2022 (9) TMI 392 - AT - Service Tax

Refund of Service Tax - amount claimed to have been paid as pre-deposit - amount was paid under protest or not - appellant had passed on the duty element to the ultimate service recipients or not - principles of unjust enrichment - Section 11B of the Central Excise Act, 1944 - HELD THAT - Higher courts have held that no tax shall be collected without the authority of law and, as a necessary corollary, the amount collected as tax without the authority of law shall be refunded. The liability to tax is determined after adjudication proceedings and the same is not an empty formality. So also, when a bona fide taxpayer remits tax, it is incumbent upon the Revenue to retain the tax as per law and if such remittance is found to be excessive, then that excess being collected without the authority of law, shall have to be refunded. Strangely, the Adjudicating Authority having referred to the certificate issued by the Chartered Accountant, has not at all discussed anything about it and has proceeded to hold that the appellant had passed on the duty element to the ultimate service recipients and hence, there was unjust enrichment, which, according to me, is not in accordance with the requirement of law - The fact that the appellant claimed refund itself shows that the remittance which was subsequently claimed as refund was not paid in accordance with law and hence, the same would partake the character of an amount being paid under protest or the same being paid by mistake, which aspect has been considered in the above ruling of the Hon ble jurisdictional High Court. The rejection orders of the lower authorities are not in accordance with law, which cannot therefore be sustained - Appeal allowed.

Summary

Issues:
Whether the appellant is entitled to a refund under Section 11B of the Central Excise Act, 1944 for the amount claimed as pre-deposit?

Analysis:
The appellant sought a refund of Service Tax paid on advances received pre-G.S.T. regime, contending that upon the introduction of G.S.T., they fulfilled their entire G.S.T. liability, including the advances for which Service Tax was previously remitted. A Show Cause Notice was issued, challenging the refund claim for not meeting Section 11B conditions and lacking evidence that the duty incidence was not passed on. Despite the appellant's detailed response, the Adjudicating Authority rejected the claim in an Order-in-Original. The appellant then appealed to the Commissioner of G.S.T. and Central Excise, whose Order-in-Appeal also dismissed the appeal, leading to the current appeal before the forum.

The forum considered both parties' arguments and reviewed the documents and decisions presented. It noted that the appellant had paid tax twice, under the Service Tax regime and the subsequent G.S.T. regime, a fact undisputed by the Revenue. The forum emphasized that tax collection without legal authority necessitates a refund, as determined by higher courts. It highlighted that the liability to tax is established through adjudication and must not be collected without legal backing. The forum found no mention in the lower authorities' orders regarding the authority to retain the tax paid in advance, especially when G.S.T. payments were made in full post-transition, unchallenged.

The forum criticized the Adjudicating Authority for disregarding the Chartered Accountant's certificate, alleging unjust enrichment without proper examination. It stressed that the authority should have addressed the evidence provided instead of ignoring it. Referring to a judgment by the jurisdictional High Court, the forum emphasized that a refund claim due to mistaken or protest payments cannot be time-barred under Section 11B limitations. It concluded that the rejection orders by lower authorities were legally unsound, setting them aside and allowing the appeal with any consequential benefits.

In conclusion, the forum ruled in favor of the appellant, overturning the lower authorities' decisions and ordering the refund under Section 11B, emphasizing the legal obligation to refund tax collected without proper authority.