2019 (1) TMI 7 - AT - Service Tax

Refund of service tax paid - services provided to the Ministry of Defence - rejection on the ground of unjust enrichment - Held that - As per Section 11B(2)(e), the person who has borne the tax, can file the refund claim. Admittedly, this refund claim has been filed by the appellant on persuasion of the service recipient vide letter dt. 17.10.2016 - the service recipient has directed the appellant to file refund claim on their behalf under section 11B(2)(e) of the Central Excise Act, 1944. In these circumstances, the refund of the service tax paid by the appellant for which no service tax is payable, the appellant is entitled to file the refund claim on behalf of service recipient. As the appellant has paid the said amount of the service tax from the service recipient and as per the request of the service recipient, the same is required to be deposited in the account of service recipient. Therefore, the said refund is to be given to the service recipient only. Refund of interest paid by them on late payment of the service tax - Held that - In the application of refund, the appellant has not claimed the refund of any interest; therefore, refund claim of interest cannot be entertained at this stage - further, at the time of payment of service tax with a delay, the appellant was required to pay service tax. In these circumstances also, the appellant can not claim the refund of interest. Appeal allowed in part.

Summary

Issues:
Refund claim rejection on the ground of unjust enrichment.

Analysis:
The appellant, a service provider to a Ministry of Defence entity, filed a refund claim for service tax paid on services provided, which became exempt retrospectively. The claim was rejected citing unjust enrichment, as the Ministry of Defence had paid the service tax to the appellant, who then passed on the burden to the service recipient. The appellant argued that the Ministry of Defence directed them to file the refund claim on their behalf and requested the refund be credited to the service recipient's account. The appellant contended that since they were not required to pay the service tax, the interest paid should be refunded as well.

On considering both parties' submissions, it was noted that the refund claim was filed at the service recipient's behest, as per Section 11B(2)(e) of the Central Excise Act, 1944. The letter from the service recipient directed the appellant to claim the refund on their behalf, indicating that the service recipient should receive the refund. Therefore, the service recipient was deemed entitled to the refund, and the appellant was directed to provide the recipient's details for the refund to be sanctioned within 30 days. However, the claim for refund of interest paid by the appellant was not entertained as it was not mentioned in the refund application.

Additionally, it was observed that the appellant could not claim a refund of interest paid on late service tax payment, as they were required to pay the tax with a delay. Consequently, the appeal was partly allowed, granting the service recipient the refund of the service tax amount, while dismissing the claim for interest refund due to late payment of service tax.