2018 (7) TMI 2359 - AT - Service Tax

Tribunal grants refund claim, payment made under protest exempted from limitation. Unjust enrichment principle not applicable.

The Tribunal ruled in favor of the appellant, setting aside the Revenue's decision and granting the refund claim. The Tribunal held that the appellant's ... Refund of Service tax paid - tax was paid under protest - services being provided to their own members of the club - Club or Associations Services - rejection of refund on the ground of time limitation and unjust enrichment - Held that:- Having held that service tax was being paid “Under Protest”, the limitation prescribed under Section 11B will not apply - the refund claim by the appellant has to be held as having been filed with limitation. Unjust Enrichment - Held that:- The club, while providing services to its members, have not provided the same to a second person and such services have been held to have been provided to the club itself or to the member themselves - For invoking the principle of 'unjust enrichment’, the presence of two different parties, distinct from each other is required and it has to be held that the tax collected by the one, who is claiming the refund of the same has already been collected by him from the other party and the refund of the same cannot be allowed so as to make first party as unduly enriched - When services stands provided to himself only, and there is no second party, it cannot be said that the club would become unduly enriched by collecting the service tax from its members as well as by claiming the same as refund inasmuch as club and members have been held to be the same by various High Courts. The Tribunal in the case of Karnavati Club Ltd. vs. Commissioner of Service Tax, Ahmedabad [2013 (5) TMI 752 - CESTAT AHMEDABAD] has examined an identical issue and has held that members are not to be seen separately as client or customers. Services rendered to self cannot be equated with services rendered to client or customers and as such it has to be held that assessee passed hurdle of the principles of 'unjust enrichment’. Appeal allowed - decided in favor of appellant. Issues:Refund claim filed by a Non-profit Making Company providing club services, denial of refund claim by Revenue on grounds of limitation and unjust enrichment.Analysis:1. Limitation Issue:The appellant filed a refund claim for Service Tax paid during a specific period, citing legal precedents where Service Tax was deemed unnecessary for services provided to club members. The Revenue rejected the claim based on limitation and unjust enrichment. The Commissioner (Appeals) upheld the rejection, stating the appellant's letter expressing intent to discontinue tax payment did not constitute a protest. However, the Tribunal found the letter did serve as a protest, as the appellant paid tax under pressure from authorities. Citing legal judgments, the Tribunal held the payment was made under protest, exempting it from the limitation under Section 11B.2. Unjust Enrichment Issue:The appellant argued that club services to members did not involve separate entities, negating unjust enrichment. High Court judgments supported this view, emphasizing the unity of club and members. The principle of unjust enrichment requires distinct parties, which was absent in services provided to oneself. Referring to a relevant Tribunal case, it was established that services to self cannot be equated with services to external clients. The Tribunal concluded that the appellant overcame the unjust enrichment hurdle, aligning with legal precedents and allowing the appeal with consequential relief.In conclusion, the Tribunal ruled in favor of the appellant, setting aside the Revenue's decision and granting the refund claim. The judgment highlighted the importance of legal precedents, protest letters, and the concept of unjust enrichment in determining tax liabilities for services provided by a club to its members.