2018 (7) TMI 855 - AT - Service Tax

Refund claim - unjust enrichment - refund allowed but transferred the same to Consumer Welfare Fund, in terms of Section 12C of the CEA, 1944 - burden of service tax has been passed on to the passengers/customers or not - Held that - Similar issue has been considered by this Tribunal in identical set of circumstances/ arguments in M/s Rajdhani Travels & Ors case 2018 (4) TMI 168 - CESTAT AHMEDABAD , where it has been concluded that once the refund amount has been shown as an expenditure in the books of accounts, accordingly it enters into the cost of the service, then inevitably the burden of tax is passed on to customers/others, and consequently hit by the principles of unjust enrichment. Regarding the refund amount of ₹ 12,86,403/-, the Ld. Commissioner(Appeals) has upheld the same observing that once the duty is refundable, there is no question of imposition of penalty and recovery of interest. Appeal allowed in part.

Summary

Issues:
Appeal against rejection of service tax refund - Burden of service tax passed on to customers - Principle of unjust enrichment - Applicability of judgments in similar cases - Imposition of penalty and interest on refund amount.

Analysis:
1. The appeal was filed by the Revenue against the rejection of a service tax refund claim by the Commissioner (Appeals). The respondent, a service provider registered under the category of 'Tour Operator Service,' had filed a refund claim of ?2,20,78,450. The adjudicating authority sanctioned a portion of the claim but transferred the rest to the Consumer Welfare Fund, citing the principle of unjust enrichment.

2. The Revenue argued that the burden of service tax had indeed been passed on to customers as the tax amount was shown as an expenditure in the respondent's books of accounts. They referred to a previous Tribunal judgment on a similar issue to support their contention that the refund amount was not eligible due to unjust enrichment.

3. The Respondent's Chartered Accountant countered, stating that the service tax payment being shown as expenditure did not automatically mean the burden was passed on to customers. They cited judgments of high courts to support their argument that the fees collected from customers remained constant, indicating the burden was not passed on.

4. The Tribunal analyzed previous judgments and held that once the refund amount was treated as expenditure in the books of accounts, the burden of tax was passed on to customers, invoking the principle of unjust enrichment. They distinguished the facts of the case from those in the judgments cited by the Respondent's Chartered Accountant and set aside the Commissioner (Appeals)'s decision on the issue of unjust enrichment.

5. Regarding a separate refund amount of ?12,86,403, the Tribunal upheld the Commissioner (Appeals)'s decision that no penalty or interest should be imposed once the duty is found refundable. The Revenue's appeal was partly allowed on this issue, modifying the impugned order accordingly.

6. In conclusion, the Tribunal ruled in favor of the Revenue on the issue of unjust enrichment, setting aside the Commissioner (Appeals)'s decision. However, they upheld the decision on the penalty and interest on the separate refund amount. The appeal was partly allowed based on these findings.