Refund claims for unprovided services: limitation and unjust enrichment principles under CGST transition rules may not defeat substantive entitlement

Refund claims under section 142(5) of the CGST Act for cesses paid on services that were ultimately not provided are addressed through the existing-law framework. The notes state that such claims should not be rejected merely because they were filed after the original tax payment, since entitlement arises from the non-provision of service. They further explain that unjust enrichment does not apply where the refunded amount is returned to the person from whom it was received through the applicable service-tax refund mechanism, including an intermediary or financing channel. On this basis, the notes identify entitlement to refund and rejection of the limitation and unjust-enrichment objections.

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Issues: (i) Whether the refund claim for Krishi Kalyan Cess and Swachh Bharat Cess under section 142(5) of the CGST Act was barred by limitation; (ii) whether the refund was hit by the principle of unjust enrichment.

Issue (i): Whether the refund claim for Krishi Kalyan Cess and Swachh Bharat Cess under section 142(5) of the CGST Act was barred by limitation.

Analysis: The refund arose from cancellation of insurance policies after tax had been paid under the existing law for services that were not ultimately provided. The Tribunal followed its earlier view that claims under section 142(5) are to be dealt with under the existing law and are not to be rejected merely on the ground of delay or time bar. The refund mechanism was treated as governed by the substantive entitlement arising from non-provision of service, rather than the date of original tax payment.

Conclusion: The refund claim was not barred by limitation.

Issue (ii): Whether the refund was hit by the principle of unjust enrichment.

Analysis: The Tribunal held that Rule 6(3) of the Service Tax Rules, 1994 and section 142(5) of the CGST Act require return of the amount to the person from whom it was received, and do not mandate direct payment to the insured under section 64VB of the Insurance Act, 1938. On the facts, the amount attributable to the cancelled policies had been returned through the financing/agent channel and ultimately reached the service recipient. The Tribunal therefore found no basis to invoke unjust enrichment.

Conclusion: The refund was not hit by unjust enrichment.

Final Conclusion: The appellant was held entitled to refund of the cesses claimed under section 142(5) of the CGST Act, and the impugned rejection was set aside.

Ratio Decidendi: A refund claim under section 142(5) of the CGST Act for tax paid on services not provided cannot be denied merely as time barred, and unjust enrichment does not arise where the amount has been returned to the person from whom it was received in accordance with the service tax refund mechanism.

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