2018 (10) TMI 974 - AT - Service Tax

Refund of Service tax paid erroneously - refund claimed on the ground that appellant provided services to the developer of SEZ and the services were consumed in the SEZ itself - case of Revenue is that the approval of Co-developer agreement was issued on 28.01.2008 whereas the services provided during period August 2007 to December 2007 - denial of refund also on the ground of unjust enrichment. Held that - The Co-developer agreement dated 27.01.2007 was formed part of the same approval dated 28.01.2008, therefore, the approval become effective retrospectively i.e. from 27.01.2007. In this fact, the services provided during August 2007 to December 2007 is clearly to Co-developer M/s RGA Software Systems Pvt. Ltd, this to be approved as Co-developer of SEZ by Ministry of Commerce and Industries. Accordingly, the services provided to approve Co-developer of SEZ was exempted from payment of service tax, hence the service tax paid by the appellant is refundable. Unjust enrichment - Held that - The appellant have admittedly not recovered the amount of service tax from the service recipient, which is evident from the certificate issued by the service recipient of M/s RGA Software Systems Pvt. Ltd. The adjudicating authority before sanction of the refund claim must verify the balance sheet that whether the amount of refund is shown as receivable on the asset side in the balance sheet, if it is found as receivable, the refund cannot be hit by unjust enrichment. Appeal allowed by way of remand.

Summary

Issues Involved:
Refund claim rejection based on lack of Co-developer approval and unjust enrichment.

Analysis:
1. Refund Claim Rejection based on Lack of Co-developer Approval:
The appellant, registered as a Consulting Engineer, submitted a refund claim for services provided to a SEZ developer, arguing that as the services were consumed within the SEZ, they were not liable for service tax. The adjudicating authority rejected the claim citing lack of approval for Co-developer agreement during the service period. The appellant contended that the approval issued later validated from the agreement date, making the services eligible for exemption. The Tribunal analyzed the approval and found it effective retrospectively from the agreement date, thus exempting the services provided during the relevant period. This led to the conclusion that the service tax paid erroneously was refundable.

2. Unjust Enrichment Issue:
The appellant also raised the issue of unjust enrichment, claiming they did not pass on the service tax burden to the service recipient. They provided a certificate from the recipient stating non-payment despite invoiced tax amounts. The Tribunal considered this evidence along with a CA certificate and ledger showing the tax amount as receivable, indicating non-recovery. Referring to previous judgments supporting such claims, the Tribunal emphasized the importance of verifying the balance sheet to ensure the refund amount is shown as receivable. As the appellant had not recovered the tax and the balance sheet verification was pending, the Tribunal allowed the appeal, highlighting the need for proper verification before sanctioning the refund claim.

In conclusion, the Tribunal allowed the appeal on the grounds that the services provided to the SEZ developer were exempt from service tax due to retrospective validation of Co-developer approval and that the appellant had not enriched unjustly as they did not pass on the tax burden to the service recipient, pending balance sheet verification.