2020 (9) TMI 434 - AT - Service Tax

Refund of Service Tax - Club or Association Service - principles of Unjust Enrichment - Section 11B of the Central Excise Act, 1944 - HELD THAT - A refund could be granted if the conditions laid down under Section 11B are satisfied and the primary condition is the principle of unjust enrichment. This test the appellant is unable to clear since the appellant is nowhere disputing the fact that it had passed on the duty element to its customers. There has also been an admission that as and when the refund is obtained, the duty element collected from its customers would be paid back. By this safe play, the appellant has ensured itself no loss since the same has been recovered and it has come in appeal by taking a chance. The fact that the appellant has passed on the tax element to its service recipient, the refund of which is not made as on date, coupled with the appellant s claim for refund of tax clearly attracts the principles of unjust enrichment and hence cannot be entertained. The lower authority has therefore rightly rejected which action does not call for any interference. Appeal dismissed - decided against appellant.

Summary

Issues:
1. Appeal against rejection of claim for refund under Section 11B of the Central Excise Act, 1944.

Analysis:
The appellant filed an appeal against the rejection of their claim for refund under Section 11B of the Central Excise Act, 1944. The Order-in-Appeal passed by the Commissioner of Central Tax (Appeals-II), C.G.S.T. & Central Excise, Chennai, upholding the rejection of the appellant's claim was challenged. The appellant, registered with the Service Tax Department for providing membership of Club or Association Service, had a demand raised for Service Tax on subscription amounts received from members. This demand was initially set aside by the First Appellate Authority and subsequently by the CESTAT. The appellant then sought a refund of the tax paid, which was rejected by the Adjudicating Authority citing unjust enrichment, as the appellant did not dispute passing on the duty element to its customers.

The primary condition for granting a refund under Section 11B is the principle of unjust enrichment. The appellant failed to satisfy this condition as it did not dispute passing on the duty element to its customers and acknowledged that the duty element collected would be refunded to the customers upon obtaining a refund. The appellant's claim for refund, based on the tax element passed on to service recipients, was considered to attract the principles of unjust enrichment and was deemed inadmissible. The appellant's argument, supported by decisions on different factual scenarios, did not align with the present case where the duty element was passed on to customers. Consequently, the lower authority's rejection of the claim was upheld as it was deemed justified and did not warrant interference.

In conclusion, the appeal was dismissed as devoid of merits, and the findings of the lower authorities were upheld. The judgment emphasized the principle of unjust enrichment in refund cases and highlighted the appellant's acknowledgment of passing on the duty element to customers as a crucial factor in determining the admissibility of the refund claim. The decision was pronounced in open court on 08.09.2020.