2019 (5) TMI 719 - AT - Service Tax

Refund of service tax paid - principles of unjust enrichment - amount credit on Consumer Welfare Fund on the ground that the financial records of the appellant for the period 2012-2013 and 2013-14 show that the amount under claim of refund has been treated as expense and thereby passed on the effect of the amount of service tax to their customers - HELD THAT - In the present case, the Doctrine of Unjust Enrichment is not applicable because the Range Officer after verifying the records of the appellant has filed a report wherein he has categorically stated that the appellant has not collected the service tax from the service recipient and the aspect of unjust enrichment is absent in the present case. Further, the original authority as well as the appellate authority has come to the conclusion that since the appellant has shown the amount of refund as expenses in the Profit and Loss Account and thereby they have passed on to its customers. This issue has been considered by the Madras High Court in the case of COMMISSIONER OF C. EX., COIMBATORE VERSUS FLOW TECH POWER 2006 (1) TMI 37 - HIGH COURT OF JUDICATURE (MADRAS) , and it has come to the conclusion that the unjust enrichment is not applicable even when the refund amount is claimed as expenses in the Profit and Loss Account. Refund allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Whether the refund claim of the appellant is hit by the Doctrine of Unjust Enrichment?
- Whether the appellant passed on the service tax to its customers?
- Whether the impugned order rejecting the refund claim of the appellant is sustainable in law?

Analysis:
1. Doctrine of Unjust Enrichment:
The appellant filed a refund claim after a High Court decision holding the levy of service tax on 'Restaurant Services' and 'Short-term Accommodation Services' beyond legislative competence. The refund was credited to the Consumer Welfare Fund based on unjust enrichment. However, the Range Officer confirmed that the appellant did not collect service tax from customers, negating unjust enrichment. The appellate authority concluded that since the refund amount was shown as expenses, the appellant passed on the tax. Yet, the Madras High Court and other tribunal decisions held that unjust enrichment does not apply when refund amounts are treated as expenses.

2. Passing on of Service Tax:
The appellant argued that they did not pass on the service tax to customers, supported by the Range Officer's report. The appellate authority and the Revenue contended that showing the refund amount as expenses indicated passing on the tax. The Madras High Court precedent and tribunal decisions supported the appellant's stance that showing refunds as expenses does not imply passing on the tax. The Revenue's reliance on a case was deemed inapplicable as the appellant demonstrated not passing on the tax incidence.

3. Sustainability of the Impugned Order:
The impugned order rejecting the refund claim was challenged on legal grounds. The appellant asserted that the order did not consider facts and law properly, especially regarding unjust enrichment. The Revenue defended the order, citing pending appeals and the treatment of refund amounts as expenses. Ultimately, the Tribunal found the impugned order unsustainable based on the Madras High Court decision's reasoning, setting it aside and allowing the appellant's appeal with consequential relief.

This detailed analysis of the judgment highlights the key legal issues, arguments presented by both parties, and the Tribunal's decision based on legal principles and precedents cited.