Unjust enrichment and service tax refund: written authorisation by the recipient supported direct sanction of the refunded amount.

Refund of service tax paid on services rendered to the Ministry of Defence was held maintainable after retrospective exemption under Section 102 of the Finance Act, 1994. The objection based on unjust enrichment failed because the service recipient had given a written direction to file the refund claim and receive the amount on its behalf, showing that the incidence of tax was borne by the recipient. The refund was therefore directed to be sanctioned directly to the service recipient, and denial solely because the appellant initially paid the tax was not justified.

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Issues: Whether refund of service tax paid on services rendered to the Ministry of Defence, after retrospective exemption under Section 102 of the Finance Act, 1994, could be denied on the ground of unjust enrichment when the service recipient had directed the appellant to file the refund claim and receive the amount on its behalf.

Analysis: Section 11B(2)(e) of the Central Excise Act, 1944 permits refund to the person who has borne the incidence of tax. The record showed that the service recipient had issued a written direction requiring the appellant to claim refund and have the amount credited directly to the recipient's account. In those circumstances, the incidence of service tax was treated as borne by the recipient, and the refund could not be rejected merely because the appellant had initially paid the tax.

Conclusion: The refund claim was held to be maintainable and was directed to be sanctioned to the service recipient directly, so the objection based on unjust enrichment failed.

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