2017 (11) TMI 535 - AT - Service Tax

Refund claim - appellant prays that same transaction having been doubly taxed, firstly, in the hands of the service provider and secondly, in the hands of the service recipient, appellant is entitled to refund of the amounts so doubly paid - Held that - Once, tax was paid by service provider and later by the service recipient. State has been doubly benefited. Therefore, recourse available to the State is to refund the money not due to the State. It is established principle of law that any amount not due to the State is not collectible - The doctrine of unjust enrichment equally applies to the State. It is directed that the appellant should be refunded of the amount paid by service provider to the appellant - Since there is double payment and the liability was of the appellant, the appellant should not be denied Cenvat credit. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Appellant's entitlement to refund of double taxation on service tax.
2. Dispute regarding the denial of refund by Revenue.

Analysis:
1. The appellant, a recipient of manpower services, initially claimed Cenvat credit for service tax paid based on invoices from the service provider. However, upon realizing that its liability was limited to 75% of the service tax and should have been paid by the service recipient, the appellant paid the correct amount with interest. The appellant contended that the same transaction was doubly taxed, first by the service provider and then by the service recipient, justifying a refund of the excess amount paid. The Tribunal acknowledged the double taxation issue and the appellant's compliance with the correct liability, citing legal precedents emphasizing that amounts not due to the State should be refunded. The Tribunal also noted the service provider's no objection for the refund, directing that the appellant be refunded the amount paid by the service provider. It was emphasized that the appellant should ensure the service provider does not claim the refund, given the no objection provided. Additionally, the Tribunal clarified that since there was double payment and the liability rested with the appellant, the appellant should not be denied Cenvat credit.

2. The Revenue contended that the denial of the refund was justified. However, the Tribunal, after hearing both sides and examining the show cause notice, found in favor of the appellant. The Tribunal highlighted the principle of unjust enrichment, stating that the State should refund money not rightfully due to it. Legal precedents and the doctrine of unjust enrichment were cited to support the decision to grant the refund to the appellant. The Tribunal's decision was based on the fact that the same service had been taxed twice, leading to the conclusion that the State should rectify the overpayment by refunding the excess amount. The Tribunal's ruling allowed the appeal, providing specific directions for the refund and emphasizing the appellant's entitlement to the refund due to the double taxation issue and the correct liability position established during the proceedings.