2021 (7) TMI 360 - AT - Service Tax

Refund of service tax - booking of flat cancelled - principles of unjust enrichment - Department formed an opinion that appellant will gain unjust enrichment, as the service tax has already been collected from the customer - time limitation - reckoning of time limit of one year from the relevant date. Principles of Unjust enrichment - HELD THAT - It is apparent that Shri K.K. Agarwal had agreed to purchase the residential unit from the appellant and accordingly, had paid the sale consideration of ₹ 8,50,000/- alongwith the amount of ₹ 38,250/- towards Service Tax liability of the appellant. Apparently and admittedly, said amount of service tax has been paid by the appellant to the Department. The another apparent fact is that the deal for sale of the said residential unit stands cancelled and the appellant has returned the amount of sale consideration i.e. ₹ 8,50,000/- to the buyer of the flats Shri K.K. Agarwal. ₹ 38,250 were also supposed to be refunded to him in the given circumstances, though the same has not yet been paid by the appellant. From that perspective it appears to be a case of unjust enrichment to the appellant - But there is enough acknowledgment on part of appellant that the said amount has to be returned to the customer, once it is refunded. As the said amount stands already paid to the Department, the Department is liable to refund the same. Hence it is held the Commissioner (Appeals) has erred while refusing the refund on ground of unjust enrichment. Time Limitation - HELD THAT - There are no doubt the service tax was deposited by the appellant on 4th October, 2016 and 24 October, 2016 and the refund claim has been filed on 7th May, 2018 which is absolutely beyond one year from the date of deposit. But admittedly post the said deposit the circumstances arose due to which the transaction value against which the aforesaid service tax was paid, was got returned to the customer due to sale of the flat being not finalized - the date of adjustment in the present case is the date when the money received by appellant need to be refunded alongwith the amount of service tax. The period of one year, in the given facts and circumstances, shall reckon from 15.10.2017 when appellant returned the amount of sale consideration to Shri K.K. Agarwal instead of 04.10.2016. The refund claim filed on 7th May, 2018 therefore, stands very much within the period of one year. Thus, both the grounds taken by the Commissioner (Appeals) for rejecting the refund claim are held to be against the appreciation of the relevant facts of the present case. The order, accordingly, is hereby set aside - the appellant is directed to return the amount to Shri K.K. Agarwal within 15 days of receiving the said amount from the Department against the intimation thereof to the Department. Appeal allowed - decided in favor of appellant.

Summary

Issues involved:
1. Unjust enrichment in refund claim for service tax paid by the appellant.
2. Time bar for claiming refund of service tax.

Analysis:
1. Unjust enrichment: The appellant, a construction service provider, paid service tax for a customer's flat booking, which was later canceled. The customer demanded a refund of the service tax paid. The Department rejected the refund claim citing unjust enrichment and time bar. The appellant argued that since the flat sale was canceled, the service tax amount must be refunded to the customer, eliminating unjust enrichment. The Tribunal agreed, citing a similar case precedent where the appellant was directed to refund the service tax amount to the customer, and the Department was held responsible for the refund. The Tribunal set aside the Commissioner's decision and directed the Department to refund the service tax amount to the customer.

2. Time bar: The Department argued that the refund claim was time-barred as it was filed after one year from the date of service tax deposit. However, the Tribunal considered the date of the transaction's reversal as the relevant date for the refund claim, not the date of service tax deposit. Referring to previous judgments, the Tribunal held that the date of reversal should be considered the relevant date for the refund claim. Therefore, the Tribunal set aside the Commissioner's decision on the time bar issue and directed the appellant to refund the service tax amount to the customer within 15 days of receiving it from the Department.

In conclusion, the Tribunal allowed the appeal, emphasizing that the appellant must refund the service tax amount to the customer and directed the Department to take appropriate action in case of non-compliance. The decision highlighted the importance of considering the date of transaction reversal as the relevant date for refund claims and established that unjust enrichment does not apply when the service tax amount is to be refunded to the customer.