2017 (8) TMI 521 - HC - Service Tax

Refund of service tax - rejection on the ground of time limitation and unjust enrichment - Circular dated 23rd March 2004 - The appellant is relying upon the Circular dated 23rd March 2004 to suggest that pursuant to the said Circular, he got the knowledge that the appellant is no liable to pay service tax and still that service tax was being paid by the appellant - Held that - similar issue decided in the case of HINDUSTAN COCOA PRODUCTS Versus UNION OF INDIA 1994 (6) TMI 18 - HIGH COURT OF JUDICATURE AT BOMBAY , where it was held that in case the claim for refund would have been filed after lapse of one year of the issuance of the Circular. The Circular is only clarificatory in nature. As such, there is no question of its prospective or retrospective operation. Unjust enrichment - Held that - The rejection of the claim on the ground of unjust enrichment is without reason. It is expected of the Authority to probe into the matter and give reasons. The order rejecting the claim on the ground of unjust enrichment is bereft of any reason, only on the ground that there is an agreement wherein it is contended that consideration is inclusive of all taxes, the said presumption is drawn - matter on remand. Appeal allowed in part and part matter on remand.

Summary

Issues:
1. Rejection of refund claims on the grounds of limitation and unjust enrichment.

Analysis:
1. The appellant contested the rejection of the refund claims amounting to ?14,97,334 and ?5,31,607. The first claim was rejected due to limitation, while the second claim was denied on the basis of unjust enrichment.

2. The appellant argued that the limitation rejection was unjust as they paid service tax under a mistaken belief, rectified upon receiving a circular in July 2004. The court referred to relevant judgments to support the appellant's case, emphasizing that the circular did not have retrospective or prospective operation, and the appellant was not liable to pay the service tax.

3. Regarding the claim rejected for unjust enrichment, the appellant asserted that the consideration amount in the agreement was inclusive of all taxes, but there was no evidence that the burden of service tax payment was passed on to the other party. The court found the rejection lacking reasoning and ordered a further probe into the matter.

4. The court quashed the impugned orders, deeming both refund claims within limitation. The Deputy Commissioner of Service Tax was directed to reconsider the claims on their merits expeditiously, with the appellant given an opportunity to present their case on unjust enrichment. The appeal was allowed without costs.