By TIOL News Service

MUMBAI, SEPT 04, 2015: THE appellant filed an application for refund of Rs. 4,20,49,912/-. It is the case of the appellant that they are engaged in extraction of iron ores and during the period June, 2005 to May 2007 wrongly paid service tax under the category of 'Business Auxiliary Service' under pressure from the Revenue authorities.

The refund claim was rejected by the original authority.

The lower appellate authority agreed with the appellant on the question of non-taxability under Business Auxiliary Service but rejected the refund claim on the ground of unjust enrichment.

Before the CESTAT, the appellant submitted that service tax liability cannot be fastened under 'Business Auxiliary Services' prior to 01/06/2007, as recorded by the first appellate authority and Revenue is not in appeal against such an order. Further, service tax which has been wrongly paid by the appellant, though it is shown as expenses in PL account, the same is not recovered from their customers and question of unjust enrichment will not arise. Certificate of the Chartered Accountant is also produced as evidence. It is their further submission that the appellant had not collected the service tax from the customers and the invoices which are raised by the appellant showed only extraction charges and not service tax.

The AR submitted that the appellant has not been able to demonstrate that they have not recovered the amount of service tax from their customers; that although the appellant has claimed limitation will not apply in a situation where tax is recovered without authority of law, question of limitation would arise in this case as the appellant themselves have classified their services under BAS and discharged service tax liability.

The Bench observed -

+ It is undisputed that for the period in question, the appellant have discharged the service tax under 'Business Auxiliary Services'. On merits, the first appellate authority has held that for the period in question in this appeal, service tax liability does not arise under the category of 'Business Auxiliary Service' and there being no appeal from the revenue, this finding of the appellate authority is concluded in favour of the assessee.

+ We find from the records that the appellant had raised the bill on their customers which indicated that the same is for extraction of iron ore for the period in question. The said bill does not indicate any tax liability charged by the appellant.

+ It can be seen from the bill that the appellant has not charged any service tax separately but when the revenue authorities directed them to pay service tax under the category of 'Business Auxiliary Service' it is seen that the appellant had discharged service tax liability considering the amount recovered from their customers as cum-tax amount and worked out the service tax liability. This point is not disputed by the appellant in their appeal memorandum.

+ If that be so, it would mean that the amount which has been billed by the appellant to their customers and paid by their customers includes service tax liability and the same has to be held as being passed on to the customers.

+ On this factual matrix, we find that the certificate issued by the Chartered Accountant and relied upon heavily by the counsel may not carry the case of the appellant any further. There being no dispute as to the fact that the service tax liability has been discharged based upon working back from the amount which has been recovered from their customers, question of unjust enrichment arises and the appellant is not able to dislodge the presumptions and that they have recovered the amount of service tax from their customers. On this factual matrix, the appeal fails on the ground of unjust enrichment.

Holding that the first appellate authority's order is correct and legal and does not suffer from any infirmity, the appeal was rejected.

(See 2015-TIOL-1872-CESTAT-MUM)