2004 (7) TMI 4 - Commissioner - Service Tax

Service Tax Goods Transport Operators (1) Bar of unjust enrichment (2) No Service tax leviable on Goods transport operator at the material time (3) Refund

Summary

Issues Involved:
1. Whether the refund of service tax paid in excess is subject to unjust enrichment.
2. Whether the service tax paid by the appellants should be credited to the Consumer Welfare Fund or refunded to the appellants.

Detailed Analysis:

Issue 1: Applicability of Unjust Enrichment
The primary issue is whether the doctrine of unjust enrichment is applicable to the refund of service tax paid by the appellants. The lower adjudicating authority observed that the appellants likely included the service tax in the final product's price, thus passing on the burden to the customers. The appellants contended that they were merely godown owners and not manufacturers, and the freight charges were post-removal expenses, not part of the product's price. They argued that the tax was collected without legal authority and must be refunded. The appellants provided a certificate from their statutory auditors confirming that the service tax was not included in the product's price and was borne by them.

Issue 2: Crediting to Consumer Welfare Fund
The lower adjudicating authority had ordered the refund to be credited to the Consumer Welfare Fund, assuming the appellants had passed the tax burden to their customers. The appellants challenged this, providing documents such as invoices, ledger entries, and a Chartered Accountant's certificate to prove that the service tax was not included in the product's price and was not passed on to any third party.

Judgment Summary:
The Commissioner (Appeals) evaluated the evidence presented by the appellants, including invoices, general ledgers, and the Chartered Accountant's certificate. It was established that the service tax amount was shown as "service tax recoverable" in the appellants' accounts and was not passed on to the customers. The Commissioner concluded that the appellants had successfully rebutted the presumption of unjust enrichment under Sections 11B and 12B of the Central Excise Act, 1944.

The judgment referenced the Supreme Court's observation in the Mafatlal Industries Ltd. case, which emphasized that manufacturers typically pass on the duty to the buyers, but the appellants in this case had provided sufficient evidence to prove otherwise. The Commissioner also cited the Adarsh Metal Corporation case, which held that if the collection of duty is without jurisdiction, the plea of unjust enrichment cannot be used to deny a refund.

Conclusion:
The appeal was allowed, and the impugned Order-in-Original was set aside. The Commissioner (Appeals) directed that the refund of Rs. 1,46,518/- should be made to the appellants instead of being credited to the Consumer Welfare Fund, as the appellants had borne the burden of the service tax and had not passed it on to any other party.