2015 (12) TMI 881 - AT - Service Tax

Denial of refund claim - Business Auxiliary Service imported from abroad - bar of unjust enrichment - Held that - There was no question of passing on the burden of payment of service tax to another person by the appellant inasmuch as the payment made by them was under the reverse charge mechanism under Rule 2 of the Service Tax Rules 1994. The fact remains that the service tax in question was paid in cash and the amount is lying with the department. - question of unjust enrichment in this case does not arise. A similar view was taken by this Tribunal in the case of CCE, Pune-I Vs. Volkswagen (India) Pvt. Ltd. 2013 (11) TMI 1534 - CESTAT MUMBAI and it was held that when duty is paid second time by mistake, the question of unjust enrichment does not arise since no customer will pay duty twice for the same set of goods. - Decided in favour of assessee.

Summary

Issues:
1. Payment of service tax on Business Auxiliary Service imported from abroad.
2. Objection by the department regarding the mode of payment.
3. Re-credit in CENVAT credit allowed by Assistant Commissioner.
4. Revision of order under Section 84 of the Finance Act 1994 by the Commissioner.
5. Bar of unjust enrichment.
6. Reverse charge mechanism under Rule 2 of the Service Tax Rules 1994.
7. Payment of service tax in cash.
8. Question of passing on the burden of payment.
9. Precedent set by CCE, Pune-I Vs. Volkswagen (India) Pvt. Ltd.

Analysis:

1. The appellant paid service tax on Business Auxiliary Service imported from abroad by debiting the CENVAT account from December 2005 to June 2007. The department objected to this mode of payment, leading the appellant to make a cash payment on 18/10/2008, along with interest. The Assistant Commissioner initially allowed re-credit in the CENVAT account, but this decision was revised by the Commissioner under Section 84 of the Finance Act 1994, citing unjust enrichment as the reason.

2. The Commissioner's view was that the benefit granted by the Assistant Commissioner was affected by the bar of unjust enrichment. However, it was established that the appellant did not pass on the burden of paying the service tax to another party, as the payment was made under the reverse charge mechanism as per Rule 2 of the Service Tax Rules 1994. The service tax was paid in cash, and the amount remained with the department, indicating no unjust enrichment.

3. The Tribunal referred to a similar case involving CCE, Pune-I Vs. Volkswagen (India) Pvt. Ltd., where it was held that when duty is mistakenly paid a second time, the concept of unjust enrichment does not apply, as no customer would pay duty twice for the same goods. In this case, since the payments were made by the recipient of the service, the Tribunal found the situation to be even more favorable. Consequently, the appeal was allowed based on this reasoning.

This detailed analysis of the judgment highlights the issues surrounding the payment of service tax, the application of the reverse charge mechanism, the concept of unjust enrichment, and the precedent set by a similar case, leading to the decision in favor of the appellant.