2023 (6) TMI 462 - AT - Service Tax

Refund of Service Tax - Works Contract activities or commercial construction activities - deduction under various bills and remitted the same to the Service Tax Department - rejection on the ground that refund claim was filed beyond a period of one year - Department has also taken the ground of unjust enrichment at the OIO stage without issuing SCN - HELD THAT - The Appellant has been made to pay the Service Tax by their client. It is also on record that on similar projects pertaining to 17 other projects executed by them for Government of Andhra Pradesh no Service Tax was paid by them. It is also not in dispute that the Department has not initiated any action to recover any Service Tax in respect of other 17 projects undertaken by the Appellant. Therefore admittedly the Department also agrees that these projects are fully exempt from payment of Service Tax. Now coming to the refund claims filed by the Appellant it is clear that even though no Service Tax was payable the same was paid only on account of the withholding of the same by the client. Therefore the amount paid by them by way of GAR-7 Challans cannot be considered as Service Tax paid by them. Therefore when the amount has been paid by mistake (in this case only on the insistence of the client) the same cannot be treated as Service Tax paid. In such cases Section 11B of Central Excise Act 1944 will not be applicable as held in the case of COMMISSIONER OF CENTRAL EXCISE (APPEALS) BANGALORE VERSUS KVR CONSTRUCTION 2012 (7) TMI 22 - KARNATAKA HIGH COURT . It is on record that the amounts were deducted from their bills and the client had forced the Appellant to make the remittance to the Government. In such a case when it is clear that no amount was recovered from the client and this amount has been remitted by way of GAR-7 Challans there is no possibility of any unjust enrichment accruing to the Appellant if refund claim is sanctioned. Non-service of SCN - HELD THAT - It has been held by Hon ble High Court and Hon ble Supreme Court in catena of decisions that by not issuing the SCN the entire proceedings are rendered vitiated. In this case the Appellant was not put to notice as to on what count the refund claim was sought to be rejected. In such case the Appellant had attended the Personal Hearing without even being aware as to on what ground he is being granted Personal Hearing. The Learned AR s submission that opportunity given for Personal Hearing is only a lame excuse for the error of non issuance of Show Cause Notice. The Adjudicating Authority has failed to follow the principles of natural justice and even the Commissioner (Appeals) has remained silent on this issue. The impugned Order is liable to be set aside even on this count. Appeal allowed.

Summary

Issues:
The case involves a dispute regarding the deduction of Service Tax by the client from the bills raised by the Appellant for Works Contract/ EPC services provided for water supply improvement schemes announced by the Government of Andhra Pradesh. The main issues include the rejection of the refund claim by the Department on grounds of time limitation, unjust enrichment, and lack of issuance of Show Cause Notice (SCN).

Time Limitation Issue:
The Department rejected the refund claim on the basis of being filed beyond a period of one year, despite the Appellant submitting copies of GAR-7 Challans showing the actual remittance dates towards Service Tax. The Appellant argued that the claims were filed within the permissible period, as evidenced by the dates of actual remittance compared to the dates of deduction by the client.

Unjust Enrichment Issue:
Regarding the second Appeal for a specific amount, it was rejected solely due to the unjust enrichment clause. The Appellant contended that since the client directly deducted and remitted the amount to the Revenue Department, there was no possibility of unjust enrichment if the refund was granted to them.

SCN Non-issuance Issue:
The Appellant raised concerns over the lack of issuance of a Show Cause Notice before the rejection of the refund claim. They argued that attending a Personal Hearing without being informed of the grounds for rejection violated principles of natural justice, rendering the entire proceedings flawed.

Judgment:
The Tribunal found that the Appellant had been compelled to pay Service Tax by the client, despite similar projects for the Government of Andhra Pradesh being exempt from such taxation. The Tribunal emphasized that the payments made were not voluntary but due to the client's insistence, thus not constituting actual Service Tax liability. Citing precedent, the Tribunal ruled that the Appellant's mistaken payments did not fall under Section 11B of the Central Excise Act, 1944. Additionally, the Tribunal highlighted that the lack of unjust enrichment and the absence of authority for the Department to demand the tax supported the Appellant's refund claims. The Tribunal also criticized the Department for not issuing a Show Cause Notice, deeming the proceedings flawed and in violation of natural justice principles. Consequently, the Appeals were allowed, granting the Appellant consequential relief.