Unjust enrichment in service tax refund claims depends on actual incidence of tax, not merely an inclusive contract clause.

Refund of service tax paid on a service later found not payable was not barred by unjust enrichment where the evidence showed the tax was borne by the assessee. Invoices, books of account, trial balance and the chartered accountant's certificate established that service tax was paid from the assessee's own funds, was not separately recovered from the customer, and was shown as receivable. A contractual clause stating that the rates were inclusive of tax was treated as only a general term and not conclusive proof that the tax incidence had been passed on. The refund was therefore admissible and the order rejecting it was unsustainable.

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Issues: Whether the refund of service tax was barred by unjust enrichment on the ground that the contract value was inclusive of tax and the incidence of tax had been passed on to the service recipient.

Analysis: The refund claim arose in relation to service tax paid on a service which was found to be not payable. The decisive question was whether the tax burden had actually been recovered from the customer merely because the contract stated that the rates were inclusive of taxes. The documents on record, including invoices, books of account, trial balance and the chartered accountant certificate, showed that service tax was paid by the assessee from its own funds, was not separately charged, and was reflected as receivable. A contractual clause describing the rate as inclusive of tax was treated as a general clause and not as conclusive proof that the tax incidence had been passed on.

Conclusion: The refund was not hit by unjust enrichment and the assessee was entitled to refund. The order denying refund was unsustainable and the appeal succeeded.

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