2023 (7) TMI 1123 - AT - Service Tax

Short payment of service tax - amount deposited by the Respondent assessee M/s. BSNL before issuing the show cause notice - pre-deposit at the time of admission of the appeal or not - principle of unjust enrichment. HELD THAT - It is a matter of record that M/s. BSNL deposited Rs. 2.37 crores with the Revenue during the course of inquiry for the alleged short payment of service tax. Subsequently, the matter got adjudicated and finally this Tribunal has decided that there is no short payment of service tax on the part of the respondent assessee and therefore as of today there is no demand against the respondent assesse with regard to the alleged two show cause notices which was subject matter of litigation in this regard. The amount which was deposited has also been taken as pre-deposit at the time of the admission of the appeal of the Respondent and it is a settled principle of law now that deposit taken during the course of investigation or as a pre-deposit at the time of the admission of the appeal will not be hit by the provision of the Section 11 B of Central Excise Act, 1944 read with Section 83 of the Finance Act, 1994. Reliance placed on the judgment of Allahabad High Court in the case of EBIZ. COM PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, CUSTOMS AND SERVICE TAX AND ORS. 2016 (9) TMI 1405 - ALLAHABAD HIGH COURT where it was held that The consensus of the authorities of various High Courts as well as Supreme Court is that any amount received by Revenue, as deposit or pre-deposit i.e. unauthorizedly or under mistaken notion, etc., cannot be retained by Revenue since it has no authority in law to retain such amount and it must be refunded with interest Principles of unjust enrichment - HELD THAT - The amount of Rs. 2.37 Crores deposited by the assessee with the revenue, they could not have been passed by respondent assessee to its customers. Firstly as the charges of telephone/mobile phones which are charged by BSNL from its customers cannot be changed on the discretionary basis, at the same time the department has not established that the respondent assessee have issued any supplementary invoices of the above mentioned amount to their customers - since the rate of the BSNL for telephone/mobile phone are pre-determined and therefore the expenditure incurred later on by the respondent assessee cannot be directly be passed on to the customers by any chance. The element of unjust enrichment in this particular case are not present - the respondent assessee is entitled for refund of the deposit which was made them during the course of inquiry and which was further taken as pre-deposit by this Tribunal while admission of their appeals. Impugned order upheld - appeal dismissed.

Summary

Issues Involved:
1. Whether the amount of Rs. 2.37 crores deposited by the Respondent assessee M/s. BSNL before issuing the show cause notice towards the alleged short payment of service tax was considered as pre-deposit at the time of admission of the appeal by this Tribunal.
2. Whether the principle of unjust enrichment is applicable in this particular matter.

Summary:

Issue 1: Pre-deposit Consideration

The Tribunal noted that M/s. BSNL deposited Rs. 2.37 crores during an inquiry for the alleged short payment of service tax. This amount was later considered as a pre-deposit during the appeal process. The Tribunal referenced the Allahabad High Court judgment in the case of Ebiz .Com Pvt Ltd, which established that deposits made during investigations or as pre-deposits are not subject to Section 11 B of the Central Excise Act, 1944, read with Section 83 of the Finance Act, 1994. The Tribunal concluded that since the demand of service tax was set aside, the amount deposited by BSNL was to be treated as a pre-deposit, and thus, BSNL was entitled to a refund.

Issue 2: Unjust Enrichment

The Tribunal examined whether the principle of unjust enrichment applied to the refund claim. It noted that BSNL did not issue any supplementary invoices to its customers to recover the deposited amount. The Tribunal also considered the Chartered Accountant's certificate, which confirmed that the incidence of the amount deposited was not passed on to customers. The Tribunal cited several judgments, including those of the Madras High Court and the Supreme Court, which held that amounts deposited during investigations or as pre-deposits are not subject to unjust enrichment principles. The Tribunal concluded that the principle of unjust enrichment did not apply in this case, and BSNL was entitled to the refund.

Conclusion:

The Tribunal upheld the order in appeal, finding no legal lacuna, and dismissed the department's appeal. The Tribunal pronounced the decision in the open court on 26.07.2023.