2016 (12) TMI 393 - AT - Service Tax

Refund claim by recipient of services - service tax discharged for rendering of commercial and industrial construction service in the bills raised during the execution of the project and, having ascertained in 2006 that such projects were not liable to tax owing to the exclusion provision in the definition of the service on section 65 (25b) of Finance Act, 1994, applied for refund of ₹ 2,53,65,007 charged from them towards service tax for the period from 1st September 2004 to 31st July 2006 - unjust enrichment - is claim of refund justified? - Held that - The scheme of section 11B of Central Excise Act, 1944 does not specify that duty has to be credited to the Central Government as a pre-requisite for eligibility. It merely requires that duty be paid and, as far as recipient of service is concerned, that obligation is discharged by making over the amount in the invoice that separately identifies the tax component. The claimant is not required to enforce tax-payment; that is the responsibility of tax officials who are vested with power to recover such tax which has been collected in excess. With that specific empowerment available in the statute, the need to prove that provider has deposited the tax is rendered superfluous. It is sufficient to evince that invoices, incorporating the tax amount, has been honoured in full. The bank statement and invoices furnished do evidence that tax liability has been discharged along with consideration for services received. The impugned order has found that the payments made prior to September 2005 is barred by limitation. We hold that this finding is in accordance with the time-line laid down in section 11B of Finance Act, 1994, Learned Counsel for appellant attempted to forcefully argue that this, being tax not liable to be paid, is not a refund envisaged in section 11B of Central Excise Act, 1944. - it is well-settled that the powers of the Tribunal are circumscribed by the statute. The extraordinary powers vested in High Courts and the Hon ble Supreme Court cannot be exercised by us. We, therefore, uphold the rejection of the claim for the period prior to September 2005 on grounds of limitation but allow the appeal to the extent of ₹ 1,08,95,273 to be refunded to appellant, being the subsequent period discharged amount. Appeal disposed off - decided partly in favor of appellant.

Summary

Issues Involved:
1. Limitation period for refund claims.
2. Unjust enrichment.
3. Proof of tax collection and deposit.
4. Eligibility for tax exemption and refund.

Detailed Analysis:

1. Limitation Period for Refund Claims:
The claim for refund filed on 1st September 2006 by the appellant was partially rejected by the Assistant Commissioner on the grounds of insufficient documentation. The first appellate authority invoked the bar of limitation for a portion of the claim, confirming the rejection for the period prior to 4th September 2005. The Tribunal upheld this finding, stating it was in accordance with the timeline prescribed in section 11B of the Central Excise Act, 1944. Thus, the refund claim for the period before September 2005 was rightly rejected on the grounds of limitation.

2. Unjust Enrichment:
The first appellate authority confirmed the rejection of the entire refund claim, invoking the principle of unjust enrichment. The Tribunal examined whether the principle of unjust enrichment could be applied, considering the appellant had capitalized the cost of construction, which included the service tax. The Tribunal noted that capitalization transforms the expense into future revenue recovery, and depreciation charged on revenues does not constitute passing on the tax burden to customers. Furthermore, the Tribunal highlighted the regulatory mechanisms in the energy sector that prevent unjust enrichment, concluding that the appellant had borne the incidence of tax.

3. Proof of Tax Collection and Deposit:
The original authority rejected the refund claim due to a lack of proof that the tax was collected by the contractor and deposited with the government. The Tribunal clarified that the recipient of the service is not required to prove that the tax was deposited with the government. It is sufficient to show that the tax amount was included in the invoices and paid in full. The bank statements and invoices provided by the appellant were deemed sufficient evidence that the tax liability was discharged.

4. Eligibility for Tax Exemption and Refund:
The Tribunal acknowledged that the construction of ports was exempt from service tax as per notification no. 16/2005-ST dated 7th June 2005, and transport terminals were outside the ambit of taxable service. Despite this, the refund claim was initially rejected due to the time-bar and unjust enrichment. The Tribunal concluded that the appellant was eligible for a refund of ?1,08,95,273, as the unjust enrichment principle did not apply given the specific circumstances of the energy sector and the capitalization of the construction cost.

Conclusion:
The Tribunal upheld the rejection of the refund claim for the period prior to September 2005 on the grounds of limitation but allowed the refund of ?1,08,95,273 to the appellant, setting aside the rejection based on unjust enrichment. The Tribunal emphasized the need for proper scrutiny of documents to establish tax collection and deposit, and clarified the conditions under which unjust enrichment can be invoked.