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Issues involved: Determination of liability to pay service tax under the category of "Banking and Financial Services" for leasing machinery and crossing the bar of unjust enrichment for refund claim.
Summary: The appeal was filed against the Order-in-Appeal passed by the Commissioner of Central Excise (Appeals), Pune, regarding the liability of the appellant, a manufacturer of excisable goods, for service tax on leasing machinery. The department alleged financial leasing of equipment, leading to a service tax demand. The appellant contended that the activity was merely renting out machinery and did not fall under banking and financial services. The refund claim was rejected based on unjust enrichment as the service tax paid was shown as expenses in the books of accounts. The appellant argued that leasing machinery does not constitute banking and financial services, citing precedents. They also claimed not to have passed on the burden of service tax to the lessee, thus not contravening the provisions of Section 12B of the Central Excise Act, 1944. The appellant sought a stay on the decision. The Revenue conceded that the activity did not fall under banking and financial services based on Tribunal decisions but contended that the appellant failed to prove non-enrichment as the service tax paid was treated as expenditure in the accounts, making them ineligible for a refund under Section 11B(2) proviso. The Tribunal agreed that leasing machinery is not a banking and financial service, as supported by precedents. However, regarding unjust enrichment, the appellant's treatment of service tax as expenses in the accounts indicated passing on the tax burden. As per Section 11B and Finance Act, 1994, the burden of proof lies with the assessee to show non-passing of tax incidence. Consequently, the refund claim rejection was upheld, but since service tax was not applicable, the refund amount was directed to be credited to the Consumer Welfare Fund. The appeal was disposed of accordingly.
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