2013 (4) TMI 612 - AT - Service Tax

Refund claim - unjust enrichment - Erection, Commission and Installation services - Held that - It is undisputed that the first appellate authority has come to the conclusion that the appellant is eligible for the refund of the amount paid by him during the observation by the audit party. As regards the unjust enrichment, the contentions of counsel needs to be considered by the lower authorities in as much as having been out of business from 2008, appellant would not have passed on the service tax liability to any customer. On this factual matrix, since there is no evidence, this issue cannot be decided. Accordingly, holding that the lower authorities are required to pass an order on the question of unjust enrichment as per the facts put up by the ld. counsel, portion of the impugned order is set aside and remand the matter back to the adjudicating authority to consider the issue of granting refund to the appellant after ascertaining the claim of the appellant regarding the closure of the business and there cannot be any passing of the service tax liability.

Summary

Issues involved: Refund claim based on unjust enrichment.

Analysis:
The appeal in this case concerns a refund claim made by the appellant due to an alleged mistake in reconciliation of service tax returns. The appellants, engaged in the service category of "Erection, Commission and Installation," applied for a refund of Rs.50,692, citing excessive/double payment of service tax. The audit party had identified a shortfall in service tax payment for the years 2006-07 and 2007-08, which the appellants rectified by paying Rs.39,113 along with interest. However, upon subsequent reconciliation, it was discovered that the amount paid may not have been due. The refund claim was initially rejected by the adjudicating authority, leading to an appeal by the appellant.

The first appellate authority acknowledged the potential eligibility for a refund but raised concerns about unjust enrichment, directing the amount to be credited to the consumer welfare fund. The appellant's counsel argued that due to the closure of the business in 2008, there was no possibility of passing on the service tax liability to customers. This crucial aspect was not highlighted before the lower authorities, impacting the decision-making process.

Upon review, the tribunal found that the primary issue revolved around the rejection of the refund claim based on unjust enrichment. While the appellant was deemed eligible for a refund by the first appellate authority, the question of unjust enrichment needed further examination in light of the business closure in 2008. The tribunal emphasized the importance of considering the appellant's claim regarding the closure of the business and the impossibility of passing on the service tax liability. Consequently, the tribunal set aside the previous order and remanded the matter to the adjudicating authority for a fresh decision, emphasizing the need for a thorough assessment of the unjust enrichment aspect and adherence to principles of natural justice.

In conclusion, the tribunal disposed of the appeal by remanding the case for a detailed review focusing on the unjust enrichment issue and the impact of business closure on the service tax liability, underscoring the necessity for a fair and comprehensive determination by the adjudicating authority.