2025 (9) TMI 330 - AT - Service Tax

Refund claim denied for taxes paid under reverse charge; self-assessment cannot be altered without proper reassessment proceedings

M/s. GOVIND BURA BHANDAR Versus COMMISSIONER (Appeals) & ADG, DGGSTI, Jaipur (Rajasthan)

M/s. GOVIND BURA BHANDAR Versus COMMISSIONER (Appeals) & ADG, DGGSTI, Jaipur (Rajasthan) - TMI ISSUES PRESENTED AND CONSIDERED 1. Whether the statutory limitation applicable to refund claims applies where amounts paid under reverse charge mechanism were not, on the claimant's case, 'tax or duty'. 2. Whether a refund can be granted in refund proceedings where the claimant has self-assessed and paid service tax (including payments under reverse charge) without prior modification or reassessment of that self-assessment. 3. Whether unjust enrichment is established where the claimant paid service tax under reverse charge and has not shown that the service provider had deposited the tax or that the burden was passed on to another person. ISSUE-WISE DETAILED ANALYSIS - Applicability of Limitation to Payments under Reverse Charge Legal framework: Refund provisions under the Central Excise Act (applied to service tax matters) require claims to meet limitation conditions; Section 11B governs refund procedure. Limitation principles ordinarily apply to tax and duties. Precedent treatment: Revenue contends general limitation principles apply to tax refunds. The adjudicating authority and Tribunal refer to higher court pronouncements on refund procedure and limitation in analogous contexts. Interpretation and reasoning: The Court notes the appellant's contention that amounts paid under RCM were not 'tax or duty' for limitation purposes but records that the payments were made towards service tax liability. The authority treated the payments as tax paid (albeit by the recipient under RCM) and therefore within the ambit of limitation rules applicable to tax refunds. Ratio vs. Obiter: Ratio - where payment is in discharge of tax liability (even under RCM), limitation provisions applicable to tax refunds govern entitlement to refund. Obiter - nuanced distinctions about characterization of payments as not being tax are not accepted on the facts. Conclusion: Limitation is applicable to the refund claim because the amounts deposited under RCM constituted payment of service tax. ISSUE-WISE DETAILED ANALYSIS - Necessity of Modification/Reassessment before Granting Refund of Self-assessed Tax Legal framework: Refund proceedings are treated as execution-like processes that refund amounts determined as payable by an assessment; reassessment or modification of an assessment is the proper route to alter tax liabilities. Statutory schemes (customs and analogous indirect tax provisions) distinguish refund proceedings from assessment/re-assessment. Precedent treatment: The Court relies on authoritative precedent holding that refunds cannot be used to re-open or vary self-assessment; assessment (including self-assessment) must be modified under the prescribed procedure before a refund that changes an assessment can be entertained. Tribunal and High Court authorities have applied that principle to service tax refunds. Interpretation and reasoning: The Tribunal finds the payments were made by the appellant as a form of self-assessment under RCM. Accepting the appellant's refund would effectively modify the self-assessment without following statutory reassessment procedures. Refund processing cannot adjudicate exemption conditions or other liabilities that are assessment issues; allowing refund would amount to impermissible re-assessment in refund garb. Ratio vs. Obiter: Ratio - refund proceedings do not permit substantive re-assessment of tax liabilities; self-assessed amounts cannot be refunded unless the assessment is lawfully modified or reopened through prescribed statutory procedures. Obiter - references to comparative authority on double payment or mistakes of law that might, in other factual matrices, justify different relief. Conclusion: The refund claim is not maintainable because the self-assessed service tax (including RCM payments) was not modified or reopened by proper proceedings; therefore refund cannot be granted in refund proceedings. ISSUE-WISE DETAILED ANALYSIS - Unjust Enrichment and Evidentiary Burden Legal framework: Refund is barred if claimant is unjustly enriched; claimant bears evidentiary burden to show that tax burden was not passed on or that service provider had deposited tax resulting in double payment. Precedent treatment: Adjudicatory approach requires documentary proof (e.g., GRs, invoices, evidence of tax paid by service provider) to establish entitlement and absence of unjust enrichment. Interpretation and reasoning: The adjudicating authority noted absence of documents establishing that the service provider had paid service tax or that the claimant had borne and not passed on the burden. The appellant submitted a Chartered Accountant certificate but did not produce GRs, invoices or evidence of collection/payment by the service provider. Thus unjust enrichment was not disproved on the record. Ratio vs. Obiter: Ratio - absence of requisite documentary proof to rebut unjust enrichment bars refund; burden of proof lies on claimant. Obiter - commentary that misunderstanding of statute or notes on GRs may explain why claimant paid, but such explanations do not substitute for evidentiary proof in refund proceedings. Conclusion: Unjust enrichment was not satisfactorily excluded; refund denial on this ground is sustained on the evidence. INTERPLAY OF PRECEDENTS AND APPLICABILITY TO SERVICE TAX Legal framework: Principles articulated in high court/supreme court decisions concerning customs refund proceedings (that refunds are execution-like and cannot alter assessments) are considered for application to service tax refund claims under analogous rationale. Precedent treatment: The Court adopts the principle that refund proceedings cannot be used to change self-assessment, applying it to service tax despite earlier divergent Tribunal authority; subsequent High Court authority has held the principle applicable to service tax matters. Interpretation and reasoning: The Tribunal reasons that the core principle - refund proceedings being executional and not assessmental - transcends the statutory context and is applicable to service tax law; hence, the line of authority preventing refunds that would alter self-assessments governs the present dispute. Ratio vs. Obiter: Ratio - the doctrine preventing refund proceedings from being used to re-open or vary self-assessment applies to service tax refund claims. Obiter - references to contrary earlier decisions are noted but distinguished in light of higher court authority and principle. Conclusion: The principle that refund cannot change self-assessment is applicable to service tax; therefore the appellant's refund claim fails for want of prior modification of the self-assessment. OVERALL CONCLUSION The refund claim is not maintainable: (a) the amounts paid under reverse charge constitute service tax and are subject to limitation; (b) refund proceedings cannot be used to alter self-assessment and the appellant's self-assessed payment was not modified or reopened by proper procedure; and (c) unjust enrichment was not disproved on the record. The adjudicatory rejection of the refund is affirmed on these legal grounds.