2010 (5) TMI 234 - AT - Service Tax

Refund- Erroneous payment- Service tax stated paid erroneously under Chartered Accountant service as exemption limit not crossed. Exemption under Notification No. 6/2005-ST to be availed in advance. Service tax paid in first half year. Surrender of registration in second half year not permissible as per notification conditions. Held that- Notification condition not fulfilled. Appellant not entitled to exemption under said notification. Impugned order rejecting refund sustainable.

Summary

Issues:
- Appeal against rejection of refund claim based on Notification No. 6/2005(S.T.)
- Interpretation of conditions for availing exemption under the notification
- Application of unjust enrichment principle in the case

Analysis:
1. Appeal against rejection of refund claim based on Notification No. 6/2005(S.T.): The appellant, a Chartered Accountant, filed an appeal against the rejection of their refund claim for service tax paid during 2006-2007. They claimed the refund based on the exemption limit of Rs. 4 lakhs under Notification No. 6/2005(S.T.). The appellant argued that they were not liable to pay service tax during the financial year in question and thus sought a refund. However, the refund was denied, citing the provision that once the option to pay tax is exercised in a financial year, it cannot be withdrawn. The lower appellate authority upheld the rejection, leading to the appellant's appeal.

2. Interpretation of conditions for availing exemption under the notification: The key issue revolved around the interpretation of the conditions specified in Notification No. 6/2005(S.T.). The tribunal examined the provision which stated that a service provider, once opting to pay tax in the 1st half of a financial year, cannot withdraw the option during the remaining part of the year. The appellant had paid service tax for the 1st half year and surrendered their registration in the 2nd half, which was deemed impermissible under the notification. Consequently, the tribunal held that the appellant failed to fulfill the condition of the notification, leading to the rightful rejection of the refund claim by the lower authorities.

3. Application of unjust enrichment principle in the case: The appellant contended that since they had not recovered the service tax amount from their clients, the principle of unjust enrichment should not apply in their case. However, the tribunal focused on the non-compliance with the conditions of the notification rather than the issue of unjust enrichment. The tribunal upheld the lower authorities' decision to reject the refund claim, emphasizing that the appellant's failure to adhere to the conditions of the notification rendered them ineligible for the exemption.

In conclusion, the tribunal dismissed the appellant's appeal against the rejection of their refund claim, highlighting the importance of complying with the conditions specified in Notification No. 6/2005(S.T.) for availing exemptions and emphasizing the significance of adhering to such regulatory provisions in tax matters.