Unjust Enrichment not applicable on refund of Service tax paid when no services are received under reverse charge and payment thereof had been adjusted between associated enterprises
Wolters Kluwer India Ltd. Vs. Commissioner of Service Tax, Delhi [(2014) 48 taxmann.com 97 (New Delhi – CESTAT)]
Wolters Kluwer India Ltd. (the Appellant) entered into an agreement with Wolters Kluwer Amsterdam (“foreign associated enterprise”) for receiving services of ‘Management or Business Consultant’ from abroad in respect of management of their ongoing office in India and also to provide service related to Mergers and Acquisitions. Foreign associated enterprise provided services related to ongoing management of their India office and raised consolidated invoice thereafter. The Appellant paid the full value of the invoice and also deposited Service tax under reverse charge.
Later, the Appellant found that it had not received merger and acquisition services and accordingly, got back the payments from foreign associated enterprises and filed refund claim of Service tax paid on the stated service.
The Department denied refund on ground of unjust enrichment alleging that the Appellant’s claim was an afterthought and a mere financial adjustment between associated enterprises was made just to suit their benefit.
The Hon’ble CESTAT, Delhi held that if services under reverse charge are not actually received, service recipient is entitled to refund of Service tax being paid by him, provided he has not taken Cenvat credit thereof. The Department cannot raise issue of unjust enrichment inasmuch as it is tax deposited by the service recipient himself which is being sought to be refunded. The Hon’ble Tribunal further held that if services have not been received and payment made for said services had been adjusted between Indian and foreign Company, said corresponding value of services would not be liable to Service tax. Thus, the matter was remanded back to verify factual position as to whether services were received by the Appellant and if not, to grant refund without raising issue of unjust enrichment.
(Bimal Jain, FCA, FCS, LLB, B.Com (Hons), Mobile: +91 9810604563, Email: firstname.lastname@example.org)