2020 (1) TMI 587 - AT - Service Tax

Refund claim - Completion of Finishing Services - service tax was paid but the said activity does not attract levy of service tax - refund was rejected on the ground of unjust enrichment - HELD THAT - It is undisputed fact that the appellants are traders and this being so, it is not possible for them to collect service tax by issue of invoices. Further, the Chartered Accountant s certified to the effect that they have not passed on the burden of service tax, interest or the penalties to their customers. The Hon ble High Court in the case of M/S. SHOPPERS STOP LTD. VERSUS THE COMMISSIONER OF CUSTOMS (EXPORTS), CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL 2017 (7) TMI 11 - MADRAS HIGH COURT had held that such certificate of Chartered Accountant cannot be the sole evidence for concluding that the burden of tax has not been passed on - In the present case, the Chartered Accountant s Certificate has categorically certified that the burden has not been passed on to another. These documents show that VAT has been collected. There is no collection of service tax - All these facts establish that the burden of tax has not been passed on to another. The conclusion arrived at by the authorities below that the appellant has not passed the test of unjust enrichment cannot sustain - refund allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether the activity of providing Modular Kitchen falls under the category of 'Completion of Finishing Services' for the purpose of service tax?
2. Whether the appellant is entitled to a refund of service tax paid along with interest and penalties?
3. Whether the appellant has passed on the burden of service tax to another, invoking the doctrine of unjust enrichment?

Analysis:

Issue 1:
The appellants were engaged in providing Modular Kitchen, and the department alleged that this activity would fall under the category of 'Completion of Finishing Services' for the purpose of service tax. A show-cause notice was issued, culminating in a demand for service tax, interest, and penalties. The Tribunal, in Final Order No.41993/2018, set aside the demand, observing that the said activity does not attract the levy of service tax.

Issue 2:
After the Tribunal's order, the appellants filed a refund claim for the amount paid as service tax, interest, and penalties. The claim was rejected by the adjudicating authority and sustained by the Commissioner (Appeals) on the grounds of unjust enrichment. The appellants contended that they had not collected service tax from customers and had paid the amount only after confirmation by the original authority. They provided a Chartered Accountant's Certificate to show that they had not passed on the service tax burden to customers.

Issue 3:
The rejection of the refund claim was based on the doctrine of unjust enrichment. The authorities below argued that the Chartered Accountant's Certificate alone was not sufficient evidence to prove that the tax burden had not been passed on. However, the Tribunal found that the appellants, being traders, could not collect service tax through invoices. The Chartered Accountant's Certificate explicitly stated that the burden of tax had not been passed on, and there was no collection of service tax. Relying on the certificate and distinguishing a previous case, the Tribunal held that the burden of tax had not been passed on, and the appellant was entitled to the refund. The impugned order was set aside, and the appeal was allowed with consequential reliefs.