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2016 (3) TMI 205 - CESTAT NEW DELHI

2016 (3) TMI 205 - CESTAT NEW DELHI - 2016 (43) S.T.R. 552 (Tri. - Del.) - Refund claim - Service tax paid on royalty by the transferee company M/s Usha International Ltd. (UIL) to transferer company M/s Jay Engineering Works Ltd. (JEW) on the basis of the High Court order dated 26.5.2008 approving merger of the erstwhile UIL and M/s Shree Ram Fuel Injections Ltd. (SRFIL) with JEW with effect from 1.4.2007 - Registrar of Companies, National Capital Territory of Delhi & Haryana, Ministry of Compa .....

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vice to self and consequently service tax paid during the said period became eligible for refund. - Refund claim - Doctrine of Unjust Enrichment - Appellant contended that it was neither a manufacturer of goods nor was it providing any service (which utilized the impugned service) during the relevant period and no Cenvat credit was taken of the service tax, the refund of which was sought and therefore the presumption contained under Section 12B of the Central Excise Act made applicable to S .....

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ch royalty was paid as service to self. As the service was rendered to self and service tax was paid thereon, burden can only passed on to self and passing on the burden to self is not tantamount to passing it to any other person. Therefore, the appellant is not hit by the doctrine of unjust enrichment. - Decided in favour of appellant - No. ST/Stay/57540/2013 & ST/56974/2013, ST/58043/2013-CU(DB) - Final Order No. 50858-50859/2016 - Dated:- 4-2-2016 - MR. G. RAGHURAM, PRESIDENT AND MR. R.K. SIN .....

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ering Works Ltd. (JEW) on the basis of the High Court order dated 26.5.2008 approving merger of the erstwhile UIL and M/s Shree Ram Fuel Injections Ltd. (SRFIL) with JEW with effect from 1.4.2007 being appointed the date of said merger. JCW was receiving royalty from UIL for the use of it brand name and paid service tax on royalty so received and sought refund of service tax paid during the period 1.4.2007 to 31.3.2008 on the ground that as a result of merger from 1.4.2007 it became service to s .....

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file relevant documents before the primary adjudicating authority in respect of proof of compliance of the direction contained in the order dated 26.5.2008 of the Hon ble High Court regarding the date of merger of three companies on which the issue of taxability of the payment in respect of royalty was dependent. The primary adjudicating authority in turn held that refund of ₹ 71,74,496/- already granted deserved to be rejected and recovered. 3. The appellant filed appeal before the Commi .....

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refund of which was sought. The Commissioner (Appeals) came to a finding that Registrar of Companies, National Capital Territory of Delhi & Haryana, Ministry of Company Affairs, issued to the appellant its approval for change of name of JEW to Usha International Ltd. from 20.6.2008 and therefore up to that date the rendition of service cannot be termed as service to self and the service tax was correctly payable/paid and so no refund was admissible. Appeal No. ST/58043/2013 is against the sa .....

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r dated 26.5.2008 the Hon ble High Court granted sanction to the said scheme of arrangement for amalgamation. Thus, the High Court approved to the appointed date as 1.4.2007 and therefore service tax paid from 1.4.2007 onwards up to 31.3.2008 is clearly refundable as it in effect became a case of service to self. (ii) It is immaterial when the High Court order was passed and when the Registrar of Companies issued the letter of its approval of the change of name of JEW to Usha International Ltd. .....

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evant period M/s UIL did not manufacture any goods on which the brand name was used. Therefore it was not a manufacturer or provider of service and as a result, the presumption of passing on the burden does not arise in its case because such presumption arises by virtue of under Section 12B of Central Excise Act, 1944 which is applicable only to a person who has paid duty of excise on any goods (and by virtue of Section 83 of the Finance Act, 1994 also to a person who has paid service tax). (ii) .....

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ion in prices is hardly a conclusive evidence with regard to passing of the burden or otherwise. 5. The ld. DR, on the other hand contended that : (i) The impugned service tax was paid by M/s JEW which worked as an independent company up to 20.6.2008 and therefore service tax was payable and correctly paid by it. (ii) The onus is on the appellant to show that the burden was not passed on and such onus has not been discharged by the appellant. (iii) The fact that the prices of electric fan/sewing .....

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er date(s) as the Hon ble High Court may direct: . We find from the order of the Hon ble High Court that it did not direct appointed date or transfer date to be any different date from 1st April 2007. We find that para 8.1 of the said scheme of arrangement states as under ; 8.1 The Transferor Companies shall carry on and be deemed to carry on all its business and activities and stand possessed of its properties and assets for and on account of and in trust for the Transferee Company and all the .....

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that the amalgamation was effective from 1.4.2007 even if its approval by the Honble High Court and the letter of Registrar of Companies approving change of name of JEW to Usha International were issued letter. This view is clearly supported by Supreme Court judgement in the case of Marshall Sons & Co. (supra) which held as under: 14. Every scheme of amalgamation has to necessarily provide a date with effect from which the amalgamation/transfer shall take place. The scheme concerned herein .....

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t should follow that the date of amalgamation/date of transfer is the date specified in the scheme as the transfer date. It cannot be otherwise. It must be remembered that before applying to the Court under Section 391(1), a scheme has to be framed and such scheme has to contain a date of amalgamation/transfer. The proceedings before the Court may take some time; indeed, they are bound to take some time because several steps provided by Sections 391 to 394-A and the relevant Rules have to be f .....

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ss for and on behalf of the Transferee Company (Holding Company) with all attendant consequences. It is equally relevant to notice that the courts have not only sanctioned the scheme in this case but have also not specified any other date as the date of transfer/amalgamation. In such a situation, it would not be reasonable to say that the scheme of amalgamation takes effect on and from the date of the order sanctioning the scheme. We are, therefore, of the opinion that the notices issued by the .....

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the allotment of shares etc. may have all taken place subsequent to the date of amalgamation/transfer, yet the date of amalgamation in the circumstances of this case would be 1.1.1982. This is also the ratio of the decision of the Privy Council in Reghubar Dayal Vs. Bank of Upper India Ltd. 15. The Counsel for the Revenue contended that if the aforesaid view is adopted then several complications will ensue in case the Court refuses to sanction the scheme of amalgamation. We do not see any basis .....

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nsferee Companies separately. There may be a certain practical difficulty in adopting this course inasmuch as separate balance sheets may not be available for the Transferor and Transferee Companies. But that may not be an insuperable problem inasmuch as assessment can always be made, on the available material, even without a balance sheet. In certain cases, best judgment assessment may also be resorted to. Be that as it may, we need not pursue this line of enquiry because it does not arise for .....

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to its logical extent unless expressly curtailed by the law. See State of Bombay v. Pandurang Vinayak wherein the Supreme Court quoted with approval: In East End Dwellings Co. Ltd. v. Finsbury Borough Council [1952] AC 109, Lord Asquith while dealing with the provisions of the Town and County Planning Act, 1947, made reference to the same principle and observed as follows: If you are bidden to treat an imaginary state of affairs as real, you must surely, unless prohibited from doing so, also ima .....

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pril 1, 1995, though, as a matter of fact, it continued to exist for sometime more. Therefore, whatever sale of goods that took place between the subsidiary company and the holding company in the interregnum between the sanctioned date of amalgamation and the factual date of amalgamation by virtue of the fiction created under the law of amalgamation, as rightly pointed out both by the assessing authority and by the Tribunal, is only a transfer of stock of one branch of the holding company to ano .....

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to the existence of certain clauses in the scheme of amalgamation in our view is only incidental. We find that in the case of CST Vs. ITC Hotels Ltd. (supra), CESTAT also applied the ratio of aforesaid judgment of Supreme Court holding that the High Court allowed the amalgamation of two companies with the parent company with effect from 1.4.2004 is the appointed date as per Amalgamation Scheme and therefore 1.4.204 is required to be taken as the date of amalgamation and not the date on which en .....

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came service to self and consequently service tax paid during the said period became eligible for refund. Thus the refund of ₹ 71,74,496/- (as was initially sanctioned by the primary adjudicating authority) was clearly admissible to the appellant. However every refund has to be tested on the yardstick of the doctrine of unjust enrichment in terms of Section 11B of Central Excise Act read with Section 83 of the Finance Act, 1994. The appellant has contended that it was neither a manufacture .....

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e deemed to have passed n the full incidence of such duty to the buyer of such goods. It is evident from the words of the Section 12B ibid that the appellant was not covered within the scope of the said section and therefore the contention of the appellant that presumption of having passed on the incidence of duty does not arise in its case has some merit. However we find that sub section 2 of Section 11B of the Central Excise Act states as under: (2) If, on receipt of any such application, the .....

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Excise] under the foregoing provisions of this sub-section shall, instead of being credited to the Fund, be paid to the applicant, if such amount is relatable to - (a) rebate of duty of excise on excisable goods exported out of India or on excisable materials used in the manufacture of goods which are exported out of India; (b) unspent advance deposits lying in balance in the applicants account current maintained with the [Principal Commissioner of Central Excise or Commissioner of Central Exc .....

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nterest, if any, paid on such duty] to any other person; (f) the [duty of excise and interest, if any, paid on such duty] borne by any other such class of applicants as the Central Government may, by notification in the Official Gazette, specify : Provided further that no notification under clause (f) of the first proviso shall be issued unless in the opinion of the Central Government the incidence of [duty and interest, if any, paid on such duty] has not been passed on by the persons concerned .....

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on the appellant to show that it had not passed on the burden to any other persons. In the judgement of Supreme Court in the case of Union of India Vs. Solar Pesticide Pvt. Ltd. 2000 (116) ELT 401 (SC) it was held that: 17. The use of the words incidence of such duty .. is significant. The words incidence of such duty mean the burden of duty. Section 27(1) of the Act talks of the incidence of duty being passed on and not the duty as such being passed on to another person. To put it differently .....

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from the above that when the whole or part of the duty which is incurred on the import of the raw material is passed on to another person then an application for refund of such duty would not be allowed under Section 27(1) of the Act. It is evident from the aforesaid Supreme Court judgement in the case of Solar Pesticides Pvt. Ltd. that the incidence of duty need not necessarily be passed on as duty. However if the legal presumption enshrined in Section 12B is not attracted in a case of refund, .....

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has not been passed by the appellant to any other person should be sufficient to satisfy the requirement of Section 11B for releasing refund to the appellant even though a mere CA certificate may not be sufficient to rebut the presumption enshrined under Section 12B ibid. The first appellate authority inferred that the burden/incidence of duty had been passed on to the customers on the basis of the observation that the price of goods did not come down with effect from 1.4.2007 which meant that .....

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