2011 (6) TMI 383 - AT - Service Tax

Refund claim denied - appellant had not charged service tax separately in the invoice but nevertheless paid the service taxa - Held that - As appellant paid the amount without any consultation or hesitation or compulsion would show that while working out the amount to be received for the purpose of rendering the service tax, the service tax element had been taken into account. This is the only conclusion possible under the circumstances unless the appellant is able to show that in their internal costing made for the purpose of tender, etc., service tax element had not been taken into account and it was borne by them only and was not passed on, it is difficult to find fault with the conclusion of the Commissioner at this stage. The two decisions relied upon by the ld. Consultant are not applicable to the facts of this case. Thus appellant has not made out a prima-facie case in their favour thus directed to deposit an amount of ₹ 1 lakh within eight weeks and report compliance - Decided against the assessee.

Summary

Issues:
1. Eligibility for service tax refund.
2. Interpretation of inclusive service tax in contract charges.
3. Application of unjust enrichment principle.

Analysis:

Issue 1: Eligibility for service tax refund
The appellant, engaged in various services including Interior Decorator service, filed a refund claim for service tax paid during the year 2007-08 for installation services on National Highways. The Assistant Commissioner sanctioned the refund, but the Commissioner denied it under Section 84 of the Finance Act, stating lack of evidence that the amount collected was not inclusive of service tax.

Issue 2: Interpretation of inclusive service tax in contract charges
The appellant's consultant argued that service tax was not payable for the services provided, citing relevant case laws. However, the Department contended that the appellant had not proven that the service charges collected were not inclusive of service tax. The Commissioner held that the appellant had included the service tax liability in the contract charges, based on the contract terms mentioning inclusive of taxes.

Issue 3: Application of unjust enrichment principle
The Tribunal analyzed the submissions and contract terms, concluding that the appellant had paid the service tax voluntarily, indicating it was factored into their pricing. The Tribunal found no evidence that the service tax element was not passed on to customers. Referring to relevant case laws, the Tribunal determined that the appellant failed to establish a prima facie case and directed a deposit of Rs.1 lakh, waiving the balance amount pending appeal.

Overall, the Tribunal upheld the Commissioner's decision, emphasizing the need for the appellant to demonstrate that the service tax element was not passed on to customers to be eligible for a refund. The Tribunal's decision rested on the principle of unjust enrichment and the interpretation of inclusive service tax in the contract charges.