2021 (2) TMI 512 - AT - Service Tax

Refund claim of excess paid - Denial on the ground of time limitation - Section 11B of Central Excise Act, 1944 - unjust enrichment - HELD THAT - The facts in the present case is not under dispute that the appellant have paid the excess service tax during the quarter April to June, 2017, however, the appellant under bona fide belief transferred the said excess paid service tax into their TRANS-1 as balance in personal ledger account. Subsequently, on objection raised by the GST department the appellant have reversed the said amount and also paid an interest of ₹ 52,256/- on 27.02.2019. In these peculiar circumstances, it is found that since the appellant has transferred the amount of excess paid service tax in the TRANS-1 and same was reversed on 27.02.2019, therefore till the date up to 27.02.2019 there is no cause for claiming refund of this amount. The refund is arising only after the appellant reversed the amount on 27.02.2019. The refund was admittedly filed on 05.04.2019 i.e well within the prescribed time limit of 1 year in terms of section 11B. Therefore, the refund was filed well within the time. Principles of Natural Justice - HELD THAT - As submitted by the Learned Authorized Representative the issue of unjust enrichment need to be verified at the time when the refund is to be granted to the assessee. Therefore in the present case also though the refund is not hit by limitation but the fact that whether the incidence of the refund amount has been passed on or otherwise needs to be examined by the sanctioning authority. The matter is remanded to the adjudicating authority to only verify the unjust enrichment and accordingly, to dispose of the refund claim of the appellant - appeal allowed by way of remand.

Summary

Issues:
- Rejection of refund claim of excess paid service tax on the ground of being time-barred.
- Applicability of Section 11B of the Central Excise Act, 1944.
- Argument regarding the excess service tax being treated as a deposit.
- Timing of the refund claim in relation to the reversal of the excess paid service tax.
- Examination of the aspect of unjust enrichment.

Analysis:

The appeal challenged the rejection of a refund claim amounting to ?1,61,203/- for excess paid service tax, upheld by the Commissioner (Appeals) citing it as time-barred under Section 11B of the Central Excise Act, 1944. The appellant revised their ST-3 Returns due to the cancellation of some invoices, resulting in an excess payment of service tax, which was later credited in TRANS-1 under GST Law. The refund application was filed on 05.04.2019 after the reversal of the amount on 27.02.2019. The appellant contended that the limitation under Section 11B did not apply as the excess amount was treated as a deposit, and the refund claim was within the prescribed time limit. The appellant also argued that the aspect of unjust enrichment needed examination.

The appellant's counsel argued that the excess paid service tax was transferred to TRANS-1 and reversed with interest, leading to the refund accruing only after 27.02.2019. Citing various judgments, the counsel emphasized that the refund claim filed on 05.04.2019 was within the time limit specified by Section 11B. On the contrary, the Revenue representative reiterated the time limit argument, stating that the refund claim filed in 2019 was beyond the one-year limit, and the claim did not pass the unjust enrichment test. The representative relied on specific judgments to support this stance.

Upon review, the Member (Judicial) found that the excess service tax was transferred to TRANS-1 and later reversed by the appellant, leading to the refund claim accruing post the reversal on 27.02.2019. The refund application filed on 05.04.2019 was within the one-year time limit prescribed by Section 11B. While ruling that the refund claim was not time-barred, the Member highlighted the need to verify unjust enrichment before granting the refund. Consequently, the impugned order was set aside, and the matter was remanded to the adjudicating authority for further examination on the aspect of unjust enrichment before disposing of the appellant's refund claim.

In conclusion, the appeal was allowed by remanding the matter for verification of unjust enrichment, ensuring a comprehensive review before the refund is granted to the appellant.