Retrospective service tax exemption supports refund for non-commercial government construction, while unjust enrichment alone does not bar reconsideration.

Construction services provided to a Defence Ministry department for non-commercial governmental buildings were treated as covered by the retrospective service tax exemption and refund framework, so the tax paid during the interregnum was refundable in principle. The objection of unjust enrichment was not accepted as a complete bar where the tax burden was borne within the governmental reimbursement chain. The refund claim was therefore to be re-examined with the service recipient impleaded as co-applicant, and the earlier rejection was set aside.

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Issues: (i) Whether the appellant was entitled to refund of service tax paid on construction services provided to Military Engineering Services for non-commercial governmental buildings under the retrospective exemption framework. (ii) Whether the refund claim was barred by unjust enrichment and whether the matter required reconsideration with the service recipient impleaded as co-applicant.

Issue (i): Whether the appellant was entitled to refund of service tax paid on construction services provided to Military Engineering Services for non-commercial governmental buildings under the retrospective exemption framework.

Analysis: The construction services were rendered to a department of the Ministry of Defence for infrastructure and civil structures not used for commerce, industry, or any business or profession. The exemption earlier available under Notification No. 25/2012-ST was withdrawn for a period and later reintroduced by Notification No. 09/2016-ST, while Section 102 of the Finance Act, 1994 created a retrospective exemption and refund mechanism for the interregnum. The Court treated the claim as covered by the exemption and the retrospective refund provision.

Conclusion: The appellant was entitled to refund on merits, subject to the refund being examined in accordance with the remand directions.

Issue (ii): Whether the refund claim was barred by unjust enrichment and whether the matter required reconsideration with the service recipient impleaded as co-applicant.

Analysis: The Court followed earlier decisions holding that, in such cases, the burden of tax was borne in the governmental chain of reimbursement and the recipient department could be the proper claimant. It also relied on the statutory scheme of Section 102 and the refund provisions under Section 11B of the Central Excise Act, 1944 to hold that the claim should be reconsidered with the service recipient participating in the refund process. The order of rejection on unjust enrichment was not sustained.

Conclusion: The objection of unjust enrichment did not defeat the claim, but the refund was to be re-examined after impleading MES as co-applicant.

Final Conclusion: The impugned rejection was set aside and the matter was sent back for fresh decision on the refund claim in the light of the retrospective exemption and the participation of the service recipient.

Ratio Decidendi: Where construction services are rendered to a governmental department for non-commercial use, retrospective exemption and refund provisions apply, and the refund claim cannot be rejected on unjust enrichment alone when the tax burden is shown to have been borne within the governmental recipient chain.

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