2017 (12) TMI 769 - AT - Service Tax

Refund of service tax paid, which was not liable to be paid - denial on the ground of unjust enrichment - Held that - the appellants are not liable to pay service tax in view of the Circular No.108/02/2009-ST dt. 29/01/2009 - the appellant has produced a certificate from the Chartered Accountant which has categorically certified that incidence of duty has been borne by the appellant and its incidence has not been passed to any other person. The Commissioner has not discussed the certificate issued by the Chartered Accountant at all and has also not disputed its authenticity. Therefore Chartered Accountant certificate is a valid proof for the determination of an issue of unjust enrichment. The appellant has proved that the incidence of duty has not been passed on to any other person and has been borne by him alone and therefore the refund claim is not hit by unjust enrichment - appeal allowed - decided in favor of appellant.

Summary

Issues:
Refund claim rejection on the ground of unjust enrichment in a service tax case.

Analysis:
The appeal was against the Commissioner(Appeals) order rejecting the appellant's appeal due to unjust enrichment in a service tax matter. The appellant, engaged in constructing residential complexes, did not collect service tax from customers based on Circular No.108/02/2009-ST. After paying service tax, interest, and penalty, the appellant filed a refund claim which was rejected by the lower authority. The Commissioner(Appeals) accepted the appellant's contention of not being liable for service tax but rejected the refund claim citing unjust enrichment. The Commissioner held that the tax liability was shifted to the client, and the appellant failed to provide evidence of not charging service tax to clients. The appellant argued against the rejection, presenting a Chartered Accountant certificate supporting that the tax burden was not passed on. The appellant relied on various decisions to support the validity and evidentiary value of the certificate in determining unjust enrichment.

The appellant contended that the impugned order was contradictory and not sustainable in law as it failed to appreciate the legal provisions properly. The appellant emphasized that the tax liability was borne solely by them, supported by the Chartered Accountant certificate. The appellant argued that the certificate's authenticity was unquestioned by the Department, and therefore, the refund claim should not be denied. The appellant also argued that principles of unjust enrichment do not apply to refund of interest and penalty, citing relevant decisions. The Department, represented by the Assistant Commissioner, reiterated the findings of the impugned order.

After reviewing submissions, evidence, and legal precedents, the Judicial Member found that the appellant was not liable to pay service tax as per the circular. The Commissioner(Appeals) erred in rejecting the refund claim based on unjust enrichment without adequately considering the Chartered Accountant certificate presented by the appellant. The Judicial Member emphasized the validity and importance of the certificate in proving that the tax burden was not transferred to any other party. Relying on the cited decisions, the Judicial Member concluded that the appellant had successfully demonstrated that the tax incidence was solely borne by them, thus allowing the appeal and setting aside the impugned order with consequential relief.

In conclusion, the judgment addressed the issue of unjust enrichment in a service tax case, emphasizing the importance of evidence such as a Chartered Accountant certificate in proving that the tax burden was not passed on to others. The Judicial Member overturned the Commissioner(Appeals) decision, allowing the appellant's appeal based on the presented evidence and legal precedents.