2013 (12) TMI 798 - AT - Service Tax

Denial of refund claim - Refund of excess tax paid - Held that - ledgers which are the subject matters and which are the cause for excess payment had not been produced before the Commissioner and he has seen these ledgers and he has satisfied himself after going through the ledgers that excess payment has been made and that as submitted the entire amount of commission received was received as cum-tax receipt and tax was paid by the Bank and therefore the question of excess recovery may not arise. According to Deputy Commissioner, the appellant has been able to show effectively that the excess service tax has been paid and the same has not been collected and after going through the general ledger account and other relevant documents, ST-3 returns and TR6 challans, he has recorded a finding that there was no unjust enrichment. He has also recorded that excess payments were reflected as receipts in the general ledger account and there was no corresponding debit entries in the name of any of their customers. Therefore, the incidence of tax was not passed on to any other person. Procedure adopted by the original adjudicating authority while adjudicating the second show-cause notice cannot be found fault with, even though it may not be appropriate to take it as a basis for coming to the conclusion in favour of the appellant but it can definitely be taken note of. Since the departmental officer has verified records and has come to the conclusion and I am also satisfied that this kind of a situation cannot lead to unjust enrichment, I consider that the appeal can be allowed - Decided in favour of assessee.

Summary

Issues:
1. Calculation of service tax leading to excess payment.
2. Refund claim and unjust enrichment.
3. Contradictory orders by different authorities.
4. Jurisdiction of the Tribunal.

Issue 1: Calculation of service tax leading to excess payment
The case involved a Branch of a Bank in Andhra Pradesh that made a mistake in calculating service tax, resulting in excess payment. The Branch charged commission inclusive of service tax without separately mentioning the service tax amount in their ledgers. The mistake occurred when the Branch paid service tax on the cumulative amount instead of the commission received during the month. An internal audit team noticed the error, and a refund claim of Rs.1,41,528/- was made and initially sanctioned. However, the Commissioner issued a show-cause notice under Section 84 of the Finance Act 1994, claiming unjust enrichment and demanded repayment of the refund. The appellant argued it was a clerical error and provided a Chartered Accountant's certificate to support their claim that no unjust enrichment occurred.

Issue 2: Refund claim and unjust enrichment
The original adjudicating authority also issued a show-cause notice under Section 11A of the Central Excise Act, 1944, questioning the refund claim on the grounds of unjust enrichment. Subsequently, the Deputy Commissioner reviewed the matter and sanctioned the refund again, stating that the excess service tax was paid and not collected, thus no unjust enrichment occurred. The Deputy Commissioner examined the ledgers and relevant documents, finding no evidence of passing on the tax incidence to any other person. The Tribunal noted the difficulties faced by the Bank in documenting such specific amounts due to its size and operations, making it impractical to show evidence of unjust enrichment in the balance sheet or annual report.

Issue 3: Contradictory orders by different authorities
The Tribunal highlighted the conflicting orders issued by the Commissioner and the Deputy Commissioner, leading to parallel litigation on the same issue. The Deputy Commissioner's order contradicted the Commissioner's stance on unjust enrichment, creating confusion and reflecting poorly on the Department's supervision and management. Despite the conflicting orders, the Tribunal acknowledged that it was not within its purview to address such administrative issues.

Issue 4: Jurisdiction of the Tribunal
The Tribunal emphasized that while it was not its role to resolve administrative problems within the Department, it considered the Deputy Commissioner's findings and observations regarding the lack of unjust enrichment in the case. The Tribunal ultimately allowed the appeal, noting that the Bank had effectively demonstrated that excess service tax was paid and not passed on to customers, thereby justifying the refund claim. The Tribunal's decision was based on the Deputy Commissioner's thorough examination of the records and the absence of evidence indicating unjust enrichment, leading to the allowance of the appeal.