2019 (5) TMI 1026 - AT - Service Tax

Recovery of refund already granted - Commissioner (appeals) had set aside the refund order - Principles of unjust enrichment - Refund of service tax paid - passing of refunds to the service recipient - incidence of tax borne by whom - unjust enrichment - Section 11B of the Central Excise Act, 1944 made applicable to Service Tax under Section 83 of the Finance Act, 1994 - HELD THAT - Parliament has made a specific provision under Section 11B to ensure that the unjust enrichment does not take place by making a rebuttable presumption that the burden of tax has been passed on to the customer and hence the same needs to be credited to the consumer welfare fund. In this case, it is not in dispute that the burden has been passed on to the customer. The Assistant Commissioner, in his order-in-original, replaced this scheme provided for by the Parliament in Section 11B with his own scheme, viz., despite passing on the burden to the customers, refund will be granted and after taking the refund, you may return it to the customers within 30 days. There is clearly no provision for such a scheme and the Assistant Commissioner cannot arrogate to himself the powers of the Parliament and modify such a scheme. Correctly, the First Appellate Authority set aside such an order. However, he has not ordered recovery of the amount so refunded. Undisputedly, the appellant not only received the refund but also gave it back to the customers. Both sides agree that in this particular case, there is no net loss to the exchequer or gain to the appellant - appeal allowed.

Summary

Issues:
1. Applicability of exemption under Notification No. 25/2012-ST dated 20.06.2012 for works contract services provided to Government Authorities.
2. Refund claim under Section 102 of Finance Act, 2016 for service tax paid on works executed to Government Authorities.
3. Discharge of burden of unjust enrichment in the refund process.
4. Interpretation of Section 11B of the Central Excise Act in conjunction with Section 102 of the Finance Act, 2016.

Analysis:
1. The appellant provided works contract services to Government Authorities under the exemption of Notification No. 25/2012-ST. The exemption was withdrawn in Budget-2015, making the appellant liable for service tax. However, Budget-2016 restored the exemption retrospectively from 2015-16. The appellant filed a refund application under Section 102 of Finance Act, 2016, seeking a refund for the service tax paid during the non-exempt period.

2. The Assistant Commissioner sanctioned the refund under Notification No. 25/2012-ST read with Section 102 of the Finance Act, 2016, with a condition that the appellant proves passing on the refund amount to the Government Authorities. The appellant submitted evidence of refund disbursement, leading to the revenue filing an appeal challenging the absence of consideration of unjust enrichment.

3. The Commissioner (Appeals) allowed the revenue's appeal, emphasizing the unjust enrichment clause. The appellant then appealed to CESTAT, arguing that the burden of unjust enrichment was discharged as the refund amount was passed on to the service recipients, supported by legal references and factual circumstances.

4. The CESTAT analyzed the interplay between Section 11B of the Central Excise Act and Section 102 of the Finance Act, 2016. It noted that while Section 102 provides an extra window for refund claims, the concept of unjust enrichment remains applicable. The CESTAT highlighted the importance of ensuring no unjust enrichment occurs and criticized the Assistant Commissioner's deviation from the statutory scheme in handling the refund process.

5. Ultimately, the CESTAT allowed the appeal, noting that in this specific case, there was no loss to the exchequer or gain to the appellant as the refund was passed on to the customers. The judgment emphasized the exceptional nature of the case and clarified that it should not set a precedent for modifying established legal procedures.