2016 (12) TMI 1276 - AT - Service Tax

Refund claim - unjust enrichment - time bar - Held that - The refund claim finally stands settled only with the order of the apex court. Hence the date of the judgment of the Hon. Supreme Court is to be considered for determining the relevant date in this case i.e. 4.7.2012. The refund claim stands filed on 21.8.2012, which is within a period of 1 year as permitted under Section 11(B) - refund claim filed in time. Unjust enrichment - Held that - the appellant has made considerable efforts to refund the Service Tax benefits to the various subscribers. For current subscribers, it has been passed on as credit in future bills. However, it is also on record that many of the cheques issued to the subscribers who have closed the corrections, have not been encashed. Such funds would continue to lie in the books of accounts of the appellants. In such cases, it cannot be held that the test of unjust enrichment has been satisfied - amount need to be credited to consumer welfare fund, where found reasonable. Matter remanded back to undertake verification of the correct amount of service tax already passed on by the appellant to the ultimate subscribers which may be refunded in cash - Where such evidence has not been produced, the original authority will credit such amounts to the Consumers Welfare Fund - appeal allowed by way of remand.

Summary

Issues Involved:
1. Time-barred refund claim.
2. Doctrine of unjust enrichment.

Issue-Wise Detailed Analysis:

1. Time-Barred Refund Claim:

The appellant, M/s Mahanagar Telephone Nigam Ltd. (MTNL), filed a refund claim for ?35,50,320.28 on 21.08.2012, which was collected as Service Tax on OYT Rebate during the period from 01.07.1994 to 31.03.1995. The claim was based on the Bombay High Court's order dated 21.12.2010, which stated that Service Tax should be levied on the net amount after allowing the OYT rebate. The appellant argued that the refund claim should be considered within time as the relevant date should be the dismissal date of the SLP by the Supreme Court on 04.07.2012, not the date of the Bombay High Court's order. The Tribunal agreed with the appellant's argument, stating that the issue attained finality only with the Supreme Court's decision, and thus, the relevant date for the refund claim should be 04.07.2012. Consequently, the refund claim filed on 21.08.2012 was within the one-year period allowed under Section 11B of the Central Excise Act, 1944.

2. Doctrine of Unjust Enrichment:

Section 11B also mandates that the refund can be paid in cash only after passing the test of unjust enrichment. The lower authorities had rejected the refund claim partly on the grounds of unjust enrichment, arguing that the Service Tax amounts originally charged by the appellant had been passed on to the telephone subscribers in periodic telephone bills. The Tribunal noted that the appellant had made considerable efforts to refund the Service Tax benefits to the various subscribers, including passing on the benefits as credit in future bills for current subscribers. However, it was also recorded that many of the cheques issued to subscribers who had closed their connections had not been encashed, meaning such funds would continue to lie in the books of accounts of the appellants. The Tribunal directed the original adjudicating authority to verify the correct amount of Service Tax already passed on by the appellant to the ultimate subscribers. Amounts for which evidence of passing on the benefit to subscribers was provided should be refunded in cash to the appellant, while amounts for which such evidence was not produced should be credited to the Consumers Welfare Fund.

Conclusion:

The Tribunal decided the appeal in favor of the appellant regarding the time-barred issue, recognizing the relevant date as the Supreme Court's dismissal of the SLP on 04.07.2012. However, the case was remanded back to the original adjudicating authority to verify the amounts passed on to subscribers to satisfy the doctrine of unjust enrichment. The decision was pronounced in the open court on 14.12.2016.