whether the assessee eligible for getting refund of service tax when the doctrine of unjust enrichment is not satisfied?

PJ/CASE LAW/2015-16/2624

Case:- CONCRETE MOVERS VERSUS COMMR. OF SERVICE TAX, MUMBAI-I

Citation:- 2015 (38) S.T.R. 86 (Tri. - Mumbai)

Brief facts:- The appellant provided Concrete Pumps on Rental Basis to M/s. Ultratech Cement Ltd. and M/s. Larsen & Toubro Ltd. for pumping operation and had also deployed certain manpower to ensure the proper functioning of the pumps. They were getting the compensation on the basis of cubic meter of concrete, pumped. Appellants’ rates per cubic meter were consolidated and included all taxes, vat etc. They were paying service tax on the said activity under Business Support Service from May 2007 to January 2008 under subhead “Infrastructural Support Service.” In the Budget 2008, a new service under the name “Supply of tangible goods service” was introduced. The said service covered the activities specifically, Appellant was therefore of the view that their activity would be covered by the newly introduced service and not by Business Support Service. Accordingly, for the tax paid during the period May 2007 to January 2008 they filed refund claim and showed the amount of refund claim as receivable from the department in their Balance Sheet for the year 2007-2008 which was prepared after the filing of the refund claim. The original authority decided the matter vide order dated 19-12-2008 wherein on merits the case was held in favour of the appellant, however the amount of refund was transferred to Consumer Welfare Fund as the appellant did not satisfy the doctrine of unjust enrichment.

Appellant’s contention:- The main argument of the learned Advocate for the appellant was that on merits the original authority has held in their favour and from 2008 onwards they had been showing in their Books of Account the said amount as receivable and therefore, there was no question of passing on the burden of service tax to their customers. In view of the said position doctrine of unjust enrichment was not applicable and in support of their contention they quoted the following case laws:

(i)       Commissioner of Cus., Tuticorin v. Virudhunagar Textile Mills Ltd. - 2008 (230)E.L.T.411 (Mad.)
(ii)      Dabur India Ltd. v. Commr. of C. Ex., Ghaziabad - 2008 (228)E.L.T.131 (Tri.-Del.)
(iii)     Pride Foramer v. Commissioner of Customs (Import), Mumbai - 2006 (200)E.L.T.259 (Tri. - Mumbai) = 2008 (12)S.T.R.657 (Tri.-Mumbai)
(iv)     C.C.E, Chennai-III v. Saralee Household & Bodycare India (P) Ltd. - 2007 (216)E.L.T.685 (Mad.)
(v)      Cimmco Ltd. v. Collector of Central Excise, Jaipur - 1999 (107)E.L.T.246 (Tribunal)
(vi)     Commissioner of C.Ex., Bhavnagar v. Modest Infrastructure Ltd. - 2011 (24)S.T.R.369 (Tri. Anmd.)
(vii)    Commr. of C. Ex. & S.T., Bhavnagar v. Modest Infrastructure Ltd. - 2013 (31)S.T.R.650 (Guj.)
(viii)   Thales-E-Transaction CGA v. Commissioner of C. Ex., New Delhi - 2006 (3)S.T.R.205 (Tri.-Del.)
(ix)     Fiat India Put. Ltd. v.Commissioner of Cus., (Import), Nhava Sheva - 2008 (225)E.L.T.497 (Tri.-Mumbai.)

Learned Counsel also argued that the computation details shown in the Commissioner (Appeals) order would indicate that they have not paid the tax based upon the cum duty value, and therefore it cannot be said that they have passed on the burden of service tax to their clients.

Respondent’s contention:-Learned AR argued that the agreement with the customer specifically stated that the rates quoted by them were inclusive of all taxes and levies. While quoting the rates, appellant have taken into account the service tax element and therefore burden of service tax had been passed on to the customer. It was not the case of the appellant they had refunded amount of service tax to their customers. In view of this position, the doctrine of unjust enrichment was correctly applicable and the order of the Commissioner (Appeals) was correct.

Reasoning of judgement:- They went through the agreement produced and found that the agreement very clearly stated that the rate mentioned were inclusive of all taxes and levies. They also went through the invoices produced. It was seen that the appellants had been charging based upon the quantity of the concrete pumped through the equipment installed by them and the rate was fixed on that basis. Thus, the charges were not in the nature of rental for a particular day or particular period but with reference to the work performed. Invoices did not indicate any tax element separately. Under the circumstances, it had to be held that the rates quoted and amount collected were inclusive of service tax.

Since the charges were inclusive of all taxes which included service tax and the appellant failed to bring any evidence to indicate that they had refunded the amount of service tax to their customers, in their view the doctrine of unjust enrichment was applicable in the facts and circumstances of the case. Appellant had no doubt about the applicability of tax during the relevant period. The fact that in the balance sheet for 2007-2008, which was prepared after filing the refund claim, the amount was shown as receivable did not make any difference in the peculiar facts and circumstances of the case.The calculation sheets produced to prove that tax was not paid as cum tax basis also did not make any difference.

Learned advocate quoted number of case laws. The bench went through the said case laws. The peculiar facts and circumstances of the case were different then in all the said cases and were therefore not applicable. In the case of Virudhunagar Textile Mills Ltd. (supra) the importer had imported capital goods and was using in his premises and had produced Chartered Accountant Certificate that the burden of import duty had not been passed on to any one that the Hon’ble Madras High Court took a view that the doctrine of unjust enrichment was not applicable. In the case of Dabur India Ltd. (supra) differential duty was paid after the clearance of the goods on confirmation of the demand and under those circumstances, this Tribunal held that the doctrine of unjust enrichment was not applicable. In the case of Pride Foramer (supra) amount was deposited pursuant to the order of the High Court and in those circumstances this Tribunal held that doctrine of unjust enrichment was not applicable. In the case of Saralee Household & Bodycare India (P) Ltd. (supra) assessee was collecting 20% of duty from the customer even though he was showing 30% duty in the invoices the balance 10% was not being collected from the customer and in those circumstances Hon’ble High Court of Madras took a view that doctrine of unjust enrichment was not applicable. In the case of Cimmco Ltd. (supra) from the beginning assessee was taking a view that the goods were non-excisable and under those circumstances the Tribunal has took a view that the doctrine of unjust enrichment was not applicable. In the case of Modest Infrastructure Ltd. (supra) had collected and paid the tax but returned to the customer by issuing credit notes and under those circumstances the Tribunal took a view that doctrine of unjust enrichment was not applicable. The said order was upheld by the Hon’ble Gujarat High Court. In the case of Thales-E-Transaction CGA (supra) the tax was paid by mistake and under those circumstances the Tribunal took a view that doctrine of unjust enrichment was not applicable. In the present case there was no mistake on the part of the appellant and rate quoted were inclusive of all taxes and it is only due to introduction of new service that the refund claim were filed. In the case of Fiat India Pvt. Ltd. (supra) revenue deposit was paid at the time of clearance as goods were imported from related party. Finally transaction value was accepted and deposit was not charged by the appellant to Profit and Loss Account but included in Balance Sheet as advance recoverable, thus this Tribunal took a view that doctrine of unjust enrichment was not applicable. Clearly the facts and circumstances in the present case were not comparable to any of the above-mentioned case laws and were therefore not applicable.

Decision:- Appeal dismissed.

Comment:- The gist of the case is that failure on the part of the appellant to prove that the incidence of duty has not been passed on to the customer, the refund claim cannot be sanctioned. It has to be transferred to consumer welfare fund.

When the price is inclusive of all taxes then it is presumed that the incidence of service tax has been passed on to the buyer.

Mere showing the amount due from department in Balance Sheet does not prove that the incidence of duty has not been transferred to customers.

Prepared by: - Sharad Bang

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PJ/CASE LAW/2015-16/2624

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