2019 (1) TMI 7 - AT - Service Tax

Appeal partly allowed for service tax refund, claim for interest refund dismissed.

The appeal was partly allowed, granting the service recipient the refund of the service tax amount, while dismissing the claim for interest refund due to ... Unjust enrichment - refund of service tax - person who has borne the tax can file refund claim under Section 11B(2)(e) - refund to service recipient when tax is recovered from the recipient - refund of interest not allowable where not claimed or where tax was payable at time of delayed paymentRefund of service tax - person who has borne the tax can file refund claim under Section 11B(2)(e) - refund to service recipient when tax is recovered from the recipient - unjust enrichment - Entitlement to refund of service tax paid on services provided to the Ministry of Defence where tax was recovered from the service recipient - HELD THAT: - The Tribunal found that although the appellant had recovered service tax from the Ministry of Defence, the service recipient (Ministry of Defence) had directed the appellant by letter dated 17.10.2016 to file the refund claim on its behalf under section 11B(2)(e) of the Central Excise Act, 1944. Under Section 11B(2)(e), a person who has borne the tax can file the refund claim; the letter shows the appellant acted at the instance of the service recipient and paid the tax amount on behalf of the recipient. Accordingly, the Tribunal held that the refund is to be given to the service recipient (not retained by the appellant) and directed the appellant to furnish recipient details so that the adjudicating authority may deposit the refund into the service recipient's account within 30 days. [Paras 6]Refund of the service tax is allowable to the service recipient; appellant to provide recipient details and adjudicating authority to deposit refund in the recipient's account within 30 days.Refund of interest not allowable where not claimed or where tax was payable at time of delayed payment - Claim for refund of interest paid by the appellant on late payment of service tax - HELD THAT: - The Tribunal examined the refund application and found that no claim for interest refund was made in the appellant's refund application; consequently, an interest refund cannot be entertained at this stage. Further, the Tribunal noted that at the time of delayed payment the appellant was required to pay service tax; on that basis the appellant cannot claim refund of the interest paid for delay. [Paras 7, 8]Refund of interest is not allowable-firstly because it was not claimed in the refund application, and secondly because interest paid on delayed payment when tax was payable cannot be refunded.Final Conclusion: Appeal partly allowed: refund of service tax granted in favour of the service recipient and to be deposited in its account after the appellant furnishes recipient details; claim for refund of interest rejected. Issues:Refund claim rejection on the ground of unjust enrichment.Analysis:The appellant, a service provider to a Ministry of Defence entity, filed a refund claim for service tax paid on services provided, which became exempt retrospectively. The claim was rejected citing unjust enrichment, as the Ministry of Defence had paid the service tax to the appellant, who then passed on the burden to the service recipient. The appellant argued that the Ministry of Defence directed them to file the refund claim on their behalf and requested the refund be credited to the service recipient's account. The appellant contended that since they were not required to pay the service tax, the interest paid should be refunded as well.On considering both parties' submissions, it was noted that the refund claim was filed at the service recipient's behest, as per Section 11B(2)(e) of the Central Excise Act, 1944. The letter from the service recipient directed the appellant to claim the refund on their behalf, indicating that the service recipient should receive the refund. Therefore, the service recipient was deemed entitled to the refund, and the appellant was directed to provide the recipient's details for the refund to be sanctioned within 30 days. However, the claim for refund of interest paid by the appellant was not entertained as it was not mentioned in the refund application.Additionally, it was observed that the appellant could not claim a refund of interest paid on late service tax payment, as they were required to pay the tax with a delay. Consequently, the appeal was partly allowed, granting the service recipient the refund of the service tax amount, while dismissing the claim for interest refund due to late payment of service tax.