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2022 (12) TMI 907 - AT - Service TaxRefund of service tax - contention of the appellant is that the tax having been paid under mistake, the period of limitation as envisaged in Section 11B will not apply - Principles of unjust enrichment - HELD THAT - Interestingly, it has to be noted that the adjudicating authority as per OIO No.34/2015 dt. 30.09.2015 has held that tax has indeed been paid by mistake by the appellant. The adjudicating authority has even sanctioned the refund. However, the amount was ordered to be credited to the Consumer Welfare Fund on the issue of unjust enrichment - it can be seen that there is an observation by the original authority in both the orders that the tax has been paid by mistake. However, the Commissioner (Appeals) in para-7 has summarily held that refund claim is hit by limitation without discussing the aspect whether the tax amount has been paid by mistake. In the present case, it has to be noted that as per Rule 2A of Service Tax (Determination of Value) Rules, 2006, the extract of which has already been reproduced; in the case of works contracts which is in the nature of original works, the service provider has to pay only on 40% of the total amount charged for the works contract. The levy of service tax on such works is 40% of the total amount and has to be paid by the service provider only. The service provider had correctly issued invoices collecting service tax @ 40% on the consideration received by them. It is the case of the appellant that as the invoice showed only collection of tax on 40% of the consideration paid by them, they were under the impression that they have to pay service tax for the balance 60% of the consideration. Thus they paid tax on the balance 60% as their own liability. This has been clearly discussed by the original authority in para 6.1 of the order No.33/2015 dt. 31.08.2015. It is clearly brought out from evidence that appellant has paid the tax by mistake. Moreover, the original authority vide OIO No.34/2015 dt. 30.09.2015 has held that limitation will not apply as the tax has been paid by mistake - the rejection of refund claim on the ground of limitation is not sustainable. The second ground of rejection of refund is that the amount paid is hit by the doctrine of unjust enrichment - HELD THAT - Section 11B of Central Excise Act, 1944 deals with claim for refund of duty and interest, if any, paid on such duty. Section 83 of the Finance Act, 1994 makes certain provisions of Central Excise Act, 1944 applicable to service tax also. As per Section 83, the provisions dealing with refund (Section 11B, 11BB, 11C, 12,12A, 12B, 12C, 12D) are applicable to service tax. As per sub-section (1) of Section 11B any person who has paid the duty / tax can make an application for refund, along with documents to show that the incidence of such duty/interest/tax paid by him or collected from him has not been passed on to any other person. In the instant case, the disputed tax has been paid by the service recipient. He has paid it directly and has neither collected the amount nor issued any invoice. Further, when the amount of tax is held to be paid under a mistake, it cannot be said that the tax was paid under the Finance Act, 1994. It was an amount which was paid without having a liability to pay. There was no authority of law to collect such amount from the appellant. In the present case, the appellant has furnished the Chartered Accountant certificate. In page 132 and 133 of appeal paper book the appellant has enclosed the copy of this certificate. The Ld. A.R has relied upon the decision in the case of Rajasthan Spinning Mills Ltd. (supra) to contend that such certificate cannot be solely relied to establish that the incidence of duty has not been passed on. In the present case, there is no levy of tax on the balance 60% of the consideration. There is no invoice issued by appellant mentioning the amount as tax and they have paid from their own pocket. In the case on hand, the department does not dispute the veracity of the certificate, but merely denies the refund stating that appellant has to produce further documents. The Chartered Accountant who has issued the certificate has stated that he has examined the statutory records of the assessee-appellant. Taking into consideration, that the amount was paid by mistake, an no invoice was issued, that rejecting the said certificate in toto so as to hold that the incidence of duty has been passed on cannot be legally sustained. In the result, the appellant has succeeded in establishing that the amount is not hit by the doctrine of unjust enrichment. The appellant is eligible for refund. The appeals are allowed.
Issues Involved:
1. Limitation for filing refund claims. 2. Doctrine of unjust enrichment. Issue-Wise Detailed Analysis: 1. Limitation for Filing Refund Claims: The appellants filed two refund claims for service tax paid on works contract services, arguing that the tax was paid by mistake. The original authority rejected one refund claim on the grounds of limitation and unjust enrichment, while the other was sanctioned but credited to the Consumer Welfare Fund due to unjust enrichment. The Commissioner (Appeals) upheld these decisions. The appellants argued that the limitation period under Section 11B of the Central Excise Act, 1944, does not apply when tax is paid by mistake. They cited the case of 3E Infotech, where it was held that the limitation period does not apply to taxes paid by mistake. The adjudicating authority acknowledged the tax was paid by mistake but still rejected the refund claim due to the limitation period. The Tribunal held that the tax was indeed paid by mistake, referencing Rule 2A of the Service Tax (Determination of Value) Rules, 2006, which states that for original works contracts, the service provider should pay tax on 40% of the total amount. The appellant mistakenly paid tax on the remaining 60%. The Tribunal concluded that the limitation period under Section 11B does not apply when tax is paid by mistake, following the precedent set by the jurisdictional High Court in 3E Infotech. Therefore, the rejection of the refund claim on the grounds of limitation was not sustainable. 2. Doctrine of Unjust Enrichment: The second ground for rejecting the refund was the doctrine of unjust enrichment. The department argued that the tax paid on construction services was included in the cost of production, thus passing the tax burden onto the customers. The appellants countered that under the reverse charge mechanism, there is no occasion to pass on the tax burden to the customer. They provided a Chartered Accountant certificate to show the tax amount was recorded as 'receivables' and not as 'expenditure'. The Tribunal noted that the disputed tax was paid directly by the service recipient without issuing any invoice or collecting the amount from another party. It was held that when tax is paid by mistake, it cannot be considered as tax under the Finance Act, 1994, and thus, the doctrine of unjust enrichment does not apply. The Tribunal cited previous judgments, including the case of Oil and Natural Gas Corporation Ltd., which supported the view that the Chartered Accountant certificate, if not disputed by the department, is sufficient to prove that the incidence of duty has not been passed on. The Tribunal concluded that the appellants had successfully demonstrated that the tax amount was not passed on to the customers, and thus, the doctrine of unjust enrichment did not apply. Consequently, the appellants were entitled to a refund. Conclusion: The Tribunal set aside the impugned order, allowing the appeals with consequential reliefs, if any, and pronounced the judgment in open court on 20.12.2022.
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