2024 (1) TMI 139 - AT - Service Tax

Refund claim - rejection on the ground of unjust enrichment - incidence of service was passed on or not - HELD THAT - Even though the terms of inclusive of tax in the value is mentioned in the contract but the appellant have paid the Service Tax over and above the bill value, therefore, it cannot be said that the service tax paid by the appellant is included in the gross value of the service which was recovered by the appellant from the service recipient. This is further reinforced from the chartered accountant certificate which certifies that the service tax is nil rated or otherwise, the amount receivable from the service recipient is same. It was also certified that no separate recovery on account of service tax was made from the service recipient. The payment of service tax was borne by the appellant themselves and the same was not collected from the service receiver. It is also fact on record that as per books of account for the year 2013-2014, the amount of refund shown as service tax receivable under asset side of trial balance sheet, this also proves that the amount of service tax has not been passed on to any other person - the amount of refund has not been passed on to any other person. Hence, the same is not hit by unjust enrichment. The order of the Adjudicating Authority is correct and legal and the same is upheld. The order of the Commissioner (Appeals) is not sustainable, hence, the same is set aside - Appeal allowed.

Issues:
The issues involved in this case include the denial of refund claim by the Commissioner (Appeals) based on the ground of unjust enrichment, the question of whether the service tax paid by the appellant was included in the gross value of the service, and the contention regarding the payment of service tax by the appellant themselves without passing it on to the service receiver.

Denial of Refund Claim Based on Unjust Enrichment:
The appeal was directed against an order passed by the Commissioner (Appeals) Central Excise, Ahmedabad, where it was ordered that the refund of Rs. 49,58,381/- sanctioned and paid to the appellant by the adjudicating authority was erroneous and needed to be recovered along with interest. The reviewing authority found that the Adjudicating Authority had failed to address objections raised by the audit regarding the service provider being eligible for a refund of cum-duty price basis as the service tax amount was inclusive in the agreement and already recovered from the service receiver. The revenue filed an appeal before the Commissioner (Appeals) who set aside the original order and allowed the revenue's appeal. The appellant then filed the present appeal challenging the denial of refund.

Inclusivity of Service Tax in Gross Value of Service:
The appellant's counsel argued that the Commissioner (Appeals) denied the refund on the basis that the contract value of service was inclusive of tax. However, the appellant had paid the service tax on the gross value of the service, and the service tax paid was over and above the value, not included in it. The appellant had also shown the service tax paid as receivable in their books of account, supported by a Chartered Accountant certificate. This indicated that the service tax paid was not recovered from customers, and thus, the denial of the refund was unfounded.

Payment of Service Tax by Appellant and Unjust Enrichment:
Upon careful consideration, the Tribunal found that the appellant was not liable to pay the service tax on the service in question, making the service tax paid refundable. The Commissioner (Appeals) had rejected the refund claim citing unjust enrichment, stating that the service tax paid was included in the gross value of service as per the contract. However, scrutiny revealed that the appellant had paid the service tax over and above the bill value, indicating it was not included in the gross value recovered from the service recipient. The Tribunal agreed with the Adjudicating Authority's finding that the service tax was borne by the appellant and not passed on to anyone, as supported by declarations from service receivers and the appellant's trial balance sheet. The Tribunal upheld the Adjudicating Authority's order, setting aside the Commissioner (Appeals) decision.

Conclusion:
The Tribunal held that the denial of the refund claim based on unjust enrichment was unfounded as the service tax had not been passed on to any other person, as evidenced by the appellant's financial records. Therefore, the order of the Adjudicating Authority was deemed correct and legal, leading to the allowance of the appeal with consequential relief, if any, in accordance with the law.

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