2024 (3) TMI 1229 - AT - Service Tax

Refund of Service Tax - Principles of unjust enrichment - Department took the view that the Appellant has not discharged onus of showing that unjust enrichment clause is not applicable in that case - HELD THAT - The Credit Notes issued by the Public Limited Company is a proper document wherein the transaction towards credit given to their customers is properly recorded. These Credit Notes form part of their P L Account and Balance Sheet. Therefore the Credit Notes cannot be taken as a piece of paper as has been held by the Commissioner (Appeals). However the veracity of the same can definitely be checked and verified before it is accepted as a proper document. As per judgment in COMMISSIONER OF CENTRAL EXCISE MADRAS VERSUS M/S ADDISON CO. LTD. 2016 (8) TMI 1071 - SUPREME COURT since the person who has initially bought the goods would have already charged the full amount on the end customer if subsequent discount is granted to the person there is no possibility for that discount to be passed on the end customer. Because of this reason the Supreme Court has held that unjust enrichment clause will be applicable and no refund can be granted in that case - In the present case the refund is purely on account of erroneously paid Service Tax. The only way unjust enrichment can get attracted is if the receiving client takes the Cenvat Credit. If it is established that no Cenvat Credit has been taken by the client there would be no case of unjust enrichment. Therefore it is found that in the present case the case law of Addison is not applicable. From the documentary evidence produced it is felt that they should be given an opportunity to produce all these documents before the Adjudicating Authority. In view of the forgoing the matter remanded to the Adjudicating Authority directing him to follow the principles of natural justice and decide the issue within four months from the dated of communication of this order. Appeal disposed off by way of remand.

Summary

Issues Involved:
The issues involved in the judgment are the applicability of the unjust enrichment clause in a refund claim related to Service Tax, the acceptance of Credit Notes as evidence, and the need for further verification of documents before granting a refund.

Issue 1: Applicability of Unjust Enrichment Clause

The Appellant provided plant, machinery, or equipment services and charged Service Tax. Following a Circular by the Board, the client requested a refund as VAT/Sales Tax was already charged by the State Government. The Appellant issued Credit Notes and sought a refund, but the Department raised concerns about unjust enrichment. The Tribunal found that the Service Tax was not required to be paid by the Appellant, and the refund claim was filed within the time limit. The lower authorities rejected the claim based on unjust enrichment, which the Tribunal disagreed with, stating that the Credit Notes were proper documents and the veracity could be verified.

Issue 2: Acceptance of Credit Notes as Evidence

The Appellant failed to produce copies of Credit Notes before the Adjudicating Authority but later submitted them during the Appeal. The Commissioner (Appeals) did not consider the Credit Notes properly, leading to the Appeal. The Appellant, being a Public Sector Company, argued that all transactions were recorded in their Books of Account, including the Credit Notes. A Certificate from a Chartered Accountant supported the issuance of Credit Notes. The Tribunal acknowledged the importance of the Credit Notes and directed the Adjudicating Authority to verify them further.

Issue 3: Verification of Documents for Refund

The Learned AR contended that the Appellant did not conclusively prove that the Service Tax was not passed on to the end customer, citing relevant case laws. The Tribunal differentiated the present case from the case law cited, emphasizing that the refund was sought for erroneously paid Service Tax, not a change in the Assessable Value. It was noted that unjust enrichment would only apply if the client had taken Cenvat Credit. The Tribunal remanded the matter to the Adjudicating Authority for necessary verification and a decision within four months.

In conclusion, the Tribunal allowed the Appeal and directed the Appellant to produce all relevant documentary evidence for further verification. The Adjudicating Authority was instructed to ensure no Cenvat Credit was taken by the client before deciding on the refund claim. The judgment was pronounced in the open court, emphasizing the importance of following natural justice principles in the adjudication process.