2016 (6) TMI 779 - AT - Service Tax

Claim of refund of service tax amount which was not required to be paid by appellant as per law - Unjust enrichment - claim of expenditure in the profit and loss account - Held that - The excess amount paid is not in dispute. Further it is to be borne in mind that the appellant is liable to pay service tax for the transactions on the basis of reverse charge mechanism. So there is no question of the incidence of duty/tax being passed on to another. Without an iota of incidence the Commissioner (Appeals) has concluded that the refund is hit by unjust enrichment merely because the amount was said to be shown as expenditure. The constraints faced in accounting cannot be a ground to assume that the duty has been passed on to another. The appellant also produced Chartered Accountant certificate. - the refund amount is not hit by the doctrine of unjust enrichment. The order directing to credit the sanctioned amount to Consumer Welfare Fund is not sustainable and therefore set aside. - Decided in favor of assessee.

Summary

Issues: Refund directed to be credited to Consumer Welfare Fund on grounds of unjust enrichment.

Analysis:
1. The appellant, engaged in manufacturing and availing credit of service tax, was issued a show cause notice for payment of service tax under the category of Business Auxiliary Service (BAS) for commission paid to foreign agents. The original authority confirmed the demand, which was later partially set aside by the Commissioner (Appeals) to be payable only from a specific date.

2. Upon the appellant's request for a refund of interest paid on the service tax amount set aside by the Commissioner (Appeals), the original authority sanctioned a partial refund. However, the department appealed against the refund, claiming unjust enrichment, as the appellant had shown the refund amount as expenditure in their books of account.

3. The main issue revolved around whether the appellant was eligible for a refund of the interest paid on the service tax amount not required to be paid as per law. The Commissioner (Appeals) directed the sanctioned refund to be credited to the Consumer Welfare Fund due to the assumption that the duty had been passed on to another based on the accounting treatment of the refund amount.

4. The appellant argued that the duty had not been passed on to another and provided a Chartered Accountant certificate to support their claim. The Tribunal referred to previous judgments where similar issues were decided in favor of the assessee, emphasizing that accounting constraints cannot be a basis to assume unjust enrichment.

5. After considering the arguments and precedents, the Tribunal held that the refund amount was not hit by the doctrine of unjust enrichment. The order directing the amount to be credited to the Consumer Welfare Fund was set aside, and the appellant was deemed eligible to receive the sanctioned amount as a refund.

6. In conclusion, the impugned order directing the refund to be credited to the Consumer Welfare Fund was set aside, and the appeal was allowed in favor of the appellant with consequential reliefs, if any.