By TIOL News Service

MUMBAI, OCT 13, 2017: THIS is a Revenue appeal.

According to the case of the respondent, the service tax was erroneously paid on gross amount of bills before the discount was allowed of 15% on the gross bill.

Two refund claims in the sum of Rs.1,14,060 and Rs.3,67,935/- respectively were filed by the respondent.

In the SCNs issued by the original authority, the allegation was that the respondent had failed to furnish documents to establish that the amount of service tax for which the refund is claimed has not been collected by the respondent from its clients and that incidence of such tax has not been passed on to any other person.

The Deputy Commissioner, after examining the bills raised by the respondent towards their client, the credit notes issued and the leger account maintained concluded that there is no unjust enrichment and thus allowed the refund.

On the ground that the refund claims were sanctioned erroneously, SCNs were issued by the Deputy Commissioner.

The CCE concluded that - "In the present case, the assessee has not amended/rectified the grossed bill or issued a revised bill before payment of service tax. Subsequently reimbursement of service tax does not in any way change the position that the assessee passed on the burden excess of service tax charged by them to their client. No proof,as discussed earlier, is shown by them to prove that M/s.Emami Ltd., did not further pass on the service tax to ultimate consumer or buyer of the product."

Inasmuch as the CCE held that the refund claims were erroneously allowed.

The respondent preferred an appeal before the CESTAT and the Tribunal allowed the same. Hence, the orders granting the refund were restored.

As mentioned, Revenue is aggrieved and is in appeal before the High Court.

The counsel for the appellant Revenue relied upon the decision of the Apex Court in the case of Addison & Company Limited =  2016-TIOL-146-SC-CX-LB and submitted that the respondent had not discharged the burden of proving that the incidence of such duty has not been passed by him to any other person; that there is no finding recorded by the Appellate Tribunal that the respondent has discharged the burden on him and, therefore, the Order is patently illegal and deserves to be set aside.

None appeared for the respondent.

The High Court extracted paragraph 19 of the cited apex court decision and inter alia observed -

"11. … finding recorded by the Commissioner of Central Excise is not disturbed by the Appellate Tribunal. Perhaps, the Appellate Tribunal oversimplified the matter by observing in paragraph 4 that there was no dispute that the realization for service was less than bill amount entitling the respondent to pay duty on the net amount received after discount. The only other finding recorded by the Appellate Tribunal is that the respondent has admitted that service tax is paid to its customers. This finding is based on the credit notes issued by the respondent to M/s.Emami Limited. There is no finding recorded by the Appellate Tribunal that M/s.Emami Limited did not pass on incidence of service tax on the 15% amount to its customers or buyers of the products. The burden was on the respondent to establish that M/s.Emami has not passed on the incidence of service tax to any other person including its customers or purchasers of the products . Thus, even going by the finding of fact recorded by the Appellate Tribunal, in paragraph 5 and the finding of fact recorded by the Deputy Commissioner in paragraph 14, the respondent did not establish that the incidence of service tax has not been passed by M/s.Emami Limited to any other person."

The Revenue appeal was allowed by setting aside the order of the Appellate Tribunal.

(See 2017-TIOL-2154-HC-MUM-ST)