No Provision in Law regarding Refund of Penalty: CESTAT quashes Order Rejecting Refund on ground of Failure to Pass the Bar of Unjust Enrichment [Read Order]

The CESTAT, Delhi, on Monday, quashed an order rejecting the refund claim on the ground that appellant has failed to pass the bar of unjust enrichment observing that there is no provision in law regulating the refund of penalty.

The department initiated the proceedings against the appellant, Rajasthan Financial Corporation for the payment of service tax under the category of “Banking and Financial Institution Services” and a show cause notice were issued to the appellant. On adjudication of the same, the demand of service tax was confirmed along with interest and equivalent penalty was also imposed. For the subsequent period also, the proceedings were initiated against the appellant and demand of service tax was confirmed along with interest and penalty was also imposed.

On appeal, the Commissioner (Appeals), who gave the benefit of payment of penalty under wrong head holding that this is only procedural lapse on the part of the appellant but he hold that the appellant has failed to pass the bar of unjust enrichment. Against the said order, the appellant is before me.

Mr. Ashok Jindal, Judicial Member observed that for the refund of penalty there is no such provision under law wherein the appellant is required to pass the bar of unjust enrichment.

Quashing the impugned order, the Tribunal held that the learned Commissioner (Appeals) had failed to appreciate the facts of the case as it is a case of a refund of the penalty paid by the appellant where he has considered that it is a case of a refund of duty.

“As facts of the case are crystal clear that it is a case of refund of penalty and for refund of penalty there is no such provisions in law where the appellant is required to establish that they have to pass the bar of unjust enrichment. In such circumstances, following the decisions of the Tribunal in the case of Be Office Automation Pvt Ltd., Anand Silk Mills vs. Commissioner of Customs (Import) Nhava Sheva, Ratan Udyog vs. Commissioner of Cus. (Acc & Export), Mumbai, I hold that bar of unjust enrichment is not applicable to the facts of the case,” the Tribunal said.

To Read the full text of the Order CLICK HERE

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