2012 (11) TMI 866 - AT - Service Tax

Refund of service tax unjust enrichment Under the impression that he had to pay service tax, he made a remittance of Rs. 2,13,360 - But before filing the return, he realized that he was eligible for the exemption for the small service provider as provided under Notification No. 6/2005-S.T. Held that - Disputed amount has not been realized as service tax from the person to whom service is provided - appellant had not filed a service tax return and the amount deposited in the tax account of the Government becomes payment towards service tax only when return is filed - it is a strictly not a refund of service tax paid - neither tax has been passed on as tax nor the amount has been shown in return as paid towards tax. What has happened is only remittance of a higher amount to the bank for credit to service tax account - unjust enrichment is not involved in this case and the amount is to be refunded to the appellant. - refund allowed - decided in favor of assessee.

Summary

Issues:
- Whether the appellant is eligible for a refund claim under the small service provider exemption?
- Whether unjust enrichment is involved in the refund claim?
- Whether the appellant passed on the service tax burden to the recipient of the service?
- Whether the appellant's entries in the profit and loss account indicate passing on the tax incidence?
- Whether the appellant's realization from the recipient of service was lower than the cum tax value?
- Whether the appellant's payment can be considered as a deposit and subject to the principle of unjust enrichment?

Analysis:

1. Eligibility for Refund Claim under Small Service Provider Exemption:
The appellant provided "Management Consultancy Service" to a company and remitted an amount as service tax. However, realizing eligibility for the small service provider exemption, the appellant claimed an excess payment and filed a refund claim. The Revenue contended that the appellant could not withdraw the option not to avail the exemption once exercised. The appellant argued that the relevant contract specified that he bore the service tax, supported by a certificate from the company stating no reimbursement for service tax. The appellant's actions, such as not making payments and not getting registered, indicated availing the exemption.

2. Unjust Enrichment and Passing on the Tax Incidence:
The Revenue argued unjust enrichment due to the burden of proof on the appellant regarding passing on the tax incidence. They claimed that the appellant's profit and loss entries and charging the recipient inclusive of tax supported this argument. However, the appellant contended that the remittance reflected as expenditure did not prove passing on the incidence. The appellant's higher remittance amount was not conclusive evidence of intention to pass on the liability.

3. Realization and Deposit Consideration for Unjust Enrichment:
The Revenue contended that the appellant's realization from the recipient was lower than the cum tax value, leading to unjust enrichment upon refund. The appellant referenced a case law stating that inclusive contract rates do not necessarily indicate passing on the tax. The appellant argued that the remittance to the bank did not constitute passing on the tax as it was not realized from the recipient and not shown in the return as paid towards tax.

4. Judgment and Conclusion:
The Tribunal considered both sides' arguments and found that the disputed amount was not realized as service tax from the service recipient. Since the amount was not shown in the return as paid towards tax and was only remitted to the bank, the Tribunal concluded that unjust enrichment was not involved. Therefore, the Tribunal allowed the appeal, stating that the amount should be refunded to the appellant.

(Order dictated and pronounced in the open Court)