Refund admissible when service tax paid even under SSI exemption and no return filed.

PJ/Case Laws/2012-13/1298

Case:- NANDAN KUMAR GOILA versus COMMISSIONER OF CENTRAL EXCISE DELHI-II

Citation:- 2012 (27) S.T.R. 33 (TRI. – DEL.)

Brief Facts:- The Assessee provided the service of "Management Consultancy Service" to M/s Usha International Ltd. and received an amount of Rs. 20 lakhs. Under the impression that they are liable to pay service tax, the assessee remitted Rs. 2,13,360/- on 26.03.2009 but before filing the return, they realized that they were eligible for the exemption for the small service provider as provided under Notification No. 6/2005-S.T., dated 1-3-2005. Therefore, at the time of filing half yearly return which was to be filed, they had indicated that they had made excess payment and that their liability did not work out to the amount which they had paid. They also filed a separate refund claim after filing the return. But the refund claim filed by the appellant was rejected on 3 grounds:

1. The first proviso to the Notification No. 6/2005 ST provides that any option exercised by the assessee in any financial year, not to avail the exemption, cannot be withdrawn during the remaining part of the financial year. The Revenue’s contention was that when the assessee remitted the tax on 26.03.2009, he exercised the option not to avail exemption. Further, no option was given by the assessee in writing either to avail or not to avail the exemption.

2. There was unjust enrichment and so refund could not be granted to the assessee.

3. The amount involved has been shown as expenditure in the Profit & Loss account and so the incidence of tax has been passed on.

Appellant Contentions:- The appellant submits that service tax has to be borne by the appellant and therefore, there was no question of passing of the incidence of service tax. The appellants have also produced a certificate from service receiver stating that they had not reimbursed any amount towards service tax and therefore, there is no question of unjust enrichment involved in this case. They further submit that at the time of filing the return itself, they had claimed that they were availing small scale exemption. They did not make any payment for the first half year also shows that they were availing the exemption. They did not get registered either. This also shows that they were availing exemption for small scale service provider. Further Notification No. 6/2005-S.T. does not prescribe filing of written options. In the matter of entries in the profit and loss account, they submit that since the amount was remitted in the bank, the amount has to be necessarily reflected as expenditure and the said amount was shown as such and this cannot be a ground to conclude that the incidence has been passed on to the person availing the service. They also submit that they were an individual providing service and the fact that a higher amount was remitted at the time of remitting the service tax amount by a challan, cannot prove that they had intention not to avail the exemption and that they have passed on the liability to the person availing the service.

The appellant also points out the decision in Cimmco Ltd. v. C.C.E. reported in 1999 (107) E.L.T. 246 (CEGAT) holding that where contract rates are inclusive of duties and tax, the interpretation should be that tax that was due was paid. Even zero liability can be considered as tax due. Such contracts do not by itself prove that incidence has been passed on.

Respondent Contentions:- The Respondent submits that if the payment made is treated as deposit, there are decisions of Courts that principle of unjust enrichment will apply to deposits made also. It is the argument of Revenue that when tax is paid, the appellant's realization is lower than the cum tax value which he actually gets from service receiver. When the amount is now refunded to him, it amounts to higher realization for him and therefore, there is clearly unjust enrichment.

Reasoning of Judgment:- We have considered arguments of both sides. We note that the disputed amount has not been realized as service tax from the person to whom service is provided. It is also to be noted that appellant had not filed a service tax return and the amount deposited in the tax account of the Government becomes payment towards service tax only when return is filed. Therefore, it is a strictly not a refund of service tax paid. The case laws relating to pre-deposit are in the context where the deposits were made towards duty liability at least provisionally determined in pursuance of adjudication order. In the present case, neither tax has been passed on as tax nor the amount has been shown in return as paid towards tax. What has happened is only remittance of a higher amount to the bank for credit to service tax account. Therefore, it is held that unjust enrichment is not involved in this case and the amount is to be refunded to the appellant. The appeal is allowed.

Decision: - Appeal Allowed.

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PJ/Case Laws/2012-13/1298

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