2019 (11) TMI 245 - AT - Service Tax

Refund of service tax - works contract services - reverse charge mechanism - refund rejected on the ground that the value shown in the input service invoices vis-a-vis value shown in the S.T return do not match as far as the total value paid for receiving work contract services - principles of unjust enrichment - HELD THAT - Nothing has been brought to the notice that any appeal has been preferred by the department challenging those findings. However, the amount of said refund has been denied to be disbursed rather is ordered to be deposited with consumer welfare fund for want of the evidence regarding not passing of the incidence of the impugned services by the Appellant to any other person. Perusal thereof shows that since the year 2015 till the time of filing the impugned refund Appellant is showing the impugned amount of ₹ 6,36,415/- as an advance recoverable in cash as being paid towards the Service Tax - thus, there is sufficient evidence otherwise on record to falsify any unjust enrichment as is alleged on part of the Appellant. Thus, the Commissioner Appeals has committed an error while holding the unjust enrichment on part of the Appellant without any cognizant reason being given to support that finding - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether the refund claim for an amount paid by the Appellant as a service recipient under reverse charge mechanism can be hit by the principle of unjust enrichment.

Analysis:
The appellant, engaged in providing Construction of Residential Complex Services, filed a refund claim under Section 11B of the Central Excise Act, 1944, amounting to ?6,36,415, which was initially proposed to be rejected due to discrepancies in the value shown in input service invoices and the service tax return. The claim was later rejected on grounds of unjust enrichment, directing the amount to be deposited with the consumer welfare fund. The appellant contested this decision before the Tribunal.

The appellant argued that as the service tax was paid under reverse charge mechanism, the principle of unjust enrichment should not apply, citing a previous order from CESTAT NEW DELHI. The Department, however, supported the order, stating that the refund claim was admissible on merits but was directed to the consumer welfare fund due to unjust enrichment. The Tribunal noted that the Commissioner had found the claim maintainable on merits and not hit by limitations, but ordered the amount to be deposited due to unjust enrichment.

The Tribunal analyzed the evidence, including the balance sheet showing the amount as an advance recoverable in cash since 2015. It concluded that there was sufficient evidence to refute unjust enrichment and held that the Commissioner had erred in finding otherwise without proper reasoning. As a result, the Tribunal set aside the order, allowing the appeal.

In conclusion, the Tribunal ruled in favor of the appellant, holding that the refund claim for service tax paid under reverse charge mechanism cannot be hit by the principle of unjust enrichment, especially when there is evidence to show that the amount was not passed on to others. The decision highlights the importance of proper evidence and reasoning in determining unjust enrichment in such cases.