The Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ) Chandigarh Bench observed that the Erroneous payment of Duty/Tax under mistake of law would not attract provisions of Unjust Enrichment under Section 11B of Central Excise Act, 1944 (CE Act,1944).
The facts of the case is that the respondent is engaged in providing services of real estate agent services, maintenance and repair and consulting engineering services. The respondent provides services to various clients located in Domestic Tariff Area (‘DTA’) as well as in Special Economic Zones (‘SEZ’). In respect of the services rendered to clients located in DTA, the Respondent duly discharged service tax liability after availing the credit of input services in terms of CCR Rules. However, with respect to the services rendered to SEZ Unit, the Respondent claimed the exemption from the payment of service tax.
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Since, the respondent, CBRE South Asia Pvt Ltd was availing the CENVAT credit on the input services without maintaining separate accounts for taxable and exempted services. Accordingly, considering the services rendered to SEZ Unit as exempted, the Respondent paid an amount of Rs. 2,52,31,030 on the amount received against the services provided to SEZ Units for the period October 2011 to March 2012 (‘Disputed Period’), in compliance of the Rule 6(3)(i) of the CCR Rule 2004.
The respondent has also shown the reversal of the said amount of Rs. 2,52,31,030/- in the service tax returns produced on record. Subsequently, the respondent came to know that in terms of Rule 6(6A) of the CCR Rules, Rule 6(3) of CCR Rules is not applicable in case the taxable services are provided to SEZ Unit without payment of service tax. Thereafter, the respondent filed a refund application of Rs. 2,52,31,030 on 26 March 2013 claiming that the amount was paid inadvertently and erroneously during the disputed period.
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After the lapse of almost 4 years, the department issued a ‘Deficiency Memo’ dated 24 Jan 2017 and proposed to reject the refund claim. The Respondent filed the reply against the ‘Deficiency Memo’ on 02 February 2017; thereafter, the refund claim was rejected by the adjudicating authority vide the Order-in-Original dated 09.01.2018.
Aggrieved by the order-in-original appeal was filed and the Commissioner ( Appeals ) allowed the appeal in favor of the respondent and set aside the Order-in-Original. Against which revenue filed the present appeal.
AR appearing for the Revenue submitted that the refund has rightly been rejected by the adjudicating authority because the amount paid for the service provided to SEZ unit was paid from Cenvat Credit and not in cash as claimed by the respondent.
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He further submitted that the respondent must have taken into account this cost into value of services provided to SEZ units and passed on the same to them and the refund of such amount shall amount to unjust enrichment. Also submitted that the refund of deposit sought by the respondent is covered u/s Section 11B of the Central Excise Act, 1944 as made applicable to the service tax matters.
On the other hand, Counsel appearing for the respondent supported the impugned order and submits that it is undisputed that the respondent has paid the amount of Rs 2,52,31,030/- towards Cenvat credit under Rule 6(3) of CCR Rules inadvertently as reflected in the revised ST-3 returns for the period October, 2011 to March, 2012.
Also submitted that the objection of the Department that the payment was made from Cenvat and not via cash challans is immaterial for the purpose of refund claim. And the denial of refund claim would be against the constitutional provision under article 265 of the Indian Constitution. In support of which various decisions were submitted.
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Regarding the unjust enrichment, the counsel submitted lists of invoices issued to SEX units, which shows no service tax was charged from the SEZ unit. Further, the respondent also filed the affidavit of a Chartered accountant who has certified that no tax was charged from the SEZ unit. In support of this submission he relied upon various decisions.
The court observed that “there is no doubt in our minds, that if the Revenue is allowed to keep the excess service tax paid, it would not be proper, and against the tenets of Article 265 of the Constitution of India. On the facts and circumstances of this case, we deem it appropriate to pass the following directions:-
a) The Application under Section 11B cannot be rejected on the ground that is barred by limitation, provided for under Section.
b) The claim for return of money must be considered by the authorities.”
The CESTAT Bench comprising S.S Garg ( Judicial Member ) and P. Anjani Kumar ( Technical Member ) observed that denial of refund claim of the amount wrongly paid is in violation of Article 265 of Indian Constitution. As regards the claim of unjust enrichment, the respondent has proved that no tax has been charged from the SEZ unit. The invoices issued to SEZ units along with sample copies of tax invoice shows that no service tax was charged from the SEZ unit. The respondent has proved that the amount of refund claim has actually been borne by them and sanctioning of the refund would not amount to unjust enrichment.
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Based on various decisions cited, the court is of the opinion that the erroneous payment of the duty/tax under mistake of law would not attract provisions of unjust enrichment as provided in Section 11B of Central Excise Act.
In view of the above discussion, the court finds no infirmity in the impugned order which we uphold by dismissing the appeal of the Revenue.
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