An assessee who paid service tax under good faith that the services are taxable, but found later on that the services was not taxable.

Now, he wants to file a refund claim before the department on the ground that since the services ware not subject to tax, government can not retain the amount and should be refunded.

But, the government says that a person shall not be allowed to avail the dual benefit i.e once he recover the amount from the customer / client, he can not be enriched by granting refund.

For this purpose, section 11B read with section 12B of Central Excise Act, 1944 has been extended to service tax.

In the present case, appellant took the ground that; the service tax was not required to be paid. However, they have paid service tax and therefore, service tax should be allowed.

Tribunal held that, refund is subject to unjust enrichment and if failed to produce the evidence to discharge the burden of unjust enrichment, refund can not be granted.

Therefore, refund claim should be filed with due care and with proper documents.

 

(For full text of judgment - visit 2008 -TMI - 30614 - CESTAT BANGLORE)

Unjust enrichment prevents refund of wrongly paid service tax unless claimant proves no recovery from clients. Refund claims for service tax paid by mistake are governed by the unjust enrichment principle; claimants must prove they did not recover the tax from customers because the central excise refund framework has been applied to service tax. Absent adequate documentary evidence to discharge the burden of proving no recovery, refunds will be denied.