2019 (4) TMI 1966 - AT - Service Tax

Refund of service tax - doctrine of unjust enrichment duly complied with or not - appellant had not charged the tax element in the profit and loss account as an expenditure and that no amount was payable by the appellant to various service providers - section 87 of FA - HELD THAT - The learned Commissioner (Appeals) has modified the adjudication order, without proper examination of the issue, whether the refund amount in question had actually been charged to the profit and loss account or not. Further, the amounts payable to various service providers, in order to attract the provisions of Section 87 ibid have also not been addressed properly with the help of the documentary evidences. Furthermore, it is also observed that the submissions made by the appellant were not addressed in effective manner for adjudication of the dispute. Therefore, the issues involved in this case are required to be reconsidered by the learned Commissioner (Appeals) for arriving at a proper conclusion, whether or not the appellant should be entitled for refund benefit. The matter is remanded to the learned Commissioner (Appeals) for deciding the issues afresh - Appeal allowed by way of remand.

Summary

Issues Involved:
Refund of service tax paid under Reverse Charge Mechanism; Doctrine of unjust enrichment; Appropriation of refund amount under Section 87(b) of the Finance Act, 1994.

Refund of Service Tax Paid:
The appellant had paid service tax on importation of services under Reverse Charge Mechanism for the period October 2002 to December 2004. The Tribunal had earlier allowed the appeal, stating that the appellant was not liable to pay service tax for the mentioned period. The original authority sanctioned the refund claimed by the appellant, but the amount was appropriated under Section 87(b) of the Finance Act, 1994 due to past service tax liabilities of some service providers. The Commissioner (Appeals) modified the adjudication order, holding that the refund amount was hit by the doctrine of unjust enrichment, and thus, could not be sanctioned in favor of the appellant.

Doctrine of Unjust Enrichment:
The appellant argued that the doctrine of unjust enrichment did not apply to their case as they had not charged the tax element in the profit and loss account, and no amount was payable to various service providers. They contended that since the disputed service tax amount was treated as work-in-process and not debited to the profit and loss account, they should be entitled to the refund benefit. The appellant also claimed that the doctrine of unjust enrichment did not apply to the interest amount paid by them.

Appropriation under Section 87(b) of the Finance Act, 1994:
The impugned order held that the refund amount could not be appropriated under Section 87(b) as it was ordered to be credited to the Consumer Welfare Fund, making the appellant ineligible to benefit from the refund amount. The Tribunal set aside the impugned order, remanding the matter to the Commissioner (Appeals) for proper examination of whether the refund amount was charged to the profit and loss account and if the appellant should be entitled to the refund benefit. The Commissioner (Appeals) was directed to reconsider the issues involved and provide the appellant with an opportunity of personal hearing before deciding afresh.

This judgment delves into the complexities of service tax refund under Reverse Charge Mechanism, the application of the doctrine of unjust enrichment, and the appropriation of refund amounts under relevant legal provisions. The Tribunal's decision to remand the matter for further examination highlights the importance of thorough consideration of all aspects before reaching a conclusion in tax refund cases.