Whether unjust enrichment applicable on amount deposited under protest?

PJ/CASE LAW/2015-16/2697

Case:-COMMISSIONER OF SERVICE TAX, MUMBAI-II VS ARVIND AGRAWAL

Citation:-2015 (37) S.T.R. 142 (Tri. - Mumbai)

Brief Facts:-Revenue is in appeal against the impugned order wherein the learned Commissioner (Appeals) sanctioned the refund claim of Rs. 40 lakhs with interest to the respondent.
Brief facts of the case are that an investigation was carried out in the respondent’s firm to examine the activities undertaken by them. During the course of investigation, the respondent paid a sum of Rs. 40 lakhs towards the activity undertaken by them under the category of Management Consultancy Service for the period from October, 2010 to March, 2011.
Later-on the respondent sought change of the category of service from ‘Management Consultancy Services’ to “Legal Consultancy Services” as the activity undertaken by them does not fall under the category of “Management Consultancy Service” and the service provided has come into Service Tax net with effect from 1-5-2011. The respondent filed a refund claim of Rs. 40 lakhs which was paid during the course of investigation along with interest. The adjudicating authority rejected their refund claim. Aggrieved by the said order, the respondent filed an appeal before the learned Commissioner (Appeals) who allowed the refund claim along with interest. Being aggrieved by the said order the Revenue is in appeal on the ground that the lower authority while sanctioning the refund claim has not examined the issue of unjust enrichment.

Appellant contentions:- Learned AR submits that in this case while sanctioning the refund claim the learned Commissioner (Appeals) held that the amount paid by the respondent is a pre-deposit and not a Service Tax therefore, unjust enrichment is not applicable. In fact, the findings of the learned Commissioner (Appeals) is not correct in the light of the decision in the case of C.C.E., Pune-Iv. Poona Rolling Mills Ltd.-2007 (220) E.L.T. 907 (Tri.-Mumbai)=2009 (15) S.T.R. 643 (Tri.-Mumbai). Therefore, the learned AR sought the matter be remanded back to the adjudicating authority to examine the issue of unjust enrichment.

Respondent contentions:-On the other hand, the learned Counsel appearing on behalf of the respondent submits that as the respondent has paid the said amount on persuasion of the investigating team in his individual capacity as pre-deposit. Therefore, bar of unjust enrichment is not applicable in the light of the decisions of this Tribunal in the case of Motor Industries Co. Ltd.v. CC (Chennai) - 2005 (188) E.L.T. 315, CCE v. Ravishankar Industries - 2002 (150) E.L.T. 1317 and Airlight Electronics (P) Ltd. v. CCE, Faridabad - 2004 (177) E.L.T. 971 (T).

Reasoning of Judgment:-Considered the submissions made by both sides.
In this case, during the course of investigation, the respondent himself has paid the Service Tax under the category of “Management Consultancy Service”. Later on, the respondent sought change of classification from “Management Consultancy Service” to “Legal Consultancy Service”. It is not coming out from the facts of this case whether the respondent has recovered the Service Tax from the clients or not. During the course of investigation, the learned Counsel for the respondent has produced a certificate issued by the Chartered Accountant showing that the amount is recoverable. We have examined the certificate issued by the CA which does not reflect true and correct picture on basis of which documents Commissioner had come to the conclusion that the bar of unjust enrichment has been passed.
We do not agree with the contention of the learned Counsel that the provisions of Section 11B of the Central Excise Act, 1944 are not applicable to the facts of this case as it is a pre-deposit, as they have paid the Service Tax under the Head of Management Consultancy Service and thereafter sought change of classification. The case law, relied upon by the learned Counsel are not applicable to the facts of this case. As Service Tax has been paid by the respondent during the course of investigation therefore, test of bar of unjust enrichment is required to be passed on by the respondent. In these circumstances, we remand the matter back to the adjudicating authority only to the extent to examine the issue of bar of unjust enrichment. The respondent shall produce the required documents in support of their claim that bar of unjust enrichment has been passed on by them. The adjudicating authority shall pass an appropriate order in accordance with law. The adjudicating authority shall decide the issue within one month on production of the required documents.
Appeal is disposed of by way of remand.

Decision:- Matter remanded.

Comment:-The crux of the case is that if Service Tax has been paid by the assessee during the course of investigation then also, the bar of unjust enrichment is required to be passed on by the assessee. This is contrary decision as there have been a number of cases wherein it is being concluded that the provisions of section 11B are not applicable to the amount paid under persuasion during the course of investigation

Prepared By:- Meet Jain

Comments

PJ/CASE LAW/2015-16/2697

Post a Comment

Query