2022 (2) TMI 668 - AT - Service Tax

Refund of service tax - duty free shops in airport - taxable territory in transactions involving goods sold to outbound passengers - principles of unjust enrichment - time limitation - HELD THAT - The appellant, admittedly, was not fastened with the statutory responsibility to deposit service tax in the Consolidated Fund of India but was liable to discharge the tax component of the payments, contractually claimed by the airport concession-holder, in periodical bills. However, under section 11B of Central Excise Act, 1944 as applied to Finance Act, 1994, appellant, having thus been saddled with the burden, is entitled to seek extraction of tax collected from the Consolidated Fund of India on establishing the absence of legislative intent. As the statutory enactment stipulates time-period beyond relevant date for preferring such claims, that constraint on the assessee liable to tax, which, by default, is date of payment of tax, is similarly applicable to bearer of tax burden. The appellant filed the claims within one year from the date on which the Tribunal interpreted the law on levy of service tax as not intended to cover the business of the appellant - there was, thus, no legal ground to reject the claim as barred by limitation of time. In the meanwhile, the leviability of the impugned activity to tax was sought to be disputed through the refund route; the appellant, not being the assessee, was excluded from appellate remedy under Finance Act, 1994 against the charging of tax and claim for refund was the only alternative under the statute. It is not controverted that appellant sells goods and is, thereby, beyond the pale of tax on service on such sales. Without the duty free specialist, the airport concession-holder would have to undertake this necessary, and cardinal, facilitation of international airports with such activity too being beyond the pale of tax on service. The goods stocked in these duty free outlets are not liable to duties at the transaction stage and it has been consistently held that exemption from duty liability in the hands of the duty free outlet flows from taxable event occurring later on the arrival side and having occurred before access is afforded to the departure side - Undoubtedly, stocking and display is impossible without space and the sole issue that remains in the dispute is the finding of the lower authorities that space has been provided to the appellant and that the payment flow is rent which is taxable within the meaning airport service or service , as the case may be, for the period in dispute. Duty free shops in airports are a global market competing among themselves in a tax exempt environment and the compulsions of this business segment, wherein the consumers are not only knowledgeable but also sensitive about pricing, set it apart from a normal trading model which permits the underlying presumption of cost plus implicit in the legislatively nuanced unjust enrichment relied upon by lower authorities. It is also on record that the certificate of chartered accountant, an option that has been sanctified by judicial endorsement, was furnished with the claims for refund and is reasonable explanation for such impediment not having been alleged in the show cause notice. There is no finding on insufficiency or non- acceptability of this evidence of having borne the incidence of tax - The finding of applicability of unjust enrichment is, thus, not only beyond the sanction of law but is also entirely superfluous as the notice issuing authority, cognizant of deficiencies factual and cognitional in the claim, had already mapped the boundaries within which claim would be adjudicated. Submissions on the interpretation of principle of restitution by the original authority that did not render a finding on bar of unjust enrichment is too remote a crutch to substitute for the statutory mandate of section 128A(3) of Customs Act, 1962 which the first appellate, admittedly, did not resort to. The claims for refund were filed within the period permitted under section 11B of Central Excise Act, 1944, relate to levy which the law did not authorize for collection and which had been borne by the appellants - Appeal allowed - decided in favor of appellant.

Issues Involved:
1. Applicability of bar of limitation.
2. Legal authority for the levy of service tax.
3. Entitlement to refund of service tax.
4. Relevance of judicial precedents and decisions.
5. Application of the principle of unjust enrichment.

Issue-wise Detailed Analysis:

1. Applicability of Bar of Limitation:
The appellant filed claims for refund within one year from the Tribunal's decision, interpreting the law on the levy of service tax. The lower authorities rejected the claims as barred by limitation, but the Tribunal found that the payments were made under protest and were thus excluded from the bar of limitation under section 11B of the Central Excise Act, 1944. The Tribunal held that the relevant date for refund claims arising from judicial determination should be the pronouncement of the verdict, not the date of payment of tax.

2. Legal Authority for the Levy of Service Tax:
The Tribunal examined whether the Finance Act, 1994 envisaged the levy of service tax on the transactional flow between the appellant and the airport concession-holder. The lower authorities presumed that the appellant was provided space by the airport concession-holder, and the payments were considered rent taxable under 'airport service' or 'service.' However, the Tribunal found that the appellant's operation of 'duty-free shops' was an essential component of airport operations and not a principal-to-principal rental transaction. The Tribunal concluded that the remuneration was for collaborative sharing of sales proceeds, not for renting space, and thus not subject to service tax.

3. Entitlement to Refund of Service Tax:
The Tribunal found that the appellant was entitled to a refund of service tax paid under protest. The claims were filed within the permissible period under section 11B of the Central Excise Act, 1944. The Tribunal held that the levy of service tax on the appellant's activities was not authorized by law, and the tax collected must be refunded.

4. Relevance of Judicial Precedents and Decisions:
The Tribunal considered the decision in re Flemingo Duty Free Shops Pvt Ltd, which held that transactions of 'duty-free' shops were outside the 'taxable territory.' The Tribunal also referred to the decision of the Government of India in re Aarish Altaf Tinwala and the Hon’ble High Court of Bombay in A1 Cuisines Pvt Ltd, which affirmed that transactions at duty-free shops are deemed to take place outside India for tax purposes. The Tribunal found these decisions binding and applicable to the present case.

5. Application of the Principle of Unjust Enrichment:
The lower authorities raised the issue of unjust enrichment, but the Tribunal found no basis for this claim. The appellant provided a certificate from a chartered accountant, evidencing that the incidence of tax was borne by them. The Tribunal noted that the lower authorities did not find any insufficiency or non-acceptability of this evidence. The Tribunal concluded that the bar of unjust enrichment was not applicable and the claims for refund should be granted.

Conclusion:
The Tribunal allowed the appeals, finding that the claims for refund were filed within the permissible period, the levy of service tax was not authorized by law, and the appellant bore the incidence of tax. The Tribunal ordered consequential relief to the appellant.

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