostel facility only to the students of the Medical College; that it is also a fact that the Provisions of Anti-Ragging Act is also applicable to the said premises of the hostel. Further, the word " By whatever name called" should be interpreted in a way which will continue to carry the meaning/purpose of the Hotels/Inn/Guest house etc. A Hotel or guest house is for a commercial use for any individual and by no stretch of imagination a student hostel can be concluded to be falling in the said category of Hotel, Inn, Guest House, Club. The Appellant is providing accommodation to individual students, but the entire premises is required to be allotted Hence, I do not find any merit in the said argument of the Appellant and I reject the same. In other words, I am in agreement with the decision passed by the Respondent and I uphold the same."
4.3 The terms "Hostel" is not used in entry at S No 18 of the Notification No 25/201-ST dated 20.06.2012 as amended. However to understand the meaning and scope of the said entry we refer to the dictionary meaning of the various terms used in the said entry:
A. Dictionary meanings referred to by the appellant
i. Oxford English Dictionary- Hostel: Noun - An Establishment which provides inexpensive food and lodging for a specific group of people, such as students, workers, or travelers.
ii. Merriam Webster Dictionary: Definition of HOSTEL :INN
:an inexpensive lodging facility for usually young travelers that typically has dormitory-style sleeping arrangements and sometimes offers meals and planned activities - called also youth hostel 3 chiefly British : a supervised institutional residence or shelter (as for homeless).
iii. Wikipedia Dictionary:
Hostels provide budget-oriented, sociable accommodation where guests can rent a bed, usually a bunk bed, in a dormitory and share a bathroom, lounge and sometimes a kitchen. Rooms can be mixed or single-sex, and private rooms may also be available.
Hostels are often cheaper for both the operator and occupants; many hostels have long-term residents who they employ as desk agents or housekeeping staff in exchange for experience or discounted accommodation.
In a few countries, such as the UK, Ireland, Nepal, India and Australia, the word hostel sometimes also refers to establishments providing longer-term accommodation. In India, Pakistan and South Africa, hostel also refers to boarding schools or student dormitories in resident colleges and universities. In other parts of the world, the word hostel mainly refers to properties offering shared accommodation to travelers or backpackers.
iv. Cambridge Dictionary Inn: noun [C]
IN UK: a pub where you can stay for the night, usually in the countryside
In Us a small hotel, usually in the countryside
Inn used in the names of some hotels and restaurants: example "the Holiday Inn"
v. Dictionary.com Inn : noun
i) a commercial establishment that provides lodging, food, etc., for the public, especially travelers; small hotel.
ii) a tavern.
iii) British: any of several buildings in London formerly used as place s of residence for students, especially law students. Compare Inns of Court.
iv) a legal society occupying such a building.
v) Oxford Web Dictionary: Hotel: NOUN
An establishment providing accommodation, meals, and other services for travelers and tourists.
vi) Merriam Webster dictionary HOTEL:
an establishment that provides lodging and usually meals, entertainment, and various personal services for the public : INN
vii) Wikipedia web dictionary A guest house (also guesthouse) is a kind of lodging. In some parts of the world (such as for example the Caribbean), guest houses are a type of inexpensive hotel-like lodging. In still others, it is a private home which has been converted for the exclusive use of guest accommodation.
viii) Merriam Webster Dictionary: GUESTHOUSE: a building used for guests (as on an estate); especially : a house run as a boardinghouse or bed-and breakfast
B. Further we also refer to some more references as below to understand these terms:
i. Cambridge dictionary (assessed at https://dictionary.cambridge.org/ dictionary/english/hostel on 18.10.2021) defines the word hostel to mean: a large house where people can stay free or cheaply: a student hostel a place where people, especially young people, can stay cheaply for short periods when they are travelling, with shared rooms and sometimes some private rooms:
ii. "Hostel." Merriam-Webster.com Dictionary, Merriam- Webster, https://www.merriam-webster.com/dictionary/hostel. Accessed 18 Nov. 2021.
Synonyms for hostel: Synonyms: Noun - auberge, caravansary (or caravanserai), hospice, hostelry, hotel, inn, lodge, public house, tavern
History and Etymology for hostel Noun
Middle English, "lodging, accommodation, inn, dwelling place," borrowed from Anglo-French ostel, hostel, going back to Latin hospitāle "guest accommodation" (in plural hospitālia) - more at HOSPITAL
4.4 By referring to the above dictionaries we can conclude with certainty that the phrase "hotel, inn, guest house, club or campsite, by whatever name called, for residential or lodging purposes," used at sl No 18 in the Notification No 25/2012-ST dated 20.06.2012, is wide enough to bring in its ambit the word "Hostel" as commonly understood. In view of this we do not see any reason for denying the benefit of the exemption under this entry.
4.5 We also note that we are in the present appeal concerned with the refund claims filed by the appellant. In case of Mafatlal Industries {1997 (89) ELT 247 (SC)], a Constitutional Bench of the Hon'ble Apex Court has laid down the law as follows:
"82.A good amount of debate took place before us on the question whether sub-section (3) makes Section 11B exhaustive of all kinds of refund claims including those which are refundable as a consequence of appellate/revisional order and/or as a consequence of orders made by the High Court/Supreme Court. Sri Nariman pointed out that in Rule 11 (as it was in force during the period August 6, 1977 to November 17, 1980), sub-rule (3) expressly provided that "where as a result of any order passed in appeal or revision under the Act, refund of any duty becomes due to any person, the proper officer may refund the amount to such person without his having to make any claim in that behalf" and that sub-section (3) of Section 11B, before its amendment in 1991, was also in identical terms. But, Sri Nariman says, sub-section (3) of Section 11B has now been dropped; there is no corresponding provision in Section 11B as it now stands, which means, says the counsel, that even a refund claim arising as a result of an appellate order or an order of a court has also got to be made under and in accordance with sub-sections (1) and (2) of Section 11B and will be disposed of in terms of sub-section (2) of the said section, as amended in 1991. This consequence, learned counsel says, is unjust, unreasonable and arbitrary. There is no reason why a person who becomes entitled to refund of duty as a result of appellate or court order should also be made to apply and satisfy all the requirements of sub-sections (1) and (2) of Section 11B (amended) when he is entitled to such refund as a matter of right. Sri Nariman submits that if a manufacturer/assessee, who succeeds in vindicating his claim after a long fight - may be, upto this Court - and applies for refund is asked to satisfy that he has not passed on the burden of tax to another, he would rather keep quiet than fighting the levy. There would be no incentive for him to file the appeal/appeals or approach the higher courts which also involves substantial expense. If after all this fight and expense, he is to be denied the refund on the ground that he has passed on the burden of duty to third parties, why should he fight and spend money for fighting the litigation, says the counsel. Sri Sorabjee and Sri Salve too emphasised this aspect and said that this situation would lead to many an undesirable consequence. The assessing/approving officer (original authority) would become the monarch; whatever he says would be the law since there would be nobody interested in challenging his order. Illegal levies would become the order of the day. Such a situation, the learned counsel point out, is neither in the interest of law nor in the interest of consumer or the larger public interest. It is accordingly submitted that it would be just and proper that the amended Section 11B is held not to take in refund claims arising as a consequence of appellate or a superior court order. We do not think it is possible to agree. Such a holding would run against the very grain of the entire philosophy underlying the 1991 Amendment. The idea underlying the said provisions is that no refund shall be ordered unless the claimant establishes that he has not passed on the burden to others. Sub-section (3) of the amended Section 11B is emphatic. It leaves no room for making any exception in the case of refund claims arising as a result of the decision in appeal/reference/writ petition. There is no reason why an exception should be made in favour of such claims which would nullify the provision to a substantial degree. So far as "lack of incentive" argument is concerned, it has no doubt given us a pause; it is certainly a substantial plea, but there are adequate answers to it. Firstly, the rule means that only the person who has actually suffered loss or prejudice would fight the levy and apply for refund in case of success.
Secondly, in a competitive market economy, as the one we have embarked upon since 1991-92, the manufacturer's self interest lies in producing more and selling it at competitive prices - the urge to grow. A favourable decision does not merely mean refund; it has a beneficial effect for the subsequent period as well. It is incorrect to suggest that the disputes regarding classification, valuation and claims for exemptions are fought only for refund; it is for more substantial reasons, though the prospect of refund is certainly an added attraction. It may, therefore, be not entirely right to say that the prospect of not getting the refund would dissuade the manufacturers from agitating the questions of exigibility, classification, approval of price lists or the benefit of exemption notifications. The dis-incentive, if any, would not be significant. In this context, it would be relevant to point out that the position was no different under Rule 11, or for that matter Section 11B, prior to its amendment in 1991. Sub-rules (3) and (4) of Rule 11 (as it obtained between August 6, 1977 and November 17, 1980) read together indicate that even a claim for refund arising as a result of an appellate or other order of a superior court/authority was within the purview of the said rule though treated differently. The same position continued under Section 11B, prior to its amendment in 1991. Sub-sections (3) and (4) of this section are in the same terms as sub-rules (3) and (4) of Rule 11; if anything, sub-section (5) was more specific and emphatic. It made the provisions of Section 11B exhaustive on the question of refund and excluded the jurisdiction of the civil court in respect of all refund claims. Sub-rule (3) of Rule 11 or sub-section (3) of Section 11B (prior to 1991) did not say that refund claims arising out of or as a result of the orders of a superior authority or court are outside the purview of Rule 11/Section 11B. They only dispensed with the requirement of an application by the person concerned which consequentially meant non-application of the rule of limitation; otherwise, in all other respects, even such refund claims had to be dealt with under Rule 11/Section 11B alone. That is the plain meaning of sub-rule (3) of Rule 11 and sub-sections (3) and (4) of Section 11B (prior to 1991 Amendment). There is no departure from that position under the amended Section 11B. All claims for refund, arising in whatever situations (except where the provision under which the duty is levied is declared as unconstitutional), has necessarily to be filed, considered and disposed of only under and in accordance with the relevant provisions relating to refund, as they obtained from time to time. We see no unreasonableness in saying so."
4.6 In case of Addisson & Co [2016 (339) ELT 177 (SC)] Hon'ble Supreme Court laid down the law as under
"16. In the instant case, the Assessee has admitted that the incidence of duty was originally passed on to the buyer. There is no material brought on record to show that the buyer to whom the incidence of duty was passed on by the Assessee did not pass it on to any other person. There is a statutory presumption under Section 12B of the Act that the duty has been passed on to the ultimate consumer. It is clear from the facts of the instant case that the duty which was originally paid by the Assessee was passed on. The refund claimed by the Assessee is for an amount which is part of the excise duty paid earlier and passed on. The Assessee who did not bear the burden of the duty, though entitled to claim deduction, is not entitled for a refund as he would be unjustly enriched.
It will be useful to refer to the relevant para of Mafatlal Industries v. Union of India (supra) in this connection.
"108. (iii) A claim for refund, whether made under the provisions of the Act as contemplated in Proposition (i) above or in a suit or writ petition in the situations contemplated by Proposition (ii) above, can succeed only if the petitioner/plaintiff alleges and establishes that he has not passed on the burden of duty to another person/other persons. His refund claim shall be allowed/decreed only when he establishes that he has not passed on the burden of the duty or to the extent he has not so passed on, as the case may be. Whether the claim for restitution is treated as a constitutional imperative or as a statutory requirement, it is neither an absolute right nor an unconditional obligation but is subject to the above requirement, as explained in the body of the judgment. Where the burden of the duty has been passed on, the claimant cannot say that he has suffered any real loss or prejudice. The real loss or prejudice is suffered in such a case by the person who has ultimately borne the burden and it is only that person who can legitimately claim its refund. But where such person does not come forward or where it is not possible to refund the amount to him for one or the other reason, it is just and appropriate that that amount is retained by the State, i.e., by the people. There is no immorality or impropriety involved in such a proposition.
The doctrine of unjust enrichment is a just and salutary doctrine. No person can seek to collect the duty from both ends. In other words, he cannot collect the duty from his purchaser at one end and also collect the same duty from the State on the ground that it has been collected from him contrary to law. The power of the Court is not meant to be exercised for unjustly enriching a person. The doctrine of unjust enrichment is, however, inapplicable to the State. State represents the people of the country. No one can speak of the people being unjustly enriched".
Section 11B(2) of the Act contemplates that the amount of refund determined by the Authorities shall be credited to the fund. The Proviso to Section 11B(2) permits the refund to be paid to the applicant instead of being credited to the fund if such amount is relatable to the manufacturer, the buyer or any other such class of applicants as notified by the Central Government.
Mr. Venkatraman interpreted the said provision to mean that the only persons who were entitled for claim of refund are the manufacturer, his buyer and any other class of persons as notified by the Central Government. There is no dispute about the fact that no notification has been issued by the Central Government as contemplated in Clause (f) to proviso to Section 11B(2) of the Act. He contested that the claim for refund can be made only by the manufacturer or his buyer and any enquiry pertaining to unjust enrichment should be restricted only to the manufacturer and his buyer. The ultimate buyer/consumer will not figure in the scheme of Sections 11B, 12A, 12B and 12C of the Act. This submission was accepted by the High Court in the impugned judgment. We do not approve the findings of the High Court in this regard.
The sine qua non for a claim for refund as contemplated in Section 11B of the Act is that the claimant has to establish that the amount of duty of excise in relation to which such refund is claimed was paid by him and that the incidence of such duty has not been passed on by him to any other person. Section 11B(2) provides that, in case it is found that a part of duty of excise paid is refundable, the amount shall be credited to the fund. Section 2(ee) defines Fund to mean the Consumer Welfare Fund established under Section 12C. There is a proviso to Section 11B(2) which postulates that the amount of excise duty which is refundable may be paid to the applicant instead of being credited to the fund, if such amount is relatable to the duty of excise paid by the manufacturer and he had not passed on the incidence of such duty to any other person. Clause (e) to proviso of Section 11B(2) also enables the buyer to receive the refund if he had borne the duty of excise, provided he did not pass on the incidence of such duty to any other person. There is a third category of a class of applicants who may be specified by the Central Government by a notification in the official gazette who are also entitled for refund of the duty of excise. A plain reading of Clauses (d), (e) and (f) of the proviso to Section 11B(2) shows that refund to be made to an applicant should be relatable only to the duty of excise paid by the three categories of persons mentioned therein i.e. the manufacturer, the buyer and a class of applicants notified by the Central Government. Clause (e) refers to the buyer which is not restricted to the first buyer from the manufacturer. The buyer mentioned in the above Clause can be a buyer downstream as well."
4.7 In the present case appellant has in the initial stage issued invoices claiming the service tax payable from their client, and have also deposited the same with the exchequer. Now by way of this application they seek the refund of the same. However as is evident from the above referred decisions of the Apex Court that there can be no refund except for in the manner provided by Section 11B, i.e. without Assistant Commissioner recording his satisfaction to effect that the burden of tax paid and claimed as refund has not been further passed on. In the present case in absence of any such satisfaction matter needs to be referred back to the original authority of r consideration of the refund claims in light of these decisions, and also the decision of the Hon'ble Apex Court in case of ITC Limited [2019 (368) ELT 216 (SC)].
5.1 In view of the above appeal is allowed and the matter remanded back to original authority for consideration of the refund claims as indicated in para 4.5, 4.6 & 4.7 above.
5.3 Needless to say since the issue is relation to refund claim, filed nearly four years ago, original authority should decide the claim within three months of receipt of this order after following the principles of natural justice.
(Order pronounced in the open court)