2010 (8) TMI 222 - AT - Service Tax

Refund - Service tax paid at the time of raising debit notes - later on debit notes were cancelled - refund was filed but rejected on the ground of unjust enrichment - Held that - transfers entries between Bank of Tokyo, New Delhi and Bank of Tokyo, Japan stand reversed though the entries relating to the services stand reversed later on. It is not the case of the Department that the New Delhi Branch of Bank of Tokyo rendered services to Suzuki Motor Corporation, Japan and received payment for the same from Suzuki Motor Corporation, Japan - there was to be an export of services by Bank of Tokyo, New Delhi Branch then, the service tax paid is refundable without reference to unjust enrichment - Appeal is allowed

Summary

Issues:
- Refund of service tax on fund transfer between branches of the same legal entity.
- Application of unjust enrichment principle in service tax refund claim.

Analysis:
1. Refund of service tax on fund transfer between branches of the same legal entity:
The case involved a fund transfer from Suzuki Motor Corporation, Japan to Suzuki Motor Cycle India Pvt. Ltd. through the Bank of Tokyo, with the New Delhi branch raising debit notes for service charges and service tax. The appellant claimed a refund of service tax after the debit entries were reversed. The appellant argued that as the Bank of Tokyo, New Delhi and Bank of Tokyo, Japan are branches of the same legal entity, no taxable services were rendered between them. The Tribunal agreed, emphasizing that transactions within the same legal entity do not attract service tax, even if adjustments like credit and debit notes were made. The Tribunal highlighted that services rendered to oneself are not taxable under service tax laws, unlike in Central excise levy. The Department failed to prove that the New Delhi branch provided services to a different legal entity, and the service tax refund was deemed applicable.

2. Application of unjust enrichment principle in service tax refund claim:
The original authority rejected the refund claim citing unjust enrichment. However, the Tribunal found that the New Delhi branch of Bank of Tokyo did not collect service tax from any third party, and the service charges were reversed without actual receipt. The Tribunal noted that even if there was an export of services by the New Delhi branch, the service tax paid was refundable without unjust enrichment considerations. The Tribunal upheld the appeal, allowing the refund claim with consequential relief as per law.

This judgment clarifies that in transactions between branches of the same legal entity, service tax may not apply, and the unjust enrichment principle may not bar a refund claim if services were not rendered to external parties.