By TIOL News Service

MUMBAI, FEB 13, 2015: THE appellants are engaged in providing taxable service of "Market Research Agency (MRA)" to companies abroad. They paid Service Tax of Rs. 18,26,064/- on the services exported by debiting the CENVAT Credit account.

The department was of the opinion that the input service CENVAT Credit was wrongly usedand, therefore, on persuasion, the appellant reversed the credit of Rs. 18,26,064/-. They also paid the entire amount of Rs. 18,26,064/- in cash vide GAR-7 challan no. 369 dated 5.2.2011.

Later, the appellant realized that MRA service provided to client abroad amounts to export of service and they had inadvertently paid the amount of Rs. 18,26,064/- and, therefore, took re-credit of this amount in Cenvat Account which had been reversed earlier. They also filed refund claim on 29.7.2011 for Rs. 18,26,064/- paid in cash.

The refund claim is the subject matter of appeal. The Commissioner (Appeals) held that the service provided is to be treated as export of service which is exempted from liability of payment of Service Tax under Rule 4 of the Export of Services Rules, 2005. The lower appellate authority also held that the appellant is not entitled to refund of Service Tax as they had already re-credited the amount of Service Tax paid by them in their CENVAT Credit Account and they would be unjustly enriched if such refund is allowed to them. It was also held that the refund claim is time barred as the relevant date in the case of export of service is the date when the payment for service exported has been received by the assessee. He also relied on the decision in Eaton Industries Pvt. Ltd. - 2011-TIOL-166-CESTAT-MUM.

The appellant is, therefore, before the CESTAT and produces the export invoice which only reflected the service charges and, therefore, it is submitted that the question of unjust enrichment does not arise. In the matter of limitation, it is submitted that the payment was made on 5.2.2011 and refund claim was filed on 28.7.2011 and is, therefore, not hit by limitation.

The Bench observed -

++ On the issue whether the MRA service provided to clients abroad is an export of service or not has already been decided by the Commissioner (Appeals), who held that the said service is to be treated as export of service. Therefore, the only issues to be decided in this matter are the issues of unjust enrichment and time limitation.

++ The findings of the Commissioner (Appeals) that the appellant would be unjustly enriched is not clear to me. In fact it is confusing as to how he has arrived at this conclusion. It is nowhere brought out on record in any part of the proceedings as to why the CENVAT Credit of Rs. 18,26,064/- was not admissible to the appellant. The entire sequence of events show that since the appellant was not required to pay the Service Tax on the export of service, the status of CENVAT Credit Account needs to be restored to its original status. The appellant debited Rs. 18,26,064/- from their CENVAT Credit account for payment of duty on export of service, which was not required to be paid. Therefore, as the matter stands today, this CENVAT Credit is to be restored in the CENVAT account. Further, since the appellant had paid the amount of Rs. 18,26,064/- in cash, the same is to be refunded as the amount was paid by them wrongly. I do not see how this refund will amount to double benefit or unjust enrichment. Clearly, the invoices show that the incidence of tax has not been passed on to the customers abroad. Once appellant have discharged the proof of not passing on the incidence of tax, the onus lies on the department to prove that duty incidence was passed. The invoices prove to be contrary and the department has not been able to establish that the duty incidence has been passed on to the customers abroad. In any case, it is a settled matter that the unjust enrichment does not arise in the case of export of services. Therefore, on the issue of unjust enrichment, I hold that the same does not arise and the appellant is eligible for the refund.

After holding that the reliance by the Commissioner (Appeals) on the decision in Eaton Industries (supra) is clearly misplaced and that for the purpose of refund, in view of the provisions of s.11B of CEA, 1944, the relevant date applicable is clause (f) of Explanation clause (B) viz. "in any other case, the date of payment of duty", the refund application filed on 28.07.2011 is well within the period of one year from the relevant date (i.e 05.02.2011 when payment was made) and hence is not hit by limitation.

The order-in-appeal was set aside and the appeal was allowed with consequential relief.

(See 2015-TIOL-328-CESTAT-MUM)