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2023 (12) TMI 1070 - AT - Service Tax


Issues Involved:
1. Eligibility of refund on merits.
2. Application of the unjust enrichment clause.

Summary:

Eligibility of Refund on Merits:
The appellant, a partnership firm registered with the Service Tax Department, provided Works Contract Services for Central and State Government buildings. These services were initially exempt from service tax by notification no. 25/2012-ST dated 20.6.2012, effective until 31.3.2015. The exemption was withdrawn by notification no. 6/2015 dated 1.3.2015, effective from 1.4.2015, and later restored retrospectively by section 102 of the Finance Act, 1994, as amended by the Finance Act, 2016. The appellant filed a refund claim on 16.8.2016, and the Assistant Commissioner sanctioned a partial refund. The Commissioner (Appeals) did not dispute the eligibility of the refund on merits but questioned the application of the unjust enrichment clause.

Application of the Unjust Enrichment Clause:
The Commissioner (Appeals) held that the clause of unjust enrichment applied, reasoning that the appellant had indirectly passed on the burden of service tax to the government departments by quoting an all-inclusive price in the bids. The Commissioner relied on the Supreme Court judgment in Union of India vs. Solar Pesticide Pvt. Ltd., which held that the concept of unjust enrichment applies where the incidence of duty is passed on indirectly.

The appellant contended that the Commissioner (Appeals) incorrectly assumed that there was no service tax exemption at the time of bidding. The exemption was available until 1.4.2015, and the contracts were entered into before this date. The Tribunal found that the appellant had not invoiced or collected service tax from the government departments and that it was inconceivable for the appellant to have anticipated the withdrawal of the exemption while bidding.

The Tribunal concluded that the appellant had not passed on the burden of service tax to the client government departments, and thus, the unjust enrichment clause did not apply. The Tribunal set aside the impugned order and allowed the appeal, emphasizing that the appellant's contracts met the conditions specified under section 102 of the Finance Act, 1994.

Order:
The impugned order was set aside, and the appeal was allowed. The judgment was pronounced on 22.12.2023.

 

 

 

 

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