2006 (2) TMI 16 - AT - Service Tax

Service Tax Proprietorship concern providing hire-purchase services under the category of bank and financial service Service tax paid under mistaken belief Refund

Summary

Issues:
1. Refund claim based on mistaken payment of service tax under the category of banking and financial services.
2. Proof of non-passing over of service tax to customers.
3. Applicability of service tax on proprietorship firms providing hire-purchase activities.
4. Eligibility for refund of the service tax amount paid.

Analysis:
1. The respondent, a proprietorship concern providing Hire-Purchase Services, paid service tax under the mistaken belief that it falls under the category of banking and financial services. The Board's Circular clarified that proprietorship and partnership concerns are excluded from the service tax net. The appellate authority allowed the refund claim, which was rejected by the Adjudicating Authority, leading to the current appeal.

2. The Departmental Representative argued that even if the payment was made under a mistaken identity, the respondent was aware that it was service tax. However, the respondent contended that the payment was made under a mistaken identity and provided proof of non-passing over of the service tax to authorities, justifying the refund claim.

3. The Tribunal noted that the respondent, being a proprietorship concern engaged in Hire-Purchase Services, had paid service tax for a period when, as per the Board's clarification, no service tax was applicable to such firms. The amount collected by the government without legal authority is eligible for a refund, as confirmed by the Hon'ble Supreme Court's decision on unconstitutional levies.

4. Referring to the SRF Ltd. case, the Tribunal emphasized that the refund is contingent upon establishing that the incidence of duty has not been passed on to customers. As the original order was silent on this aspect, the matter was remanded to verify the non-passing over of service tax incidence to customers, requiring the respondent to provide evidence such as a Chartered Accountant certificate or relevant records.

In conclusion, the appeal was allowed by way of remand solely to verify the claim regarding the non-passing over of service tax to customers, ensuring a fair assessment of the refund eligibility based on the legal principles and factual evidence presented.