2016 (2) TMI 370 - AT - Service Tax

Refund - unjust enrichment - the impugned amount was deducted by Revenue from the refunds of Bharat heavy electricals Ltd in terms of the powers under section 87 (d) of Finance Act 1994 and BHEL recovered the said amount from the appellant by deducting the same from the payments due to the appellant for providing security services - Held that - . It is also not in dispute that by virtue of the above referred exemption order issued by the Ministry of Finance the respondent was not liable to pay the said amount service tax which was recovered by adjustment from the refunds of Bharat Heavy Electricals Ltd. which in turn recovered it from the respondent. Consequently it clearly became eligible for the refund of the said amount as the burden was borne by the respondent. Further Bharat Heavy Electricals Ltd pays crores of rupees of duty in cash and therefore it really is of no consequence whether the amount of refund was to be given to it by credit to its Cenvat account in cash because this issue becomes important only in those cases where the assessee does not pay any duty in cash and is able to discharge all its liabilities out of CENVAT credit. - Refund allowed - Decided against the revenue.

Summary

Issues Involved:
1. Appeal against order allowing refund of service tax.
2. Contention regarding eligibility for refund.
3. Principles of unjust enrichment.
4. Recovery of service tax from refunds.
5. Interpretation of exemption order.
6. Adjustment of service tax from payments.

Analysis:
1. The appeal was filed by Revenue against an order allowing a refund of service tax to the appellant based on an exemption order issued by the Ministry of Finance. The appellant was exempted from paying service tax for a specific period.

2. Revenue contended that the appellant was not eligible for the refund as the service tax liability was not discharged by them. It was argued that Bharat Heavy Electricals Ltd (BHEL) had paid part of the amount from Cenvat credit, which could not be refunded in cash.

3. The principle of unjust enrichment was raised by Revenue, suggesting that the burden of service tax had been passed on to BHEL by the appellant. However, the respondent argued that the service tax amount was recovered from BHEL's refunds, and there was no passing on of the burden.

4. The recovery of the service tax from the refunds of BHEL was done by Revenue under the powers granted by the Finance Act. BHEL, in turn, recovered the amount from the appellant by adjusting it from the payments due for security services provided. This process demonstrated that the appellant had not paid the service tax directly.

5. The Tribunal analyzed that the service tax was not paid by the appellant but was recovered from BHEL's refunds as per the exemption order. Therefore, the appellant was eligible for the refund as the burden was borne by them, not passed on to BHEL.

6. Regarding the contention that the refund could not be given in cash due to Cenvat credit payments, the Tribunal clarified that the appellant did not receive an equal amount of cash from BHEL, as the service tax was adjusted from payments. The Tribunal emphasized that the mode of refund was not crucial in this case, as BHEL regularly paid duty in cash.

7. Ultimately, the Tribunal dismissed Revenue's appeal, finding no fault in the order allowing the refund of service tax to the appellant. The decision was based on the clear analysis of the recovery process and the exemption order, affirming the appellant's eligibility for the refund.