Tax Refund Cannot Be Claimed Without Challenging Or Modifying Self-Assessment: CESTAT Mumbai

On 8 October, the Mumbai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that a taxpayer cannot claim a service tax refund solely on the basis of a subsequent departmental clarification granting an exemption. The taxpayer must first challenge or modify the original self-assessment before seeking a refund of nearly Rs. 5.92 crore.

A Bench comprising Judicial Member S.K. Mohanty and Technical Member Sanjiv Srivastava dismissed five appeals filed by Sodexo India and allowed five appeals filed by the Revenue in a dispute over service tax on services provided to educational institutions. The Tribunal observed:

“The representation made by the appellant to the Board and clarification issued by the Board is not akin to appellate proceedings as provided by Section 85 of the Finance Act, 1994 against the self assessment made by the appellant at time of provision of the services and hence no refund claim would be maintainable till the time such self assessment is modified.”

Sodexo had paid service tax on housekeeping, facility management and catering services provided to educational institutions. In September 2013, the Central Board of Excise and Customs (CBEC) clarified that housekeeping and canteen facilities provided to educational institutions qualified for exemption as auxiliary educational services. Following the clarification, Sodexo sought a refund of the tax it had paid between July 2012 and September 2013.

The Commissioner (Appeals) allowed a refund of approximately Rs. 1.21 crore for housekeeping services. It also sanctioned around Rs. 4.71 crore for canteen and outdoor catering services but directed that the amount be transferred to the Consumer Welfare Fund because Sodexo had failed to establish that it had not passed on the tax burden to students and faculty members.

Sodexo argued that the one-year limitation period for claiming a refund should begin on 19 September 2013, when the CBEC issued its clarification. It also submitted that it had issued credit notes to educational institutions to return the service tax collected from them. The Revenue challenged the refund allowed for housekeeping services, arguing that certain claims were time-barred.

Relying on the Supreme Court's decision in ITC Ltd. and other precedents, the Tribunal held that self-assessment constitutes an assessment order that a taxpayer must challenge before seeking a refund. It also considered the principle of unjust enrichment, which prevents a taxpayer from obtaining a refund when the tax burden has already been passed on to another person.

Accordingly, the CESTAT dismissed Sodexo's five appeals and allowed the Revenue's five appeals.

For Sodexo India (Assessee): Advocate Arun Jain.

For the Revenue/Department: Jitesh Kumar Jain, Authorised Representative.