2022 (2) TMI 197 - AT - Service Tax

Refund of service tax paid - rejection on the ground of failure to cross the bar of unjust enrichment - HELD THAT - Most of the cost of tax is actually passed on to the buyers but such shifting the burden if remains backward then the cost of tax is borne by those who are engaged in producing the product. Example of such Shifting and Incidence , as noted in the Encyclopaedia, was lowering wages and salaries, lowering price of raw materials or a lower return on borrowed capital. However, in some cases tax may not be shifted at all and the payer bears the burden. Example of such incidence is stated in the said paragraph as reducing the net income of the business owner by way of reducing the business benefit. It is difficult to understand from where he borrowed this inference that ultimate incidence of all taxes shifts from business to the consumer and mere reflection of the same in the books of account (perhaps he meant thereby receivable) does not reflect actual shifting of incidence. No prudent man would concur to his finding that is based on erroneous understanding of simple English sentence available in the Encyclopaedia Britannica strangely he equated most of the cost of tax with all taxes . Therefore, the reasoning in his order on failure of the Appellant to pass the burden of unjust enrichment appears to be erroneous. Appeal allowed.

Summary

Issues:
Refusal to credit refund amount to the Appellant's account and crediting it to the consumer welfare fund challenged.

Analysis:
The case involved a dispute where the Commissioner (Appeals) refused to credit the refund amount to the Appellant's account and instead directed it to be credited to the consumer welfare fund. The matter originated in 2010 when the Appellant received Service Tax incentives, which the Respondent-Department sought to include in the assessable value. Despite the Appellant voluntarily discharging the duty liability before a Show-cause notice was issued, the final decision at the Commissioner (Appeals) level set aside the duty, penalty, and interest, allowing the appeal with consequential relief. Subsequently, the Appellant's refund claim was rejected on various grounds, including unjust enrichment. The Commissioner (Appeals) held that the Appellant failed to meet the unjust enrichment requirement, leading to the decision to credit the refund amount to the consumer welfare fund.

The appeal before the Appellate Tribunal involved extensive arguments on the legality of including sales tax incentives in the assessable value, the nature of payments made during investigations, and the application of the doctrine of unjust enrichment. The Appellant's counsel cited a judgment from the Allahabad High Court to support the argument that deposits made during adjudication proceedings should be considered as made under protest, thus exempting them from the unjust enrichment principle. On the other hand, the Respondent-Department's representative relied on a different judgment to assert the applicability of unjust enrichment to all refund cases. The Commissioner's understanding of the "Shifting and Incidence" of tax definition, as derived from the Encyclopaedia Britannica, was also a focal point of discussion.

The Appellate Tribunal, in its order, allowed the appeal and modified the Commissioner's decision to credit the refund amount to the consumer welfare fund. Instead, the Tribunal directed the refund amount, along with interest, to be paid to the Appellant within three months of the order. The Tribunal's decision was based on the interpretation of legal principles, including the application of unjust enrichment and the specific circumstances of the case, ultimately leading to the modification of the initial ruling.