2014 (2) TMI 580 - AT - Service Tax

Claim of refund of service tax paid earlier but later services were not provided by the appellants - claim of refund rejected for want of roper documentary evidence and that the same were not reflected as receivable in the balance sheet of the appellant. - Held that - otherwise there is no dispute on the fact that the Service Tax was deposited by the appellant in advance relating to the services which were to be provided by them to M/s. DRDPL. Further, there is no dispute that the said services were actually not provided, on account of cancellation of an agreement. Consequently the appellant was not required to pay any Service Tax in respect of the Services, which were not undertaken by them. There is also no dispute that the entire consideration received by them from M/s. DRDPL stand refunded, alongwith service tax amount. In the above scenario, denial of the refund on the sole technical ground that the same was not shown in the balance sheet, as receivable from the revenue, cannot be held to be just and fair. - Refund allowed - Decided in favor of assessee.

Issues:
1. Refund claim of service tax rejected by adjudicating authority.
2. Insufficient documentary evidence for refund claim.
3. Legal sustainability of refund claim.
4. Unjust enrichment and passing on of service tax incidence.
5. Entitlement to interest for delayed refund.

Analysis:
1. The appellants filed a refund claim for service tax amounting to Rs. 9,40,343/- after the termination of an agreement with M/s. DRDPL, where services were not provided by the appellants. The adjudicating authority rejected the refund claim citing lack of proper documentary evidence and legal sustainability, along with the possibility of the tax incidence being passed on. The appellants appealed, arguing that they had refunded the consideration along with service tax to DRDPL after termination, thus justifying the refund claim.

2. The appellants provided various documents to support their refund claim, including General Ledger and Ledger Accounts showing transactions with DRDPL, debit and credit notes, and a Chartered Accountant Certificate certifying the refund. They argued that the refund claim was legally sustainable based on guidance notes and previous case laws, highlighting that the consideration was returned, and unjust enrichment did not apply as the tax incidence was not passed on.

3. The Commissioner (Appeals) scrutinized the documents and rejected the refund claim, noting that the amount was not reflected as receivable in the appellant's balance sheet. However, the Tribunal found that the Service Tax was deposited in advance for services not provided, and the consideration was refunded along with the service tax amount. Despite the technicality of non-reflection in the balance sheet, the Tribunal held that the refund was justified as the tax was not required to be paid by the appellant.

4. The Tribunal emphasized that the denial of refund solely based on the balance sheet discrepancy was unjust, considering the actual circumstances of the case where services were not provided, and the consideration along with the tax amount was returned. Therefore, the Tribunal set aside the impugned order and allowed the appeal, providing consequential relief to the appellant.

5. In conclusion, the Tribunal ruled in favor of the appellant, acknowledging the validity of the refund claim due to the non-provision of services, the return of consideration, and the absence of tax passing on. The decision highlighted the importance of substance over form in assessing refund claims and ensuring fairness in tax matters.

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