2017 (5) TMI 186 - AT - Service Tax

Refund claim - unutilized input service credit - Rule 5 of CCR 2004 read with N/N. 5/2006-CE dated 14.3.2006 - unjust enrichment - Held that - it has been clearly held that the principle of unjust enrichment is not applicable in the export of services - the impugned order has clearly travelled beyond the show-cause notice and the Order-in-Original and the appellant has been put into a worse off situation than originally he was because of the Order-in-Appeal - appeals are allowed by way remand to the original authority to decide and quantify the refund claim - matter remanded.

Summary

Issues:
- Refund of CENVAT credit on input service taxes for exported services.
- Application of the doctrine of unjust enrichment.
- Scope of show-cause notices and Orders-in-Original.
- Applicability of Section 11B of the Central Excise Act, 1944.
- Legal principles regarding refund claims in cases of export of services.

Analysis:
1. Refund of CENVAT Credit: The appellants, engaged in providing IT enabled services to group entities outside India, sought a refund of unutilized CENVAT credit on taxable input services exported. The refund claims were rejected due to various reasons, including non-submission of required documents and erroneous claims. The Commissioner (A) set aside the Orders-in-Original and allowed the appeals by way of remand, acknowledging the refund principle but questioning the locus standii of the appellant to claim the refund amount representing CENVAT credit. The issue of reimbursement of taxes by the customer was raised, leading to the filing of appeals by the appellant against this observation.

2. Doctrine of Unjust Enrichment: The Commissioner (A) invoked the doctrine of unjust enrichment, questioning the appellant's entitlement to the refund. However, the appellant argued that unjust enrichment is not applicable in this case as per the proviso to Section 11B of the Central Excise Act, 1944. The appellant cited relevant legal provisions and decisions to support their argument that the refund should not be subject to unjust enrichment principles, especially in cases of service export. The Tribunal agreed with the appellant, finding that the Commissioner (A) wrongly applied the doctrine of unjust enrichment.

3. Scope of Show-Cause Notices and Orders: The Tribunal noted that the impugned order exceeded the scope of show-cause notices and Orders-in-Original. It emphasized that an order cannot introduce new matters not mentioned in the show-cause notice. Citing legal precedents, the Tribunal held that the appellant cannot be put in a worse position due to an appeal, emphasizing the importance of adhering to the issues raised in the original proceedings.

4. Applicability of Section 11B: The Tribunal analyzed Section 11B of the Central Excise Act, 1944, which governs refund claims. It noted that the proviso to Section 11B(2) creates exceptions for refund claims, particularly in cases of exported goods or services. Relying on legal decisions, the Tribunal concluded that the principle of unjust enrichment does not apply to export of services, supporting the appellant's argument against the Commissioner's findings.

5. Remand and Decision: Considering the arguments and legal principles presented, the Tribunal found the impugned order unsustainable in law. It set aside the order and remanded the case to the original authority for a fresh decision on the refund claim. The Tribunal directed the original authority to consider the appellant's submissions, relevant legal decisions, and supporting documents within three months from the date of the order, ensuring a fair assessment of the refund claim in accordance with the law.

This detailed analysis of the judgment highlights the key issues, legal arguments, and the Tribunal's decision, providing a comprehensive overview of the case.