2022 (12) TMI 1335 - AT - Service Tax

Rejection of refund claim - section 11B of the Excise Act - finalization of provisional assessment - principles of unjust enrichment - HELD THAT - In the present case, it is not in dispute that the appellant had made a request for provisional assessment in terms of rule 6(4) of the 1994 Rules and such permission was granted to the appellant. It filed returns on provisional basis and, thereafter, the assessment was finalized by the department on 21.06.2011, raising a demand of Rs. 8,71,249/- as the tax liability was found to be more than what was covered by the amount reflected in the challans. The department has calculated the period of one year from which the refund claim could have been filed under section 11B of the Excise Act from the date of finalization of the assessment i.e. 21.06.2011, in terms of clause B(eb) of the Explanation to section 11B of the Excise Act. According to the appellant, refund could not have been claimed on the basis of this finalization of the assessment on 21.06.2011, as it was the appellant which had to pay an excess amount of Rs. 8,71,249/- towards the tax. Against the finalization of the assessment carried out on 21.06.2011, the appellant had filed an appeal before the Commissioner (Appeals) and this appeal was allowed by order dated 17.10.2012. The demand of service tax was set aside for the reason that the appellant had deposited more tax as the chart indicated that the appellant had paid an excess amount of Rs. 71,88,504/- towards the tax liability. The Adjudicating Authority and the Commissioner (Appeals) both calculated the limitation of one year for filing the refund claim under section 11B of the Excise Act from the date of final assessment i.e. 13.07.2011 and, accordingly, rejected the refund claim. Clearly an error was committed in arriving at such a conclusion for no refund could have been claimed by the appellant pursuant to the final assessment made on 13.07.2011 and it is only when the Commissioner (Appeals) passed the order on 17.10.2012 that the refund could be claimed by the appellant. The provisions of clause B (ec) and not (eb) of the Explanation to section 11B of the Excise Act would be attracted to the facts of the present case - the assessment can be said to have been finalized only when the Commissioner (Appeals) passed the order and for this reason also the relevant date would be 17.10.2012 and not 13.07.2012. Principles of unjust enrichment - HELD THAT - It is not possible to accept the reasoning given by the Commissioner (Appeals). As noted above, the appellant was discharging its service tax liability on provisional basis, in terms of rule 6(4) of the 1994 Rules by computing the tax liability on the projected receipts for each month. It was, however, found that the actual premium collected was lower than the amount of taxable value assessed in the provisional return. Refund of tax would accrue in such a situation. There can be no question of passing the tax burden to the customers as tax was paid on a higher value and it is the balance amount of tax that was claimed by the appellant in the refund application. It cannot, therefore, be urged that the burden of tax had been passed to a third person. The order passed by the Commissioner (Appeals) rejecting the refund claim cannot be sustained and is set aside. The appellant is entitled to refund of an amount of Rs. 71,88,504/- with interest, which shall be calculated in accordance with law - Appeal allowed.

Summary

Issues Involved:

1. Limitation period for filing the refund claim.
2. Applicability of the principle of unjust enrichment.

Detailed Analysis:

1. Limitation Period for Filing the Refund Claim:

The appellant, M/s. Oriental Insurance Company Limited, filed an appeal challenging the rejection of their refund claim of Rs. 71,88,514/- by the Commissioner (Appeals-I), Central Excise, Delhi, which upheld the Deputy Commissioner's order. The refund claim was filed under section 11B of the Central Excise Act, 1944, applicable to service tax under section 83 of the Finance Act, 1994.

The appellant argued that the service tax refund became due by virtue of the Commissioner (Appeals) order dated 17.10.2012, not the final assessment order dated 13.07.2011. The appellant contended that the refund claim was filed within one year from the relevant date, i.e., the date of the Commissioner (Appeals) order, as per clause B(ec) of the Explanation to section 11B of the Excise Act.

The Tribunal noted that section 11B of the Excise Act requires a refund claim to be filed within one year from the relevant date. The relevant date could be either the date of adjustment of duty after final assessment (clause B(eb)) or the date of the order of the appellate authority (clause B(ec)). The Tribunal concluded that the relevant date in this case was 17.10.2012, the date when the Commissioner (Appeals) passed the order, and not 13.07.2011, the date of final assessment. Therefore, the refund claim was filed within the permissible time limit.

2. Applicability of the Principle of Unjust Enrichment:

The Commissioner (Appeals) rejected the refund claim on the ground of unjust enrichment, stating that the appellant had not provided proof that the burden of tax had not been passed on to the customers.

The Tribunal found this reasoning flawed. The appellant had been paying service tax on a provisional basis, based on projected receipts. The actual premium collected was lower than the taxable value assessed in the provisional returns, resulting in excess tax payment. Thus, the refund claim was for the excess tax paid, not passed on to customers. The Tribunal concluded that the principle of unjust enrichment did not apply in this case.

Conclusion:

The Tribunal set aside the order passed by the Commissioner (Appeals), holding that the refund claim was filed within the permissible time limit and was not subject to unjust enrichment. The appellant was entitled to a refund of Rs. 71,88,504/- with interest, calculated in accordance with the law. The appeal was allowed.