2022 (11) TMI 692 - AT - Service Tax

Refund claim - burden of tax has been passed on or not - applicability of unjust enrichment - HELD THAT - In the facts and circumstances, the appellant have not passed on the burden of tax to any third person or to the buyer of the flats. In the facts and circumstance, it is the appellant who has borne the burden of tax. It does not make any difference whether the amount is debited in the profit and loss account or it is shown as amount receiveable on the asset side in the balance sheet, in either case the burden falls on the appellant-assessee only. The appellant has passed the test of unjust enrichment - Appeal allowed.

Summary

Issues:
1. Whether the principle of unjust enrichment applies to the refund granted.

Analysis:
The appeal revolved around the issue of unjust enrichment concerning a builder/developer registered for various services. An audit objection was raised regarding non-payment of service tax on society membership fees collected from flat/unit buyers. The appellant disagreed with the objection, deposited the service tax amount, and later filed a refund claim. The revenue issued show cause notices for demanding service tax with interest and penalty. The Commissioner (Appeals) allowed both appeals, stating that no taxable service was provided, and the amount was collected as a trustee from buyers.

The Assistant Commissioner granted a refund, stating that unjust enrichment did not apply as the appellant had not collected any service tax from customers and had deposited the amount from their own funds. However, a review by the Jurisdictional Commissioner challenged this finding, leading to an appeal before the Commissioner (Appeals). The Commissioner (Appeals) observed that the appellant had not passed the test of unjust enrichment as the tax burden was borne by them, evidenced by the expenditure shown in the profit and loss account.

The appellant contended that they had borne the tax burden and not passed it on to any third party or buyer. The Tribunal, after considering the arguments, held that the burden of tax fell on the appellant, regardless of how it was accounted for in the profit and loss account or balance sheet. Consequently, the Tribunal found that the appellant had passed the test of unjust enrichment, allowing the appeal and setting aside the impugned order. The appellant was entitled to consequential benefits.

This detailed analysis demonstrates the progression of the case from audit objection to refund claim, the conflicting views on unjust enrichment, and the final decision by the Tribunal in favor of the appellant based on the burden of tax borne by them, leading to the allowance of the appeal and granting of consequential benefits.