2009 (10) TMI 289 - AT - Service Tax

Refund of service tax- The assessee had claimed refund of service tax paid by it as a receiver of service. The original adjudicating authority disallowed the same on the ground that refund was hit by unjust enrichment and credited the refund amount to the consumer welfare fund. On appeal, the Commissioner (Appeals) allowed the appeal of the assessee.

Summary

Issues:
Refund claim based on unjust enrichment principle in service tax matter.

Analysis:
The case involved a refund claim of Rs. 1,75,142 paid as a receiver of service, which was the subject of a second round of litigation. Initially, the matter was remanded by the Tribunal to the Original Adjudicating Authority to consider the applicability of the doctrine of unjust enrichment. The Authority held that the refund was hit by unjust enrichment and credited the amount to the consumer welfare fund. However, on appeal, the Commissioner (Appeals) allowed the appeal, leading to further arguments presented by both sides.

The appellant's advocate argued that the service tax was paid after the services were rendered and utilized, thus unjust enrichment should not apply. They also provided a certificate from a Chartered Accountant stating that they bore the service tax themselves. The advocate relied on the profit and loss account and balance sheet, showing the service tax as an expense, to prove that the tax was not passed on to customers.

On the contrary, the Departmental Representative (DR) contended that showing the tax as an expenditure implied that it was recovered from customers. The DR also cited various decisions to support the position that unjust enrichment applied in this case.

Upon considering the submissions, the Commissioner (Appeals) observed that the appellant did not charge any service tax from clients and bore the tax themselves. The balance sheet and profit and loss account further supported this claim, indicating that the tax amount was borne by the appellant and not passed on to others. The Commissioner concluded that the refund was required to be paid to the appellant based on the evidence presented.

The Technical Member agreed with the Commissioner's observations, noting that the service tax was paid after the service was received, indicating a lack of awareness of the liability at the time of service receipt. Additionally, the refund claim fell under section 11B of the Central Excise Act, applicable to service tax matters, which does not consider unjust enrichment in cases of service export. Therefore, the appellant was deemed eligible for the refund, and the appeal filed by the Revenue was rejected.