2014 (4) TMI 176 - AT - Service Tax

Denial of refund claim - foreign agency commission - Reverse charge mechanism - Unjust enrichment - Held that - There is no show cause notice issued to the appellant nor any adjudication order has been passed for appreciation of the amount. The Service Tax was paid on 20.03.2009 and the decision of Hon ble Bombay High Court in the case of Indian National Shipowners Association (2008 (12) TMI 41 - HIGH COURT OF BOMBAY) is subsequent to the deposit of the amount. In view of the law laid by Bombay High Court which is upheld by Hon ble Supreme Court, we find that the appellants are not liable to pay Service Tax in respect of the services received prior to 18.04.2006 from the foreign service provider. The Hon ble Karnataka High Court in the case of CCE Bangalore Vs KVR Constructions - 2012 (7) TMI 22 - KARNATAKA HIGH COURT held that in case the tax has been paid which is not payable under the authority of law, the same can be challenged by way of refund. Hence, on merit, the appellants are entitled for refund claim. In respect of unjust enrichment, we find that the adjudicating authority has not gone into the issue and the Commissioner (Appeals) held that the appellants have not furnished any evidence that the burden of duty has not been passed on - As the issue of unjust enrichment has not been gone into by the lower authorities, therefore the impugned order is set aside and the matter is remanded to the adjudicating authority to decide the issue of unjust enrichment - Decided in favour of assessee.

Summary

Issues:
1. Liability of Service Tax on reverse charge mechanism for services received from a foreign service provider prior to 18.04.2006.
2. Entitlement to refund claim based on the decision of Bombay High Court.
3. Application of the principle of unjust enrichment in the case.

Analysis:

Issue 1: Liability of Service Tax on reverse charge mechanism for services received from a foreign service provider prior to 18.04.2006
The appellant filed an appeal against the order passed by the Commissioner (Appeals) regarding the payment of Service Tax on foreign agency commission received from a foreign service provider. The appellant claimed that as per the decision of the Bombay High Court and subsequent circulars issued by the Board, prior to 18.04.2006, the recipient of taxable services from a foreign service provider was not liable to pay Service Tax on reverse charge mechanism. The Tribunal upheld this argument based on the legal precedents and circulars, concluding that the appellant was not liable to pay Service Tax for services received before the specified date.

Issue 2: Entitlement to refund claim based on the decision of Bombay High Court
The appellant sought a refund of the amount paid as Service Tax, relying on the decision of the Bombay High Court. The Tribunal noted that the law laid down by the High Court, which was upheld by the Supreme Court, allowed for challenging the payment of tax not due under the law through a refund claim. Citing a relevant case law, the Tribunal held that the appellants were entitled to the refund claim based on the legal position established by the courts.

Issue 3: Application of the principle of unjust enrichment
The Revenue argued that the appellant could not challenge the payment of tax merely by filing a refund claim, as they had accepted their liability initially. Additionally, the Revenue contended that the burden of duty had been passed on, invoking the principle of unjust enrichment. However, the Tribunal found that the lower authorities had not properly addressed the issue of unjust enrichment. Referring to a Supreme Court decision emphasizing the doctrine of unjust enrichment, the Tribunal set aside the impugned order and remanded the matter to the adjudicating authority to decide the issue of unjust enrichment after providing an opportunity for representation to the appellant.

In conclusion, the Tribunal ruled in favor of the appellant on the issues of liability for Service Tax, entitlement to a refund claim, and the application of the principle of unjust enrichment, highlighting the importance of legal precedents, circulars, and judicial decisions in determining tax liabilities and refund claims.