2020 (1) TMI 181 - AT - Service Tax

Refund of service tax - erroneous payment of service tax which was not required to be paid by them, but was to be paid by the developers namely M/s M. Construction Co and Associates - CBEC Circular issued vide F No 354/311/2015-TRU dated 20.01.2016 - section 11B of CEA - principles of natural justice - HELD THAT - Undisputedly, Appellants have collected the service tax paid by them from their customer, the fact not disputed by the appellants at anytime. During the course of hearing of appeal, to the specific query made by bench, learned counsel replied and affirmed that they have collected the service tax from their customers - It is settled law that once the appellant has passed on the burden of Service Tax paid to their customers, the amount of tax paid even erroneously cannot be refunded to them. There is no provision in law for transferring the amount, from the account of on registered tax payer to the account of another tax payer from whom said amount of tax was actually due. Even otherwise the amount, which had been paid by the appellants as tax which was not due from them but has been collected by them from customers, will have to be credited to the Consumer Welfare as per Section 11B, and cannot be retained as Service Tax in Consolidated Fund. The request made by the appellant for adjusting this amount paid by them against the tax liability of M/s M Construction Co cannot be acceded too - appeal dismissed - decided against appellant.

Summary

Issues:
Refund claim rejection on grounds of service tax collection from customers and absence of provision for inter-unit adjustment.

Analysis:
The appeal was against the rejection of a refund claim for service tax paid by the appellant, which they claimed was to be paid by a developer as per a CBEC Circular. The Commissioner (Appeal) upheld the rejection citing the appellant's collection of service tax from customers and the absence of provisions for inter-unit adjustments. The appellant argued that since they had erroneously paid the tax, it should be refunded or adjusted against the developer's tax liability. However, the Authorized Representative contended that as the burden was passed on to customers, refund was not admissible under Section 11B of the Central Excise Act, 1944. The Tribunal noted that the appellant had indeed collected the service tax from customers, which precludes refund even if paid erroneously, as established in Mafatalal Industries case (1997). Additionally, there is no provision for transferring tax amounts between registered taxpayers. The Tribunal emphasized that the tax amount, though not due from the appellant, must be credited to Consumer Welfare under Section 11B and cannot be retained as Service Tax. Therefore, the request to adjust the amount against the developer's liability was rejected. Consequently, the appeal was dismissed.