2025 (8) TMI 1223 - AT - Service Tax

Claimant's meritorious service tax refund diverted to Consumer Welfare Fund due to failure to prove no passing on of tax

M/s. Ramky Infrastructure Ltd. Versus Commissioner of Central Excise and Customs, Central Goods and Service Tax, Jaipur – I And Commissioner of Central Excise and Customs, Central Goods and Service Tax, Jaipur – I Versus M/s. Ramky Infrastructure Ltd.

M/s. Ramky Infrastructure Ltd. Versus Commissioner of Central Excise and Customs, Central Goods and Service Tax, Jaipur – I And Commissioner of Central ... ISSUES PRESENTED AND CONSIDERED 1. Whether services rendered in execution of government contracts for laying water supply pipelines and related pumping/station works constitute taxable 'Works Contract Service' or are non-taxable infrastructure/civic-amenity services. 2. Whether a refund claim for service tax paid pursuant to self-assessment can be allowed in refund proceedings without the taxpayer first challenging/modifying the original assessment. 3. Whether the bar of unjust enrichment precludes disbursement of an otherwise sanctioned refund where the claimant has not proven that the tax incidence was not passed on to customers or expensed. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Taxability of water supply pipeline and related works as Works Contract Service Legal framework: Service tax provisions defining taxable services include 'Works Contract Service' and carve outs/exemptions apply where the activity qualifies as infrastructure or civic amenity provided by the State. The adjudicatory scheme allows assessment and refund where tax was paid on non-taxable activity. Precedent Treatment: The Tribunal accepted earlier tribunal decisions and a Tribunal-Larger Bench ruling that construction activity relating to water supply pipelines for the State is an infrastructure/civic amenity and not a commercial/industrial construction service subject to service tax. The present Tribunal relied on the assessee's own prior Tribunal decision applying the Larger Bench ratio. Interpretation and reasoning: The Tribunal examined the nature of the contracts - lump-sum contracts awarded by the State Public Health Engineering Department for public water distribution works - and concluded they fall within the infrastructure/civic-amenity character contemplated by the controlling precedents. The Tribunal observed that the matter had been remanded for fresh adjudication in light of declaratory law and that subsequent adjudication upheld non-taxability on merits. Ratio vs. Obiter: Ratio - construction works for laying water supply pipelines for the State, being infrastructure/civic amenities, are not taxable under 'Works Contract Service' as applied in the controlling precedents and the assessee's own Tribunal decision. Obiter - none additional on taxability beyond application of precedent and facts. Conclusion: The Tribunal held the claimant entitled to refund on the ground that the service was not taxable under the 'Works Contract Service' classification. Issue 2 - Permissibility of refund where original assessment was self-assessment and not appealed Legal framework: Rules define 'assessment' to include self-assessment; refund provisions permit claims where tax has been paid but typically operate without reopening assessment. Supreme Court authority (as applied by the parties) establishes that refund proceedings ordinarily cannot be used to modify or reopen an assessment unless the assessment itself is set aside or modified by appeal. Precedent Treatment: The Department relied on higher-court authority holding that a taxpayer who has self-assessed and not appealed the assessment cannot seek to modify that assessment via refund proceedings. The Tribunal considered these authorities but distinguished them on facts and relative precedents in the instant matter, noting previous Tribunal/LB and the assessee's own Tribunal decision addressing identical facts. Interpretation and reasoning: The Tribunal acknowledged the general rule that assessment (including self-assessment) should not be reopened in refund proceedings and that refunds should not be a vehicle to modify assessments. However, because the matter had been remanded earlier and subsequent adjudications applied binding Tribunal/Larger Bench declarations holding the activity non-taxable, the Tribunal treated the refund as meritorious. The Tribunal found that the adjudicating authorities had sanctioned the refund on merit (i.e., tax was not leviable), while reserving the question of disbursement based on unjust enrichment proof. Ratio vs. Obiter: Ratio - although self-assessment generally bars reopening in refund proceedings, where a binding declaratory decision establishes non-taxability and the adjudicating authority grants refund on merits, the claimant may be entitled to sanction of refund notwithstanding earlier self-assessment; however, the sanctity of assessment is not displaced unless modified by appeal or rendered inapplicable by binding law. Obiter - comments reconciling higher-court authority with Tribunal practice in remand/declared-law scenarios. Conclusion: The Tribunal confirmed entitlement to refund on merit (non-taxability) despite initial self-assessment, distinguishing the application of the general bar in view of prevailing Tribunal/LB precedent and the adjudicatory history directing de novo consideration. Issue 3 - Unjust enrichment as a bar to disbursement of sanctioned refund Legal framework: Section 11B (refund) and the unjust enrichment doctrine require the claimant to demonstrate that the tax burden was not passed on to others; if the claimant passed on the tax or expensed it, disbursement may be withheld and amounts credited to a consumer welfare fund. Judicial authority supports denial of disbursement where unjust enrichment is established or not rebutted. Precedent Treatment: The Tribunal relied on prior decisions applying unjust enrichment principles and on higher-court authority affirming that sanction of refund does not automatically compel disbursement when unjust enrichment exists. The adjudicating authority and Commissioner(Appeals) applied the unjust enrichment test and directed diversion to the Consumer Welfare Fund where the claimant failed to rebut presumption of passing on the incidence. Interpretation and reasoning: The Tribunal examined the evidence (or lack thereof) presented to show that the tax incidence was not passed on. It noted the claimant had expensed service tax in profit and loss accounts and contracts were priced inclusive of service tax. No documentary proof was produced to establish non-passing on. Given this absence of proof and applicable precedent, the Tribunal found no error in withholding disbursement and directing credit to the Consumer Welfare Fund. Ratio vs. Obiter: Ratio - when a sanctioned refund claimant fails to prove non-passing of tax incidence, the adjudicator may lawfully withhold disbursement and direct the refund amount to the Consumer Welfare Fund under the unjust enrichment doctrine. Obiter - none significant beyond application of established unjust enrichment principles. Conclusion: The Tribunal upheld denial of disbursement on unjust enrichment grounds while confirming admissibility of the refund on merits; the sanctioned amount was ordered to be credited to the Consumer Welfare Fund. Cross-references and Combined Conclusions Interrelation of issues: The Tribunal reconciled (a) the substantive entitlement to refund based on non-taxability (Issue 1) with (b) procedural limits on reopening assessments (Issue 2), and (c) the equitable constraint of unjust enrichment (Issue 3). It concluded that substantive law and binding precedent entitled the claimant to refund, but equitable proof requirements independently justified diversion of disbursement to the Consumer Welfare Fund where non-passing was not demonstrated. Final disposition: The Tribunal dismissed both cross appeals, upholding sanction of refund on merits but affirming the adjudicator's refusal to disburse funds to the claimant on unjust enrichment grounds and directing credit to the Consumer Welfare Fund.