2017 (3) TMI 1606 - HC - Service Tax

Refund claim - unjust enrichment - Held that - The deduction of the service tax is not a benefit which will amount to undue enrichment as the burden of payment of service tax cannot be passed on to the consumer - Once the liability of service tax was of the assessee, therefore, it is the assessee alone who would be entitled to refund - appeal dismissed.

Summary

Issues:
- Entitlement to refund of service tax
- Liability for payment of service tax
- Adjustment of service tax against Cenvat credit
- Principles of Unjust Enrichment
- Refund claim requirements under Section 11B of the Central Excise Act, 1944
- Consumer burden of service tax payment

Entitlement to Refund of Service Tax:
The High Court analyzed the appeal arising from a CESTAT order dismissing the Revenue's appeal against an order by the Commissioner (Appeals). The CESTAT held that the service tax adjustment by the Revenue against Cenvat credit payable to a company was not payable by the respondent-assessee, thus declining the refund claim. The Court emphasized that the liability for service tax payment rested with the assessee, entitling them to the refund.

Liability for Payment of Service Tax:
The Court addressed the substantial questions of law raised by the appellant, focusing on the liability for service tax payment. It was clarified that the ultimate liability for service tax was on the assessee, even though it was adjusted from another entity's Cenvat Credit Account. This clarification reinforced the assessee's entitlement to the refund.

Adjustment of Service Tax Against Cenvat Credit:
The Court highlighted that the adjustment of service tax against Cenvat Credit did not impact the assessee's entitlement to the refund. The judgment referenced a Division Bench Judgment of the Patna High Court to support the argument that such adjustments do not lead to undue enrichment, especially when the burden of service tax payment cannot be passed on to the consumer.

Principles of Unjust Enrichment:
In considering the principles of Unjust Enrichment, the Court referred to the Patna High Court judgment to emphasize that the payment of service tax directly by the assessee does not constitute undue enrichment. The Court concluded that the refund claim was valid and dismissed the appeal.

Refund Claim Requirements under Section 11B:
The Court did not find any merit in the appeal, as it was established that the refund claim was legitimate based on the direct payment of service tax by the assessee. The Court's decision was supported by the legal principle that the burden of service tax payment cannot be shifted to the consumer, reinforcing the assessee's right to the refund.

Consumer Burden of Service Tax Payment:
The judgment underscored that the burden of service tax payment cannot be transferred to the consumer. The Court's decision was based on the direct payment of service tax by the assessee, which entitled them to the refund. The appeal was ultimately dismissed, upholding the assessee's entitlement to the refund based on the legal principles discussed in the judgment.