Refund limitation and unjust enrichment turn on cancellation of transaction and return of consideration, not the original tax deposit.

Where service tax was paid on a transaction that was later cancelled and the sale consideration had been refunded to the buyer, the relevant date for limitation was the date of refund of the consideration, not the original tax deposit. The refund application was therefore within the prescribed one-year period and not time-barred. On unjust enrichment, the refund was not denied because the tax amount was not retained as a benefit by the assessee and was liable to be returned to the same buyer. The refund rejection was held unsustainable and refund was directed.

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Issues: (i) whether the refund claim was barred by limitation under the refund provisions; (ii) whether the refund was hit by unjust enrichment.

Issue (i): whether the refund claim was barred by limitation under the refund provisions.

Analysis: The refund was sought after the flat booking was cancelled and the sale consideration earlier received had been returned to the buyer. In these facts, the material date for computing limitation was not the original deposit of service tax, but the date on which the sale consideration itself was refunded and the liability to return the service tax amount arose. The refund application was therefore within one year of the relevant date.

Conclusion: The refund claim was not time-barred and this issue was decided in favour of the assessee.

Issue (ii): whether the refund was hit by unjust enrichment.

Analysis: The service tax had been collected in connection with a transaction that was subsequently cancelled, and the sale consideration had already been returned to the buyer. Since the amount was liable to be returned to the same buyer and had not been retained as a benefit by the assessee, the doctrine of unjust enrichment did not justify denial of refund on the facts of the case.

Conclusion: The refund was not barred by unjust enrichment and this issue was decided in favour of the assessee.

Final Conclusion: The refund rejection was unsustainable, and the appeal succeeded with direction to refund the amount and to ensure its return to the buyer upon receipt.

Ratio Decidendi: Where service tax is collected on a transaction that is later cancelled and the underlying consideration is refunded to the buyer, the relevant date for refund limitation is the date of such refund of consideration, and denial on unjust enrichment is not justified if the tax amount is not retained as a benefit by the assessee.

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