CESTAT, NEW DELHI BENCH
Nandan Kumar Goila
Commissioner of Central Excise, Delhi-II
MATHEW JOHN, TECHNICAL MEMBER
FINAL ORDER NO. 124/2012-SM (BR)
APPEAL NO. ST/1624/2011-SM
FEBRUARY 2, 2012
1. In this case, the appellant provided the service of “Management Consultancy Service” to M/s Usha International Ltd and during the year 2008-09, he received an amount of Rs. 20 lakhs. Under the impression that he had to pay service tax, he made a remittance of Rs. 2,13,360/- on 26.3.2009. But before filing the return, he realized that he is eligible for the exemption for the small service provider as provided under Notification No. 6/2005-ST dated 1.3.05. Therefore, at the time of filing the first yearly return which was to be filed during April, 2009, he had indicated that he had made excess payment and that his liability did not work out to the amount which he had paid on 26.3.09. He also filed a separate refund claim after filing the return. The refund claim filed by the appellant has been rejected on three grounds:
(i) The first proviso to 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provides that any option exercised by the assessee in any financial year, not to avail the exemption, cannot be withdrawn during the remaining part of the financial year.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 is that when he remitted the tax on 26.3.2009, he exercised option not to avail the exemption. So it could not have been changed later. Further no option was given by the appellant in writing either to avail or not to avail the exemption.
(ii) Revenue also argues that there is unjust enrichment involved in such refund because the burden to prove that the incidence has not been passed on is on the appellant and the appellant has not discharged such burden. It is argued that the appellant charged the recipient of service inclusive of service tax and if refund is given, there will be unjust enrichment.
(iii) Revenue also point out that the amount involved has been shown as expenditure in his profit and loss account and this fact supports the Revenue’s argument that the incidence was passed on.
2. The appellant submits that the relevant contract had a clear condition that service tax if any, 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 M/s Usha International Ltd stating that they had not reimbursed any amount towards service tax and therefore, there is no question of unjust enrichment involved in this case.
3. The Counsel for the appellant further submits that at the time of filing the return itself, he had claimed that he was availing small scale exemption. The fact that he did not make any payment for the first half year also shows that he was availing the exemption. He did not get registered either. This also shows that he was availing exemption for small scale service provider. Further Notification No. 6/2005-ST does not prescribe filing of written options.
4. In the matter of entries in the profit and loss account, he submits 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 onto the person availing the service. He also submits that this is 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 be to conclude that he had intention not to avail the exemption that he has passed on the liability to the person availing the service.
5. Learned AR appearing for Revenue submits that even if the payment made is treated as deposit, there are decisions of Court that opportunity of unjust enrichment will apply to deposits made also. It is the argument of Revenue that when tax is paid, its realization is lower than the cum tax value which he actually gets from M/s Usha International Ltd. When the amount is now refunded to him, it amounts to higher realization for him and therefore, there is clearly unjust enrichment.
6. The counsel for the appellant following the decision in Cimmco Ltd v. Collector of Central Excise 1999 (107) ELT 246 (Tri – Delhi) 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.
7. I have considered arguments of both sides. I 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 that tax account of the Government becomes payment towards service tax only when return is filed. Therefore, in this case, 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 a service tax account. Therefore, I am of the view that unjust enrichment is not involved in this case and the amount is to be refunded to the appellant. The appeal is allowed.