2017 (10) TMI 664 - HC - Service Tax

Refund of Service Tax erroneously paid - unjust enrichment - the service tax was erroneously paid on gross amount of bills before the discount was allowed of 15% on the gross bill irrespective of the discount allowed to the advertisements - Denial of refund on the ground that the respondent has failed to furnish documents to establish that the amount of service tax for which the refund is claimed has been collected by the respondent from its clients and that incidence of such tax has not been passed on to any other person - Rule 6 of the Service Tax Rules. Held that - There is no finding recorded by the Appellate Tribunal that M/s.Emami Limited did not pass on incidence of service tax on the 15% amount to its customers or buyers of the products. The burden was on the respondent to establish that M/s.Emami has not passed on the incidence of service tax to any other person including its customers or purchasers of the products. Thus, even going by the finding of fact recorded by the Appellate Tribunal and the finding of fact recorded by the Deputy Commissioner, the respondent did not establish that the incidence of service tax has not been passed by M/s.Emami Limited to any other person. The finding recorded by the Commissioner (Appeals) has not been disturbed by the Appellate Tribunal. Appeal allowed - decided in favor of Revenue.

Summary

Issues:
1. Refund claim of service tax paid erroneously on gross amount before discount.
2. Allegation of passing on the burden of excess service tax to clients.
3. Adjudication by Deputy Commissioner and Commissioner of Central Excise.
4. Appeal before Customs, Excise and Service Tax Appellate Tribunal.
5. Substantial questions of law regarding refund entitlement and unjust enrichment.
6. Interpretation of Rule 6 of Service Tax Rules and Section 11B of Central Excise Act.
7. Burden of proof on the respondent regarding passing on the incidence of service tax.
8. Findings of Deputy Commissioner, Commissioner of Central Excise, and Appellate Tribunal.

Analysis:
The case involved a refund claim by the respondent for service tax paid erroneously on the gross amount before discount. The Deputy Commissioner adjudicated the claim, finding no unjust enrichment based on credit notes and ledger accounts. However, the Commissioner of Central Excise issued show cause cum demand notices, alleging passing on the excess tax burden to clients. The Commissioner held that the refund claims were erroneously allowed as the respondent failed to prove non-passing of tax burden. The Appellate Tribunal later allowed the respondent's appeal, restoring the refund orders. The substantial questions of law raised included issues of refund entitlement under Rule 6 of Service Tax Rules and unjust enrichment under Section 11B of the Central Excise Act. The appellant argued that the burden of proof regarding non-passing of tax burden was not discharged by the respondent, citing a Supreme Court decision. The Court examined the Apex Court's decision and found that the respondent failed to establish non-passing of tax burden to clients. The findings of the Deputy Commissioner and Commissioner of Central Excise were upheld, leading to the setting aside of the Appellate Tribunal's order and restoration of the Commissioner's decision.