2022 (11) TMI 884 - AT - Service Tax

Refund of amount paid during the investigation - refund claims sanctioned but ordered to the same to be transferred to consumer welfare fund on the ground that paid service tax amount was already received by the Appellant from its clients - whether unjust enrichment is applicable in respect of Service Tax refund claim filed by the Appellant? HELD THAT - Even though the Service Tax was paid during the investigation of case, there is no escape from the provision of Section 11B wherein the test of unjust-enrichment is necessary before sanction of refund. As regards the fact whether incidence of refund amount has been passed on or otherwise, we find that the Ld. Commissioner (Appeals) only based on the contract clause and statement of Shri Milind Belsare concluded that appellant have passed on the burden of service tax to the customers. However here Ld. Counsel submitted the copy of balance sheet, details of amount shown as receivable in Balance Sheet, break-up of receivable amount, details of contract, copy of invoices and copy of CA certificate in support of their claim that no service tax was charged from the customers. Matter remanded to the adjudicating authority only for limited purpose to verify the factual aspect as per the books of account of the appellant that whether the incidence of service tax has not been passed on to any other person or otherwise - appeal allowed by way of remand.

Summary

Issues:
Denial of refund claim on the ground of unjust enrichment.

Analysis:
The appeal involved three appeals against an Order-In-Appeal denying a refund claim based on unjust enrichment. The appellant, engaged in manufacturing electrical goods, faced an investigation by DGCEI, Vadodara, leading to show cause notices for service tax demands. However, CESTAT set aside all demands, prompting the appellant to file a refund claim, which was sanctioned but ordered to be transferred to a consumer welfare fund due to alleged recovery of service tax amount from clients. The appellant contended that the tax burden was not passed on to customers, supported by a Chartered Accountant's certification and unchanged invoice prices.

The appellant argued that the contract price covered only applicable taxes, and the amount paid during investigation was not leviable as service tax. They cited various judgments to support their position. Additionally, post-hearing, the appellant submitted a balance sheet, receivables breakdown, and details of contracts with service tax payments under protest. On the other hand, the Revenue representative relied on judgments supporting the impugned order's findings.

Upon considering both sides' submissions, the Tribunal found the crucial issue to be the applicability of unjust enrichment to the service tax refund claim. While acknowledging the payment during the investigation, the Tribunal emphasized the necessity of the unjust enrichment test under Section 11B before refund sanction. The Commissioner (Appeals) concluded that the tax burden was passed on based on contract clauses and a statement, but the appellant's evidence suggested otherwise. As the details were not initially presented to the adjudicating authority, the matter was remanded for verification of whether the tax burden was passed on, directing a de novo adjudication within three months.

In conclusion, the appeal was allowed for remand to verify the factual aspect regarding the passing on of the service tax burden, emphasizing the importance of the unjust enrichment test in refund cases.