2010 (3) TMI 338 - AT - Service Tax

Refund unjust enrichment initially the Respondent had paid the service tax on the gross amount without any abatement and subsequently when the Department insisted that they would be eligible for Cenvat credit of the service tax payable only on the net amount after deducting the abatement, after reversal of the Cenvat credit by paying the amount of excess Cenvat credit in cash, the Respondent applied for refund of the excess amount of service tax paid by them - Held that - Respondent have produced evidence in form of Chartered Accountant s certificate and their books of accounts showing that the excess amount of service tax paid by them, whose refund is being claimed, was not part of the cost of raw-material and, hence, not part of the price of finished goods sold, and has not been booked to the profit and loss account; - refund allowed

Summary

Issues:
1. Eligibility for Cenvat credit on service tax paid.
2. Admissibility of refund of excess service tax.
3. Principle of unjust enrichment.

Eligibility for Cenvat credit on service tax paid:
The Respondents, manufacturers of MS Ingots, paid service tax on GTA service without abatement, contrary to the requirement of paying tax only on the net amount after deducting 75% abatement. The Department contended that the Cenvat credit eligibility should be limited to the tax actually payable. The Respondents reversed the excess credit and applied for a refund. The Asstt. Commissioner initially allowed the refund but credited it to the Consumer Welfare Fund due to lack of evidence that the excess tax burden was not passed on to customers. On appeal, the Commissioner (Appeals) reversed this decision based on the Chartered Accountant's certificate and the Respondent's book of accounts, showing that the tax burden was not transferred to customers.

Admissibility of refund of excess service tax:
The main issue was whether the claim for refund was subject to the principle of unjust enrichment. The burden of proof rested on the Respondent to show that the excess tax paid was not included in the cost of raw material or the price of the final product. The Department failed to provide evidence contradicting the Chartered Accountant's certificate and the Respondent's books of accounts, which clearly demonstrated that the excess tax was not passed on to customers. The Tribunal's precedent highlighted that the certificate from a Chartered Accountant should not be dismissed summarily without evidence to the contrary, supporting the decision to allow the refund.

Principle of unjust enrichment:
The judgment emphasized that the burden of proof regarding unjust enrichment lay with the Respondent, who successfully demonstrated through the Chartered Accountant's certificate and book of accounts that the excess service tax was not part of the final product's cost or price. The Department's failure to provide contrary evidence led to the dismissal of their appeal. The judgment highlighted the importance of considering evidence and not rejecting certificates summarily without supporting evidence.