Assessee Recovered Service Tax from Customers and Incidence of Tax Passed: CESTAT Upholds Refund Amount in Consumer Welfare Fund [Read Order]

The Ahmedabad bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) upheld the refund amount in the consumer welfare fundsince the assessee recovered service tax from customers and the incidence of tax passed.

Messrs Mahasagar Travels Limited, the appellants are engaged in the inter-state and intra-state transportation of passengers and registered as Tour Operators and paying service tax in the normal course of their business.  However, Notification No. 20/2009-ST dated 07.07.2009 was issued having a retrospective effect which notified that the levy of service tax on tour operators was required to be discontinued. 

The service tax which was paid by the appellants become refundable and consequently, they filed a refund application in respect of the service tax paid in the routine course. Though the refund was sanctioned the same was credited to the Consumer Welfare Fund on the ground that the appellant have recovered service tax from their customers and the same was shown as expenditure in the books of accounts.  The order of Adjudicating Authority was upheld by the Commissioner (Appeals).

Shri Amal Dave, Counsel appeared on behalf of the appellants and argued that merely because the service tax paid by the appellant was shown as expenditure in the books of accounts that itself does not prove that the incidence of service tax was passed on to any other person therefore, the refund could not have been credited in the Consumer Welfare Fund. On the other hand, Shri Himanshu P Shrimali, Superintendent (AR) appeared for the Revenue to reiterate the findings of the impugned order.  The two-member bench comprising Mr Ramesh Nair,(Judicial)and Mr C L Mahar, (Technical)held that, since the appellant paid service tax in the routine course and subsequently when the service tax was made exempted retrospectively, the incidence of service tax stood passed on.  The CESTAT held that the lower authorities have rightly credited the refund amount to the Consumer Welfare Fund. The Court upheld the impugned order and dismissed the appeals.

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