2014 (7) TMI 891 - HC - Service Tax

Clim of refund by the recipient of services - excess service tax was paid by the service provider - difference due to downgrade revision in price - unjust enrichment - period of limitation - The case of the revenue was that it was the service provider, namely RGTIL which alone was entitled to file a claim before the Commissionerate concerned and RGTIL had recovered the service tax amount from various recipients. - Held that - once the finding of the adjudicating authority that the claim for refund was filed within the period of limitation of one year under Section 11B was not challenged by the revenue before the first appellate authority, such a ground cannot be urged for the first time in an appeal before this Court. As a matter of fact, the ground was not even urged in the form of a cross objection before the Tribunal. The assessee is the recipient of the taxable service provided by RGTIL and had borne the incidence of service tax. Hence, the assessee is entitled to claim a refund of excess service tax paid consequent upon the downward revision of the transmission charges payable by the assessee to RGTIL in terms of the determination made by the Regulatory Board. The fact that the assessee has not passed on the burden has been amply established in the order of the adjudicating authority. - no merit in the case of revenue - Decided against the revenue.

Summary

Issues:
1. Refund claim under Section 11B of the Central Excise Act, 1944.
2. Consideration of limitation and unjust enrichment in allowing the refund.

Issue 1: Refund claim under Section 11B of the Central Excise Act, 1944:
The appeal arose from the decision of the CESTAT granting the refund claim of the assessee amounting to Rs. 16,99,714 under Section 11B of the Central Excise Act, 1944. The assessee purchased natural gas through a pipeline from a statutory body-fixed transmission charges. The initial tariff was revised downward, leading to excess charges collected by the service provider. The assessee applied for a refund of the proportionate service tax remitted due to the tariff revision. The Assistant Commissioner initially rejected the refund application on jurisdictional grounds, but the refund was later sanctioned by the Assistant Commissioner, Bareilly. The Commissioner (Appeals) reversed this, stating only the service provider could file a claim. However, following Supreme Court precedent, the Tribunal allowed the refund claim, emphasizing that the assessee bore the burden of service tax and was entitled to the refund application.

Issue 2: Consideration of limitation and unjust enrichment in allowing the refund:
The revenue raised two questions of law: whether the refund was allowed without considering the limitation under Section 11B and whether the refund application was barred by unjust enrichment. The revenue did not challenge the finding that the claim was within the one-year limitation period before the Commissioner (Appeals). The Tribunal correctly followed the principle that the burden of duty must not have been passed on for a refund claim to succeed. The Tribunal found that the assessee, as the service recipient, had borne the service tax burden and was entitled to the refund. The revenue's objection to the maintenance of the refund application by the assessee was not substantiated, and the finding of no unjust enrichment due to the exemption of the final product from excise duty was not questioned. Consequently, the appeal by the revenue was dismissed as it did not raise any substantial question of law.

In conclusion, the High Court upheld the Tribunal's decision, emphasizing the assessee's entitlement to the refund claim under Section 11B of the Central Excise Act, 1944, and rejecting the revenue's challenges regarding limitation and unjust enrichment. The judgment highlighted the importance of not passing on the burden of duty for a refund claim to be valid and affirmed the Tribunal's correct application of this principle in the case at hand.