2014 (1) TMI 411 - AT - Service Tax

Rejection of refund claim - Demand under Business Auxiliary Service - Job work where principal is liable to pay excise duty - Unjust enrichment - Notification 214/86-CE - Held that - activity undertaken by the appellant is in respect of machining and flame hardening on forgings and castings received from the principal manufacturer. The appellants are working under the provisions of Notification 214/86-CE. In the show-cause notice the fact is admitted. The activity undertaken by the appellant is a part of manufacturing process and the principal manufacturer was paying duty on the goods processed by the appellants. Therefore we find that the appellants are not liable to pay service tax under the Business Auxiliary Service during this period. In respect of unjust enrichment, we find that the appellant admitted the fact that though the amount of service tax was shown in the invoice but not received by them. In view of the above facts, we find the matter requires reconsideration by the adjudicating authority regarding unjust enrichment. The issue & unjust enrichment is remanded back to the adjudicating authority for consideration and to decide afresh after affording an opportunity of hearing to the appellant - Decided in favour of assessee.

Summary

Issues:
- Appeal against rejection of refund claim on merit and unjust enrichment.

Analysis:
- The appellant appealed against the impugned order where the Commissioner (Appeals) upheld the rejection of the refund claim on merit and unjust enrichment. The appellant contended that they paid service tax under "Business Auxiliary Service" for activities related to machining and flame hardening on forgings and castings received from the principal manufacturer, cleared under job work challans. They argued that since the activity was part of the manufacturing process, they were not liable to pay service tax. Regarding unjust enrichment, they claimed that although they invoiced customers for service tax, the principal manufacturer did not pay, and credit notes were issued for accounting purposes only.

- The Revenue supported the lower authorities' findings, arguing that since the appellant showed the service tax amount separately on invoices, the burden of proof was on the appellant to demonstrate that the tax burden was not passed on to consumers. However, the appellant failed to prove through their Books of Accounts that they did not receive the service tax amount. Therefore, the impugned order was deemed appropriate by the Revenue.

- The Tribunal found that the appellant's activities of machining and flame hardening were part of the manufacturing process under Notification 240/86-CE, and the principal manufacturer was paying duty on the processed goods. Consequently, the appellants were not liable to pay service tax under Business Auxiliary Service during the period in question. Regarding unjust enrichment, the Tribunal noted that the appellant acknowledged not receiving the service tax amount despite showing it on invoices. As a result, the matter was deemed to require reconsideration by the adjudicating authority concerning unjust enrichment. The issue of unjust enrichment was remanded back to the adjudicating authority for a fresh decision after providing the appellant with an opportunity to be heard. The appeal was allowed by way of remand.