2016 (7) TMI 52 - AT - Service Tax

Refund of service tax paid under the Construction of Complex Service which was not payable - unjust enrichment - refund to be made the appellant or to the buyers of the flats - The appellant appeared and contested the show cause notice stating therein that the customers of the appellant are demanding refund of the service tax amount paid by them, in view of the clarification by the board that service tax was not payable and accordingly, the refund may be granted directly to the buyers of the flats. Held that - the assessee is not entitled to refund, but it is customers of the assessee, who purchased flats, are entitled to the refund - the appellant have filed the details of his customers, with the revenue in the adjudication of the refund proceedings. The assessee also mentioned that the customers are pressing for refund and some of them have also approached various judicial forums, including the Consumer forum. In view of this matter, I set aside the impugned order and remand the issue back to the adjudicating authority, who shall examine the whereabouts of the person s who deposited the service tax to the appellant, for the purchase of flats, and after such verification having been carried out, shall grant refund to the buyers of the flats out of the said amount of ₹ 16,85,956/-. The Adjudicating Authority shall issue the refund cheques in favour of the respective buyers of the flats, to which the appellant assessee shall not be entitled to make any objection - Decided in favor of assessee by way or remand.

Summary

Issues:
1. Refund claim of service tax paid on construction and sale of flats.
2. Doctrine of unjust enrichment.
3. Time-barred refund claim.

Refund Claim of Service Tax:
The case involved a dispute regarding the refund claim of service tax paid by the appellant on the construction and sale of flats during the financial year 2006-07. The appellant, a construction company, deposited service tax based on advice from the revenue but later filed a refund claim citing a circular stating that service tax was not payable in their case. The refund claim process involved multiple submissions, defect memos, and observations by the revenue. The issue of whether the service tax was actually payable by the appellant was central to the refund claim. The appellate authority examined the provisions of unjust enrichment and relevant circulars to determine the eligibility for a refund. The tribunal ultimately allowed the refund claim considering the burden of taxes borne by the appellant and the absence of passing on the tax to customers.

Doctrine of Unjust Enrichment:
The doctrine of unjust enrichment played a crucial role in the case, as it determined whether the appellant was entitled to the refund of service tax. The appellate authority and the tribunal analyzed the concept of unjust enrichment in detail, considering the burden of tax borne by the appellant and the absence of passing on the tax to customers. The tribunal held that the doctrine of unjust enrichment was not attracted in this case, as the deposit of tax by the appellant was considered as a mere deposit due to the clarification that service tax was not payable on the transactions in question. The tribunal emphasized the need for proper verification and examination of unjust enrichment in such cases to ensure fairness and compliance with legal principles.

Time-Barred Refund Claim:
Another significant issue in the case was whether the refund claim was time-barred. The appellant filed a refund claim for a specific amount after withdrawing part of the claim, citing reasons such as circulars and demands from customers for refund. The revenue raised concerns about the claim being time-barred and subject to unjust enrichment. The appellate authority and the tribunal examined the relevant dates of submission, payment of service tax, and the conditions for filing a refund claim. The tribunal held that the refund claim was within the permissible period of one year from the date of payment, as supported by legal precedents and rulings. Proper documentation and evidence were considered crucial in determining the timeliness and validity of the refund claim.

In conclusion, the appellate tribunal, after thorough analysis and consideration of all aspects, dismissed the revenue's appeal, disposed of cross-objections, and allowed the appellant's appeal by remanding the issue back to the adjudicating authority for further verification and refund to the buyers of the flats. The tribunal emphasized the importance of examining unjust enrichment, time limitations, and customer entitlement in service tax refund cases to ensure fair and just outcomes.