2022 (7) TMI 925 - AT - Service Tax

Refund of service tax - principles of unjust enrichment - burden of tax passed on or not - appellate authority held that as the appellant had not paid any tax it could not claim refund and that there were no documents to support the fact that NBCC had not passed the burden of tax to any other person - HELD THAT - It is an admitted fact that after the exemption notification was withdrawn on 01.04.2015, NBCC had paid its share of the service tax and deducted it while making payments to the appellant. Subsequently on 01.03.2016 the government restored the exemption where contracts were entered prior to 01.04.2015 as a result of which the tax deposited by NBCC, which had been deducted from the payments made to the appellant, became refundable. Initially the claim filed by NBCC was rejected for the reason that it had not borne the burden and the claim filed by the appellant has been rejected for the reason that only NBCC could have claimed refund and also on an account of unjust enrichment. It is an admitted fact that after the exemption notification was withdrawn on 01.04.2015, NBCC had paid its share of the service tax and deducted it while making payments to the appellant. Subsequently on 01.03.2016 the government restored the exemption where contracts were entered prior to 01.04.2015 as a result of which the tax deposited by NBCC, which had been deducted from the payments made to the appellant, became refundable. Initially the claim filed by NBCC was rejected for the reason that it had not borne the burden and the claim filed by the appellant has been rejected for the reason that only NBCC could have claimed refund and also on an account of unjust enrichment. The finding recorded in the impugned order while rejecting the refund claim filed by the appellant that only NBCC could have claimed refund is also erroneous for the reason that earlier the claim filed by the NBCC had been rejected for the reason that it had not borne the incidence of tax - appellant is, therefore, clearly entitled to refund of the service tax which was deducted from the payments made by NBCC to the appellant. Appeal allowed.

Summary

Issues:
1. Appeal against rejection of refund claim under section 11B of the Central Excise Act 1944 in service tax matters.
2. Interpretation of exemption restoration notification dated 01.03.2016.
3. Justification for rejection of refund claim by the Assistant Commissioner.
4. Allegation of arbitrary rejection of refund claim by the Jaipur service tax department.
5. Assertion of entitlement to refund of service tax deducted by NBCC.

Analysis:
The case involves an appeal challenging the rejection of a refund claim under section 11B of the Central Excise Act 1944 in service tax matters. The appellant, a service provider, had entered into a works contract with NBCC before the levy of service tax on such services came into effect on 01.04.2015. Following the withdrawal of an exemption notification, the service tax liability arose, which was to be shared between the appellant and NBCC. NBCC, however, paid 50% of the service tax but deducted it from payments to the appellant. Subsequently, a government notification dated 01.03.2016 restored the exemption for contracts entered before 01.04.2015, making the service tax deposited by NBCC refundable.

The appellant filed a consolidated refund claim for various works done for NBCC at different locations, which was initially rejected by the Assistant Commissioner and upheld in the first appeal. However, the Tribunal directed the processing of refund claims by the respective jurisdictional authorities. The Jaipur service tax department rejected the refund claim, leading to the current appeal. The appellant argued that similar refund claims were allowed by other departments, indicating arbitrary rejection in Jaipur.

The appellant contended that the service tax was deducted by NBCC and borne by them, supported by certificates from a chartered accountant. The departments at Greater Noida and Delhi had already sanctioned the refund, emphasizing that the appellant had indeed borne the tax burden. The allegation of unjust enrichment was deemed misconceived, as there was no factual distinction between the refund claims processed in different Commissionerates.

The impugned order rejecting the refund claim was set aside, with a direction to refund the claimed amount with applicable interest. The decision highlighted the appellant's entitlement to the refund of service tax deducted by NBCC, emphasizing the erroneous reasoning behind the initial rejection of the claim.