Refund of service tax which was recovered from service recipient who in turn adjusted the same towards dues to the service provider subsequently.

PJ/Case Law /2016-17/3337

Case:-COMMR. OF C. EX. & S.T., BHOPAL Versus CENTRAL INDUSTRIAL SECURITY FORCE
Citation:-2016 (43) S.T.R. 311 (Tri. - Del.)
Brief facts:-Revenue is in appeal against order-in-appeal dated 5-7-2012 in terms of which refund of Rs. 39,38,678/- was allowed on the ground that the said amount of service tax was recovered from Bharat Heavy Electricals Ltd. in terms of the provisions of Section 87(d) of the Finance Act, 1994 and that the appellant was not required to pay the said amount of service tax in view of the exemption Order No. 1/1/2011, dated 1-7-2001 issued by the Ministry of Finance exempting the appellant from payment of service tax for the period 16-10-1998 to 31-3-1999.
Appellant’s contention:-Revenue in its appeal has contended as under :
(a)Bharat Heavy Electricals Ltd. paid part of the impugned amount from Cenvat credit which cannot be refunded in cash.
(b)The respondent was not eligible for refund as the service tax liability was not discharged by it.
(c)The principles of unjust enrichment would disentitle the respondent for the impugned refund as the burden had been passed on by the respondent to Bharat Heavy Electricals Ltd.
Respondent’s contention:-The respondent has contended that the impugned amount was deducted by Revenue from the refunds of Bharat Heavy Electricals Ltd. in terms of the powers under Section 87(d) of Finance Act, 1994 and BHEL recovered the said amount from the respondent by deducting the same from the payments due to the respondent for providing security services. There was no question of passing on the burden to BHEL as service tax had not been paid by the appellant and was recovered from the refunds of Bharat Heavy Electricals Ltd. The respondent also stated that similar refund amounting to Rs. 51,02,163/- has been paid in cash and that order has not been challenged by Revenue.
Reasoning of judgement:-The Tribunal considered the contentions of both sides. It is a fact that the impugned amount of service tax was not paid by the respondent and therefore Revenue in exercise of its power under Section 87(d) recovered the same from the refunds of Bharat Heavy Electricals Ltd. vide Deputy Commissioner, Central Excise, Bhopal divisions Order Nos. 13 & 14/DC/Division-1/Reference/09, dated 9-2-2009. Bharat Heavy Electricals Ltd. has clearly stated that the amount deducted by Revenue from its refunds was recovered by it from the respondent by adjusting the said amount from the payments due to the respondent for providing security service. It is clear that the service tax had not been paid by the respondent and therefore the same was recovered from the refunds of Bharat Heavy Electricals Ltd. and so the question of the respondent having passed on the burden to Bharat Heavy Electricals Ltd. simply does not arise. It is also not in dispute that by virtue of the above referred exemption order issued by the Ministry of Finance the respondent was not liable to pay the said amount of service tax which was recovered by adjustment from the refunds of Bharat Heavy Electricals Ltd. which in turn recovered it from the respondent. Consequently the respondent clearly became eligible for the refund of the said amount as the burden was borne by it. As regards the contention of Revenue that the refund of duty claimed by Bharat Heavy Electricals Limited was partly paid out of Cenvat credit account and therefore the respondent cannot be given the entire refund in cash, it is pertinent to mention that the service tax due from the appellant was adjusted from the refunds of Bharat Heavy Electricals Ltd. which in turn deducted the said amount from the payments due to the appellant and therefore as far as the respondent is concerned, it did not receive an equal amount of cash from Bharat Heavy Electricals Ltd. Further Bharat Heavy Electricals Ltd. pays crores of rupees of duty in cash and therefore it really is of no consequence whether the amount of refund was to be given to it by credit to its Cenvat account or in cash because this issue becomes important only in those cases where the assessee does not pay any duty in cash and is able to discharge all its liabilities out of Cenvat credit.
In the light of the foregoing analysis, the Tribunal did not find any infirmity in the impugned order. Revenue’s appeal is dismissed.
Decision:-Appeal rejected.
Comment:-The gist of the case is that service tax was recovered from service recipient who subsequently adjusted same towards dues to the service provider. The assessee contended that during period 16-10-1998 to 31-3-1999, they were exempted from Service Tax payment on Security services vide MOF Order No. 1/1/2001, dated 1-7-2001. Since, the assessee did not pay Service Tax to Department, question of passing burden to service recipient does not arise. Since, Service Tax was not payable during relevant period, but same was recovered from appellant by service recipient, appellant was entitled to get refund in cash, even though Department recovered Service Tax from refunds of service recipient by adjusting same towards their Cenvat credit account as per Section 11B of Central Excise Act, 1944. Hence the appeal was rejected.
Prepared by:-Praniti Lalwani

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PJ/Case Law /2016-17/3337

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