2010 (6) TMI 151 - AT - Service Tax

Refund- There is no dispute from the ER I return that the recipient of service i.e. the manufacturer has not claimed any cenvat credit on the basis of the job work invoice issued by the appellant. Held that- claim of refund cannot be denied discarding revenue s argument that mechanism of issuance of debit notes and credit notes, if countenanced, it will open flood gates for pilferage of revenue, the Hon ble High Court of Rajasthan did not agree with the proposition that it can open flood gates, inasmuch as, where false, fictitious or shame Debit note and credit note are issued for adjustment, the revenue can very well lead evidence, or can lead evidence in rebuttal. Appeal is allowed.

Summary

Issues:
1. Whether service tax on job work was leviable during a specific period.
2. Entitlement to refund due to the issuance of a debit note by the principal manufacturer.
3. Applicability of the bar of unjust enrichment.
4. Impact of the issuance of credit notes on the refund of service tax.
5. Burden of proof regarding the passing on of excise duty.
6. Validity of the debit note and denial of refund based on a single member decision.

Analysis:
1. The primary issue in this case revolved around the levy of service tax on job work during a particular period. The appellant contended that no service tax was leviable during the material period, supported by the issuance of a debit note by the principal manufacturer. The appellant argued that since there was no tax liability, they should be entitled to a refund.

2. The appellant relied on judicial precedents from the Hon'ble High Courts of Karnataka and Rajasthan, emphasizing the validity of the methodology of debit notes and credit notes for granting refunds. The appellant's position was further supported by the fact that the manufacturer did not claim any cenvat credit based on the job work invoice issued by the appellant.

3. The Departmental Representative (DR) opposed the appellant's claim, citing a delay in the appellant's request for a refund after the issuance of the debit note by the manufacturer. The DR argued that the appellant should be disentitled to the refund based on a Tribunal decision in a similar case.

4. The Tribunal considered the arguments from both sides and examined the factual position presented by the appellant's counsel. The Commissioner had previously held that the bar of unjust enrichment applied in this case, raising a question regarding the appellant's entitlement to the refund.

5. The judgment referred to the decisions of the Hon'ble High Courts of Karnataka and Rajasthan, highlighting the importance of proving the passing on of the excise duty burden to the next purchaser. The courts emphasized that if the burden was not passed on or was reversed, the claim of refund could not be denied.

6. Ultimately, the Tribunal found in favor of the appellant, emphasizing that no investigation had been conducted to prove the debit note's inaccuracy. The Tribunal rejected the revenue's arguments and the single member decision cited, stating that the appellant should not suffer when there was no tax liability. The judgment concluded that the appellant should succeed, and the appeal was allowed.