2014 (6) TMI 135 - AT - Service Tax

Appellate Tribunal rules on unjust enrichment in service tax refund claim

The appeal was dismissed by the Appellate Tribunal CESTAT MUMBAI based on the application of the doctrine of unjust enrichment. The appellants' refund ... Business Support Service - Infrastructural Support Service - appellants have provided Concrete Pumps on Rental Basis - Held that:- during the period May 2007 to January 2008 the appellants were paying tax under Business Support Service and the definition of the said service includes the 'infrastructure support service' and the appellants were providing equipment alongwith operator and prima facie it cannot be concluded that the appellants were not providing infrastructure support service. In fact they were also providing Manpower and it was their duty to ensure proper functioning of the pumps. Under the circumstances prima facie it cannot be said that the tax being paid by them was incorrect, just because from 2008 onwards a new, specific entry was introduced in the tariff. Agreement very clearly states that the rate mentioned are inclusive of all taxes and levies. I have also gone through the invoices produced. It is seen that the appellants have been charging based upon the quantity of the concrete pumped through the equipment installed by them and the rate is fixed on that basis. Thus, the charges are not in the nature of rental for a particular day or particular period but with reference to the work performed. Invoices do not indicate any tax element separately. Under the circumstances, it has to be held that the rates quoted and amount collected are inclusive of service tax. Since the charges were inclusive of all taxes which includes service tax and the appellant has not brought any evidence to indicate that they have refunded any service tax to their customers in my view the doctrine of unjust enrichment would be 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 2007-08, which was prepared after filing the refund claim, shows the amount as receivable will not make any difference in the peculiar facts and circumstances of the present case. The calculation sheets produced to prove that tax was not paid as cum tax basis will also not make any difference. - Decided against assessee. Issues involved:1. Interpretation of service tax applicability under different categories.2. Doctrine of unjust enrichment in service tax refund claims.3. Burden of proof regarding passing on service tax to customers.Issue 1: Interpretation of service tax applicability under different categoriesThe case involved the appellants providing Concrete Pumps on Rental Basis to various companies for pumping operations. Initially, they paid service tax under Business Support Service, including 'Infrastructural Support Service.' However, a new service called 'supply of tangible goods service' was introduced in the Budget 2008. The appellants believed their activity fell under the new service and filed a refund claim for the tax paid from May 2007 to January 2008. The original authority ruled in favor of the appellants on merits, but the refund amount was transferred to Consumer Welfare Fund due to unjust enrichment concerns. The Tribunal noted that the original authority's decision on merits was not challenged by the department, and the issue of tax applicability was not before them.Issue 2: Doctrine of unjust enrichment in service tax refund claimsThe main argument by the appellant was that they had shown the refund amount as receivable in their books from 2008 onwards, indicating they did not pass on the service tax burden to customers. They cited various case laws to support their position. However, the respondent argued that the agreement with customers stated rates were inclusive of all taxes, and the service tax burden was passed on to customers. The Tribunal examined the agreement and invoices, finding that the rates charged were inclusive of service tax. As the appellants did not provide evidence of refunding service tax to customers, the doctrine of unjust enrichment was deemed applicable, despite the appellant's belief in tax applicability and accounting treatment.Issue 3: Burden of proof regarding passing on service tax to customersThe Tribunal emphasized that the charges quoted by the appellants were inclusive of all taxes, including service tax, and no evidence was presented to show any refund of service tax to customers. Despite the appellant's assertion of tax applicability and accounting treatment, the doctrine of unjust enrichment applied due to the lack of proof of passing on the tax burden. The Tribunal differentiated the present case from various cited case laws where specific circumstances led to different outcomes regarding the application of the doctrine of unjust enrichment. Ultimately, the appeal was dismissed based on the applicability of the doctrine of unjust enrichment in the given circumstances.This detailed analysis covers the interpretation of service tax categories, the application of the doctrine of unjust enrichment, and the burden of proof regarding passing on the service tax burden to customers as outlined in the judgment delivered by the Appellate Tribunal CESTAT MUMBAI.