2018 (1) TMI 1015 - AT - Service Tax

Refund claim - export of services - case of appellant is that business auxiliary service exported by it falls under Rule 3(1) (iii) of the Export of Service Rules, 2005 and accordingly, no service tax was payable on export of such service - denial of refund on the ground that the services provided to the overseas client were used/ consumed within India and as such, services should not be considered as export of service - unjust enrichment - Held that - The Tribunal, in the case of Blue Star Ltd. 2014 (12) TMI 25 - CESTAT MUMBAI , by relying on the decision in the case of Paul Merchants Ltd 2012 (12) TMI 424 - CESTAT, DELHI (LB) , has held that since the services were provided for the benefit of the overseas service receiver, irrespective of the place of performance of service, the same should be considered as export for the benefit of non-payment of Service Tax under business auxiliary service - refund cannot be denied. Unjust enrichment - Held that - the appellant under reverse charge mechanism had deposited the service tax into the Government Exchequer and there was no scope on its part to collect such tax from the overseas clients - the doctrine of unjust enrichment is not applicable in this case, for denial of the refund benefit. Appeal allowed - decided in favor of appellant.

Summary

Issues involved:
Refund of Service Tax under business auxiliary service; Denial of refund benefit based on services not exported outside the country and unjust enrichment.

Analysis:
The case involved the appellant, engaged in manufacturing excisable goods and providing business auxiliary services, seeking a refund of Service Tax amounting to ?7,47,827 under the Export of Service Rules, 2005. The authorities denied the refund, stating that the services provided were used within India for the overseas client, hence not qualifying as an export of service under Rule 3(1)(iii) of the Rules. Additionally, the refund claim was rejected on the grounds of unjust enrichment.

The Tribunal analyzed the denial of refund benefit by the Commissioner (Appeals) and found that the services were not considered as exported outside the country, as they were utilized within India for the benefit of the overseas client. However, the Tribunal referred to a co-ordinate bench decision in the case of Blue Star Ltd. and held that services provided for the benefit of the overseas service receiver, irrespective of the place of performance, should be considered as export for non-payment of Service Tax under business auxiliary service. Therefore, the Tribunal concluded that the appellant was entitled to the refund of service tax paid under business auxiliary service.

Regarding the unjust enrichment aspect, the Tribunal noted that the appellant had deposited the service tax under reverse charge mechanism into the Government Exchequer, with no possibility of collecting such tax from overseas clients. Consequently, the doctrine of unjust enrichment was deemed not applicable in this case for the denial of the refund benefit. The Tribunal allowed the appeal in favor of the appellant, setting aside the impugned order and granting the benefit of the refund.

In summary, the Tribunal ruled in favor of the appellant, holding that the services provided for the overseas client, even if utilized within India, should be considered as export of service under Rule 3(1)(iii) of the Export of Service Rules, 2005. Additionally, the doctrine of unjust enrichment was not applicable in this case, leading to the appellant being entitled to the refund of service tax paid under business auxiliary service.