2009 (3) TMI 160 - AT - Service Tax

Refund of erroneous payment of service tax held that - refund was rejected on the ground of unjust enrichment as well as on merits. The Commissioner (Appeals) proceeded on the basis of Board Circular F. No. 332/35/2006-DRU dated 1-8-2006. The appellants in their written submissions stated that by Board s Circular dated 29-1-2009, it is clarified that no tax is leviable on them. We have noticed that the refund was also rejected on the ground of unjust enrichment as the appellant failed to produce any evidence that the incidence of duty has not been passed on to any other person. In the written submissions, it is contended by the appellant that the amount was paid by them and it was not recovered from the customers. In support of their contention, they placed audited financial statement for financial year 2006-2007, where it was indicated that the amount was not recovered from any customer. Matter remanded for examination.

Summary

Issues involved: Service tax refund claim rejection based on unjust enrichment and merits, interpretation of Board Circulars, evidence of tax not passed on to customers.

Analysis:
1. Service tax refund rejection: The appellants, engaged in constructing residential houses/flats, filed a refund claim stating that no tax was liable to be paid on them, citing a Board Circular. The refund was rejected on grounds of unjust enrichment and merits. The Commissioner (Appeals) relied on a different Board Circular, leading to a discrepancy. The Tribunal found it necessary to examine the matter on merit and unjust enrichment based on the Board's Circular and evidence provided by the appellant.

2. Unjust enrichment: The refund rejection was also based on unjust enrichment, as the appellant failed to prove that the duty incidence was not passed on to any other person. The appellant argued that the amount was paid by them and not recovered from customers, supported by audited financial statements for the relevant period. The Tribunal acknowledged this contention and directed the appellant to produce further evidence to support their claim of unjust enrichment.

3. Remand and further proceedings: In light of the discrepancies in Circular interpretations and the evidence provided by the appellant, the Tribunal set aside the impugned orders and remanded the matter back to the Original Authority for a fresh decision. The Original Authority was instructed to consider the Board's Circular and the appellant's submissions, particularly regarding unjust enrichment, and provide a proper opportunity for a hearing before making a decision. Ultimately, all the appeals were allowed by way of remand for further examination.

This detailed analysis of the judgment highlights the key issues of service tax refund rejection, unjust enrichment, interpretation of Board Circulars, and the need for additional evidence to support the appellant's claim. The Tribunal's decision to remand the matter for further consideration ensures a fair and thorough examination of the case in accordance with the law and relevant circulars.