2018 (1) TMI 308 - AT - Service Tax

Refund of excess service tax paid - unjust enrichment - Held that - the excess amount paid by the appellant is from the own pocket and not recovered separately from the service recipient. In that circumstances, bar of unjust enrichment is not applicable. Time limitation - Held that - The excess amount paid by the appellant is not service tax as it is not legally payable by the appellant. In that circumstances, the excess amount paid by the appellant does not invoke provision of Section 11B of the Act - the limitation is not applicable. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Denial of refund claim by the impugned orders.
2. Applicability of bar of unjust enrichment.
3. Applicability of Section 11B of the Act.
4. Issue of limitation regarding the refund claim.

Analysis:
The appellants filed appeals against orders denying their refund claim. The case involved the execution of works contracts where the appellant received a cum tax price. The service tax rate was reduced from 12.36% to 10.3% during the relevant period. The appellant inadvertently paid tax at the higher rate and sought a refund. The adjudicating authority partially allowed the claim, but the Commissioner (Appeals) rejected it citing unjust enrichment and time bar. The main contention was whether the excess amount paid by the appellant was recoverable and whether the bar of unjust enrichment applied.

The appellant argued that since the service price was inclusive of tax, they were required to pay the applicable rate during the period, which was 10.3%. They contended that the excess amount was not legally due and should be refunded without invoking Section 11B of the Act or the bar of unjust enrichment. On the other hand, the respondent argued that the appellant voluntarily paid tax at 12.36% and failed to provide evidence that the excess amount was not recovered from the service recipient.

The Tribunal noted that the works executed were cum tax price, and the service tax rate was not specified in the agreement. It held that the excess amount paid by the appellant was from their own pocket and not recovered separately. Therefore, the bar of unjust enrichment was deemed inapplicable in this scenario. Regarding the issue of limitation, it was found that the excess amount paid was not legally due as per the correct tax rate. Consequently, Section 11B of the Act was not triggered, and the limitation did not apply. As a result, the impugned orders denying the refund claim were set aside, and the appeals were allowed with consequential relief.

In conclusion, the Tribunal ruled in favor of the appellant, emphasizing that the excess tax paid was not recoverable under the provisions of unjust enrichment or Section 11B of the Act due to the inadvertent payment at a higher rate than legally required.