2008 (11) TMI 60 - AT - Service Tax

In the invoices raised to franchisee, the franchise fee and service tax is separately mentioned, but the Appellant by mistake paid service tax on the gross amount collected - Claim for refund on ground that service tax actually paid is more than the amount of service tax shown in the debit notes - matter remanded for denovo adjudication of the refund claim & to ascertain as to whether the service tax was paid was cum tax amount and if this is so, the value is to be determined as per s. 67(2)

Summary

Issues:
1. Refund claim rejection without issuing a show cause notice.
2. Calculation and payment of service tax on the gross amount received.
3. Application of Section 67(2) of the Finance Act, 1994 in determining the assessable value for service tax.

Analysis:
1. The Appellant raised bills to franchisees with franchise and service tax mentioned separately. They claimed to have mistakenly paid service tax on the gross amount inclusive of service tax and filed a refund claim. The claim was rejected without a show cause notice. The Appellant argued that the excess amount paid is refundable as it wasn't passed on to customers. The Appellant's plea was supported by a decision of the Hon'ble High Court of Allahabad. The Appellant contended that proper personal hearing was not provided, and the rejection lacked grounds communicated to them. The Appellant's Counsel emphasized the principle of unjust enrichment not applying in this case.

2. The Departmental Representative asserted that the service tax was correctly paid, and no refund was due. However, the Tribunal noted that the service tax was calculated and paid on the gross amount received without deducting the service tax. Despite this, the Dy. Commissioner and the Commissioner (Appeals) concluded that no excess service tax was paid. The Tribunal found that the refund claim rejection lacked a show cause notice, and the reasoning for the rejection was not adequately communicated to the Appellant.

3. The Tribunal referred to Section 67(2) of the Finance Act, 1994, which states that if the gross amount charged by a service provider includes service tax payable, the assessable value for calculating service tax should be adjusted accordingly. The Tribunal observed that it was unclear whether this provision was considered in the impugned order. Consequently, the Tribunal set aside the order and remanded the matter to the Dy. Commissioner for a fresh adjudication of the refund claim. The Dy. Commissioner was directed to determine if the service tax was paid as a cum tax amount and to calculate the value as per the provisions of Section 67(2) to ensure accurate assessment for service tax.

This detailed analysis of the judgment highlights the issues raised, the arguments presented by both parties, and the Tribunal's decision to remand the case for further examination in light of the relevant legal provisions.