2024 (8) TMI 323 - AT - Service Tax

Refund claim of service tax paid - additional service tax paid on the additional charges recovered from customers - case of Revenue is that appellant have already recovered service tax amount paid from their APM (Administered Price Mechanism) Gas customers and therefore the service tax has rightly been paid by them - HELD THAT - There is no denying of the fact that appellant have issued credit notes to its customers for the additional charges along with service tax charged thereon and it is also clear that the appellant s customers did not take Cenvat credit of additional service tax paid by them on the additional service charge - from the perusal of the sample contract that the appellant being a nominee of Government of India for sale of natural gas under APM to its buyers to whom the gas was allocated by Government of India under a contract. The appellant was required to transmit the gas through pipeline upto the buyer s premises. It is matter of record that for transmission of gas through pipe line during the period from October 2008 to July 2009m, the appellant have charged additional amount over and above the portion fixed by the regulatory authority and such additional charges were not approved by the Ministry of Petroleum and Natural Gas. As per the provisions of Section 67(1)(i) of the Finance Act, 1994, the service tax is payable on the gross amount charged by the service provider for rendering a particular service. Since gross amount charged by the appellant from the buyers of natural gas was less by the additional service charge recovered by them therefore, service tax paid on the additional service charges cannot be recovered as the service tax payable under Section 67 of the Finance Act, 1994. The appellant are rightly eligible for the refund of service tax paid by them on the additional charges recovered by them from their customers and same have been refunded by way of credit notes - the impugned order-in-appeal is without any merit - appeal allowed.

Issues Involved:
1. Refund claim of service tax paid on additional charges.
2. Rejection of refund claim by Adjudicating Authority and Commissioner (Appeals).
3. Legal sustainability of the rejection of the refund claim.
4. Applicability of previous Tribunal decisions on similar issues.
5. Compliance with Section 67(1)(i) of the Finance Act, 1994.
6. Application of unjust enrichment in service tax refunds.

Detailed Analysis:

1. Refund Claim of Service Tax Paid on Additional Charges:
The appellant, engaged in providing taxable services including transportation of goods through pipelines, introduced an 'additional service charge' from October 2008. However, following an order from the Ministry of Petroleum and Natural Gas, the appellant refunded these additional charges via credit notes and subsequently filed a refund claim for the service tax paid on these charges, amounting to Rs. 88,47,107/-.

2. Rejection of Refund Claim by Adjudicating Authority and Commissioner (Appeals):
The department issued a show cause notice questioning the refund claim on the grounds that the service tax had already been recovered from the customers. The Adjudicating Authority rejected the claim, a decision upheld by the Commissioner (Appeals), who ruled that the reversal of charges did not negate the provisions of the service tax law.

3. Legal Sustainability of the Rejection of the Refund Claim:
The appellant's advocate argued that the rejection was legally unsustainable. They contended that when service charges are revised and credit notes issued, the service provider is entitled to a refund of the additional service tax paid. This argument was supported by various Tribunal decisions, which established that service tax paid on refunded additional charges is refundable to the service provider.

4. Applicability of Previous Tribunal Decisions on Similar Issues:
The appellant cited several Tribunal decisions, including:
- Piramal Enterprises Limited v CST (2016): Established that charges refunded via credit notes cannot form part of the taxable value.
- Edelweiss Securities Limited v CST (2016): Supported the refund of service tax when additional charges are refunded.
- Hexacon (India) Limited v CCE (2003): Similar precedent on refund entitlement.
- Chambal Fertilizers & Chemicals Limited v CCE (2016): Reinforced the right to refund of service tax on refunded charges.
- GAIL (India) Limited v CCE (2016): Affirmed refund entitlement under similar circumstances.
- Order-in-original No. 82/09-10/DC/ST/REF/Agra: Specific to the appellant's case, granting refund.

5. Compliance with Section 67(1)(i) of the Finance Act, 1994:
The Tribunal noted that as per Section 67(1)(i) of the Finance Act, 1994, service tax is payable on the gross amount charged. Since the additional service charges were refunded, the gross amount was effectively reduced, and thus, the service tax paid on these charges was not recoverable.

6. Application of Unjust Enrichment in Service Tax Refunds:
The Tribunal referenced several decisions, including:
- Piramal Enterprises Limited v CST (2016): Highlighted that credit notes are acceptable evidence of refund and negate unjust enrichment.
- Appellant's Own Case (2016): Confirmed that unjust enrichment does not apply when amounts are refunded via credit notes.
- CCE v Indian Farmers Fertilizers Co-op Limited (2014): Supported the principle that the service provider is entitled to a refund if the burden of tax is not passed on.

Conclusion:
The Tribunal concluded that the appellant was entitled to the refund of the service tax paid on the additional charges refunded to customers. The rejection of the refund claim by the lower authorities was found to be without merit. The appeal was allowed, and the impugned order-in-appeal was set aside.

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