Duplicate service tax recovery under reverse charge cannot be retained when limitation would defeat restitution and refund.

Service tax paid by a manpower service provider after complete reverse charge applied from 1 April 2015 was not payable by that provider; liability rested with the recipient. Where the Department retained the provider's payment and also recovered tax on the same services from the recipient, the duplicate collection resulted in unjust enrichment. The notes state that the provider learned of the error only through the recipient's debit note and that statutory limitation should not defeat restitution in these exceptional circumstances. They further state that writ jurisdiction could be exercised despite an appellate remedy, and the wrongfully retained amount should be refunded.

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Issues: Whether a refund of service tax paid by a manpower service provider, though tax was payable by the recipient under the reverse charge mechanism, could be denied as time-barred despite the Department having recovered the same tax twice.

Analysis: From 01.04.2015, manpower supply services were subject to complete reverse charge, and the petitioner was not liable to collect or deposit service tax. The Department nevertheless retained the amount deposited by the petitioner and subsequently recovered tax on the same services from the recipient. The petitioner became aware of the erroneous collection only upon receipt of the recipient's debit note. In these exceptional circumstances, retention of the duplicated tax collection constituted unjust enrichment by the Department, and the statutory limitation could not defeat restitution. Exercise of writ jurisdiction was warranted notwithstanding the appellate remedy.

Conclusion: The refund claim could not be rejected as barred by limitation; the petitioner was entitled to refund of the amount wrongfully retained by the Department.

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