2019 (7) TMI 1245 - AT - Service Tax

Refund of service tax - principles of unjust enrichment - refund claim was rejected holding that as the appellant has recovered service tax from the service recipient, therefore, bar of unjust enrichment is applicable - HELD THAT - In terms of Section 11B(2)(e), the person who has borne the tax, can file the refund claim. Therefore, the service tax in the impugned matter paid by the appellant is required to be refunded to the service recipient directly. The refund of service tax paid by the appellant cannot be rejected - refund allowed subject to that it is payable in the account of service recipient directly. Appeal allowed - decided in favor of appellant.

Summary

Issues involved:
Refund claim rejection based on unjust enrichment by authorities below.

Analysis:
The appellant, a service provider to the Ministry of Defence, appealed against the rejection of their refund claim due to unjust enrichment. The appellant had paid service tax on services provided to the Ministry of Defence during a period when service tax was levied. Subsequently, the services provided became exempt retrospectively under Section 102 of the Finance Act, 1994. The Ministry of Defence directed the appellant to file a refund claim on their behalf, which was done on 30.11.2016. The claim was rejected on the grounds that the appellant had recovered service tax from the service recipient, invoking the bar of unjust enrichment. The appellant contended that the refund claim was filed as per Section 11B(2)(e) of the Central Excise Act, 1944, which allows the person who has borne the incidence of service tax to claim a refund. The appellant argued that since the claim was filed on the direction of the service recipient, they were entitled to the refund.

The appellate tribunal considered the direction from the service recipient to file the refund claim and noted that as per Section 11B(2)(e), the person who has borne the tax is eligible to file the refund claim. Therefore, the service tax paid by the appellant was required to be refunded directly to the service recipient. The tribunal held that the refund claim could not be rejected in these circumstances and sanctioned the refund, directing the appellant to provide all necessary details of the service recipient for processing the claim. The adjudicating authority was instructed to sanction the refund claim to the service recipient within 30 days from the receipt of the tribunal's order. Consequently, the impugned order was set aside, and the appeal was allowed.

This judgment clarifies the application of Section 11B(2)(e) regarding the eligibility to claim a refund of service tax and emphasizes the importance of considering the direction from the service recipient in such cases to determine the rightful recipient of the refund.