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2017 (12) TMI 1032 - AT - Service TaxRefund claim - service tax paid on reverse charge basis in terms of Section 66A, mistakenly, on non-taxable activity - denial on the ground of unjust enrichment - Held that - the tax entry on supply of tangible goods for use itself came into effect only from 16/05/2008. The tax liability under such entry is not even existing at the time when the appellant entered into contract with DMRC. Hence, the question of factoring such tax liability in the contract price is not possible. Reliance placed in the case of Himatsingka Seide Ltd. vs. CC, Bangalore 2005 (3) TMI 333 - CESTAT, BANGALORE , where the Tribunal held that there can be no presumption that duty collected in excess of what is payable is passed on to the buyers. Whenever there is a composite price inclusive of all duties, the meaning is the price includes only the duty payable. No presumption can be made that excess duty paid by mistake is passed on to the buyer - In the present case, there is not even a tax liability on the date of conclusion of contract with DMRC. The lower authorities fell in error in holding against the appellant on the question of unjust enrichment - appeal allowed - decided in favor of appellant.
Issues Involved:
1. Liability of service tax on the lease transaction. 2. Claim for refund of service tax paid. 3. Unjust enrichment and its implications. 4. Verification and sanction of refund claim. 5. Transfer of refund amount to the Consumer Welfare Fund. Issue-wise Detailed Analysis: 1. Liability of Service Tax on the Lease Transaction: The appellant, a joint venture company, entered into a lease agreement with ITD Thailand for leasing and importing tunnel boring machines to execute a contract for DMRC. They paid service tax on a reverse charge basis under the category of "supply of tangible goods for use." However, they later realized that this transaction was not liable to service tax and filed a claim for a refund. 2. Claim for Refund of Service Tax Paid: The appellant filed a refund claim on 28/03/2012 for the service tax amounting to ?11,25,05,830/-. The Jurisdictional Assistant Commissioner of Service Tax initially rejected this claim on merit, but the Commissioner (Appeals) set aside this order and directed the Assistant Commissioner to sanction the refund after verifying the relevant documents. The Tribunal and the Hon'ble Delhi High Court supported this direction. 3. Unjust Enrichment and Its Implications: The principle of unjust enrichment was a significant point of contention. The Original Authority initially concluded that the appellant could not transfer the burden of service tax to any other party, including DMRC, based on clauses in the agreement and a Chartered Accountant's certificate. Despite this, the Original Authority paradoxically concluded that the appellant would be unjustly enriched if the refund was granted. This contradictory conclusion was found to be absurd by the Tribunal. 4. Verification and Sanction of Refund Claim: Despite directions from the Commissioner (Appeals) and the Hon'ble Delhi High Court, the refund was not sanctioned promptly. Eventually, the Jurisdictional Assistant Commissioner sanctioned the refund but transferred the amount to the Consumer Welfare Fund, citing unjust enrichment. The Tribunal found no justification for re-examining the question of unjust enrichment in the second round of proceedings, given the categorical findings in the initial order. 5. Transfer of Refund Amount to the Consumer Welfare Fund: The Tribunal scrutinized the lower authorities' reliance on the phrase "inclusive of tax" in the contract to hold that the appellant collected service tax. The Tribunal referred to various judgments, including those from the Hon'ble Supreme Court and other Tribunals, which clarified that such phrases do not imply that tax was collected from the customer. The Tribunal also noted that the tax entry for "supply of tangible goods for use" came into effect after the contract with DMRC was entered into, making it impossible to factor in such tax liability in the contract price. Conclusion: The Tribunal concluded that the lower authorities erred in holding against the appellant on the question of unjust enrichment. The appeal was allowed with consequential relief, setting aside the impugned order. The Tribunal emphasized that there was no legal or factual justification for the finding of unjust enrichment, and the refund should not have been transferred to the Consumer Welfare Fund. Order Pronounced: The order was pronounced in open court on 20/12/2017.
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