2010 (3) TMI 481 - AT - Service Tax

Stay Refund Unjust Enrichment - The appellant paid service tax without claiming the benefit of 75% of abatement by mistake. Issued show cause notice to the appellants proposing recovery of refund sanctioned to them on the ground that appellants have not discharged the burden of proving that they had not passed on the service tax to the customers. Commissioner not conducted verification of certificate produced to reach conclusion and not devoted sufficient time and energy to record his finding. Held that prima facie strong case. Pre deposit waived.

Summary

Issues:
Claim of unjust enrichment regarding service tax refund.

Analysis:
The case involved a branch of a company engaged in the distribution of Fans, which paid service tax without claiming the benefit of 75% abatement by mistake from April 2006 to June 2007. Upon realizing the error, they filed a refund claim that was initially rejected but later allowed. However, the Commissioner issued a show cause notice under Section 84 of the Finance Act, 1994, proposing the recovery of the refunded amount on the grounds that the burden of proving that the service tax was not passed on to customers was not discharged by the appellants.

The advocate for the appellants argued that unjust enrichment did not apply as the price of the product (fan) was fixed by the manufacturing company, unaffected by the service tax element. They presented a certificate from a Chartered Accountant stating that there was no change in pricing structure during the relevant periods. The advocate relied on a previous Tribunal decision, supported by the Supreme Court, to assert that unjust enrichment would not be applicable under similar circumstances.

Upon reviewing the submissions and documents, the Member (T) noted that the Commissioner had not adequately examined the Chartered Accountant certificate or conducted a thorough verification. The Member found that the price of the fan was not influenced by the service tax and that the appellants had made a strong prima facie case. Despite the detailed arguments presented, the matter was not fully discussed due to the disagreement of the Departmental Representative. Consequently, the Member waived the pre-deposit requirement and unconditionally allowed the stay petition during the appeal's pendency.

In conclusion, the judgment highlighted the importance of proving unjust enrichment in service tax refund cases, emphasizing the need for thorough examination of evidence and proper verification before reaching a decision.