2022 (4) TMI 519 - AT - Service Tax

Appeal successful in penalty refund claim based on unjust enrichment. Previous cases support no unjust enrichment for penalties.

M/s Rajasthan Financial Corporation Versus Commissioner of CGST, Jaipur

The Tribunal allowed the appeal, setting aside the rejection of the refund claim for penalty based on unjust enrichment. It was held that unjust ... Refund of penalty paid by appellant - rejection on the ground of unjust enrichment - HELD THAT:- The learned Commissioner (Appeals) had failed to appreciate the facts of the case as it is a case of refund of penalty paid by the appellant where he has considered that it is a case of refund of duty. As facts of the case are crystal clear that it is a case of refund of penalty and for refund of penalty there is no such provisions in law where the appellant is required to establish that they have to pass the bar of unjust enrichment. Thus, following the decisions of the Tribunal in the case of THE COMMISSIONER OF CUSTOMS (I) , MUMBAI VERSUS BE OFFICE AUTOMATION PVT LTD. [2009 (9) TMI 968 - CESTAT MUMBAI], and RATAN UDYOG VERSUS COMMISSIONER OF CUS. (ACC & EXPORT) , MUMBAI [2010 (11) TMI 926 - CESTAT MUMBAI], it is held that bar of unjust enrichment is not applicable to the facts of the case. The impugned order qua rejecting the refund claim on the ground that appellant has failed to pass the bar of unjust enrichment, is set aside - appeal allowed - decided in favor of appellant. Issues:Appeal against rejection of refund claim of penalty based on unjust enrichment.Analysis:The appellant appealed against the rejection of their refund claim for penalty paid, citing unjust enrichment as the reason for rejection by the authorities below. The proceedings initially began with a show cause notice for payment of service tax under 'Banking and Financial Institution Services,' resulting in confirmed demands, interest, and penalties. The penalty was subsequently dropped by the Commissioner (Appeals) based on Section 80 of the Finance Act, 1994. The Revenue challenged this decision, but the Tribunal upheld the dropping of the penalty. The appellant then filed a refund claim for the penalty paid, which was rejected due to alleged procedural errors and unjust enrichment. The appellant argued that there is no legal requirement to establish unjust enrichment for a penalty refund, citing various precedents. The Tribunal agreed, emphasizing that unjust enrichment does not apply to penalty refunds, as established in previous cases. Consequently, the impugned order rejecting the refund claim on the grounds of unjust enrichment was set aside, and the appeal was allowed with consequential relief.