Unjust enrichment bars service tax refund where the burden was passed on despite retrospective exemption.

Refund of service tax paid in the ordinary course remained subject to the doctrine of unjust enrichment even after a retrospective exemption removed the levy. The decisive question was whether the tax burden had been borne by the assessee or passed on to customers; on the facts, the Tribunal found the incidence had been passed on. Merely showing the tax amount as expenditure in the books was insufficient to displace that conclusion. The refund was therefore not payable to the assessee and was correctly credited to the Consumer Welfare Fund.

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Issues: Whether the refund of service tax paid in the normal course, which became refundable after a retrospective exemption notification, was barred by unjust enrichment and therefore liable to be credited to the Consumer Welfare Fund.

Analysis: The appellants had paid service tax in the ordinary course of business and, on retrospective discontinuance of levy under Notification No. 20/2009-ST dated 07.07.2009, sought refund of the amount. The deciding factor was whether the burden of tax had been borne by the appellants themselves or had been passed on to customers. The Tribunal held that in the facts of the case the incidence of service tax stood passed on, and the mere presentation of the tax amount as expenditure in the books did not dislodge the bar of unjust enrichment. Relying on earlier decisions on identical facts, the Tribunal treated the refund as not payable to the appellants.

Conclusion: The refund was hit by unjust enrichment and was rightly credited to the Consumer Welfare Fund; the challenge by the assessee failed.

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