Order Date – 22 December 2023

Parties: M/s. Nipani Industries Vs The Commissioner of Central Excise and Service Tax

Facts –

• The Appellant, M/s. Nipani Industries, had provided Works Contract Services for the Central and State Government buildings. They filed a refund claim as per section 102 of the Finance Act, 1994. 
• The refund was sanctioned by the authorities, however the revenue contended that the clause of unjust enrichment would apply to this case and accordingly the Commissioner (Appeals) held that the unjust enrichment clause would apply to this case and the amount of refund sanctioned should have been credited to the Consumer Welfare Fund instead of paying to the appellant.

Issue –

• Whether the clause of unjust enrichment would apply to this case?

Order –

• The Tribunal observed that section 102 provides for refunds only if the contracts were signed prior to 1 March 2015. During that period, no service tax was payable because of exemption notification no. 25/2012-ST. So, it is inconceivable that the appellant would have anticipated that the exemption from service tax would be withdrawn even before submitting its bids and would have included the service tax element in the bills.
• Further it is impermissible to hold that the appellant had indirectly passed on the burden of the service tax to its client government departments. Once this anomalous and baseless presumption that the service tax would have been indirectly passed on by the appellant to its client government departments is removed, no basis remains for rejecting the refund claim or crediting it to the Consumer Welfare Fund.
• It was observed that no service tax was paid when the appellant submitted its bids to the clients. Therefore, there is no scope for passing on the burden of any service tax at that stage. After the service was rendered, it was only entitled to the amounts which it bid and which were accepted in the contract and not to any additional amount as service tax. The contracts specifically exclude any additional payments towards service tax. 
• Hence the appeal is allowed.