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2016 (7) TMI 424 - CESTAT MUMBAI

2016 (7) TMI 424 - CESTAT MUMBAI - 2016 (44) S.T.R. 429 (Tri. - Mumbai) - Refund - Excess payment of service tax - Unjust enrichment - Acceptance of credit notes - recipients were entitled to cenvat credit or not - Commissioner of Central Excise (Appeals), Mumbai-I that has credited the refund of service tax claimed by the appellant to the Consumer Welfare Fund. - Held that:- Credit notes do not exist as inactive exhibits; the financial adjustment is manifested as entries in journals and ledger .....

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prevent acceptance of credit note. - The tax is structured entirely on the existence of documentation and alienation of credit or debit notes from this documentary flow by conferment of finality to one document that serves the cause of Revenue is not consistent with the basis of taxation in section 67 of Finance Act, 1994 viz. consideration for services rendered. The decisions cited by Revenue do not, therefore, serve to support the findings in the impugned order. - The original authorit .....

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ith the onus of reversals placed squarely on the recipient. The issuance of credit note automatically curtails the entitlement and their existence suffices to enforce reversal in the course of scrutiny of returns or audit. In view of implicit reduction of entitlement to credit, with ample recourse for recovery under the Rules, assumption of having passed on the burden of tax fails to be a valid conjecture. The provisions of section 11B of Central Excise Act, 1944 cannot be stretched to fasten wh .....

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rities Ltd, a stock-broker, is before us against order-in-appeal no. MI/AV/251/2011 dated 29th April 2011 of Commissioner of Central Excise (Appeals), Mumbai-I that has credited the refund of service tax claimed by the appellant to the Consumer Welfare Fund. The dispute relates to tax on consideration received on 'brokerage' that was claimed to have been paid in excess for the period from April 2007 to July 2007. 2. The appellant had entered into agreements dated 30th April 2007 with thr .....

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ffect to by issue of credit notes in favour of the clients. 3. The refund sanctioning authority denied the claim on the primary ground that tax had been computed and paid by self-assessment and such assessment, having attained finality, could not be challenged through a refund claim. It was held that the assessee, in such cases of uncertainty about the 'brokerage', should have resorted to provisional assessment envisaged in rule 6(4) of Service Tax Rules, 1994. It was also noted that the .....

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to the Consumer Welfare Fund leading to this appeal before us. 4. Before we proceed to assess the rival contentions, we take note of one submission made by the learned Authorized Representative relying upon the decisions of the Hon'ble Supreme Court in CCE v. Mysore Electricals Industries Ltd. [2006 (11) TMI 202 - SUPREME COURT OF INDIA] and Thirumalai Chemicals Ltd v. Union of India 2011 (268) ELT 296 (SC). The thrust of the argument advanced thus was that the basis of assessment could be v .....

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ed to discuss the merits of this contention and the specific application of the cited judgements as this appeal is limited to the decision in the impugned order directing that the tax collected in excess be credited to the 'Fund'. There is a clear finding by the first appellate authority that the provisions of section 11B would be stultified if that conclusion of the original authority is adopted. We content ourselves with observing that decisions cited relate to clearance of goods which .....

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ticals (India) Ltd v. CST [ 2007 (2) TMI 595 - CESTAT BANGALORE] which relied upon Mohd Ekram Khan & Sons v. Commissioner of Trade Tax [ 2004 (7) TMI 341 - SUPREME COURT OF INDIA] to validate credit notes as evidence of payment and the judgment of the Hon'ble High Court of Karnataka, upholding the decision. Learned Counsel also drew our attention to the decision of the Hon'ble High Court of Rajasthan in Union of India v. AK Spintex Ltd. 2009 (234) ELT 41 placing the onus on Revenue t .....

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t was also submitted that in view of the decision of the Hon'ble High Court of Jharkhand in McNally Bharat Engineering Co. Ltd v. CCE 2011 (267) ELT 610 (Jhar), the impugned order is flawed in having traversed beyond the scope of show-cause notice by denying the release of refund to the appellant on the ground that availment of CENVAT credit by the three clients amounts to unjust enrichment. Besides inviting attention to the decisions relied upon in the impugned order including those of the .....

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63,046 relates to 'brokerage' collected in excess on business generated by three clients during the months of April to July 2007 and returned to them in accordance with terms of agreement entered into in April 2007. We have examined the credit notes dated 27th July 2007 and 31st August 2007 issued to M/s Crossborder Investments Pvt. Ltd, M/s Edelweiss Commodities & Advisors Ltd and M/s ECL Finance Ltd acknowledging the liability of the appellant. In each, the difference in 'broke .....

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Service Tax from the clients who in turn have availed CENVAT credit on the same. The appellants have produced Chartered Accountant's certificates all dated 28.01.2011 in respect of the three clients to whom credit notes have been stated to have been issued. As per the credit notes it is evident that the appellants have not only recovered the Service Tax paid from the clients but the latter have availed of CENVAT credit on the same amounts. The credit so availed is stated to have been reverse .....

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s had been issued, the fact that CENVAT credit had been availed on the said Service Tax paid in excess also confirms that the amounts had been fully recovered by the appellants from their customers. The Chartered Accountant's certificate that the reversals have been effected by issuing journal vouchers without any narration does not lend any credibility to the certificates. The treatment of the amounts in the books of account has also not been explained. The adjudicating authority has relied .....

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Vodadara [2010] (18) STR 237 (Tri. - Ahm) (iv) Sudhir Papers Ltd. v. CCE, Bangalore 2010 (18) STR 701 (Tri. - Chennai) 12. In view of the above case laws I hold that the principles of unjust enrichment are squarely attracted in this case. However the refund claim instead of being rejected should have been credited to the Consumer Welfare Fund." 9. That does not appear to be a proper finding as the entitlement for disbursement has been denied because 'the principles of unjust enrichment .....

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y, be the circumscribing limits rather than the elasticity inherent in broad generalization and pious incantation implicit in principles. To set the record straight, we recall to mind the framework of law that restricts disbursement of eligible refund in Central Excise Act, 1944: "Section 11B: ** ** ** (2) if, on receipt of any such application, the Assistant Collector of Central Excise is satisfied that the whole or any part of the duty of excise paid by the applicant is refundable, he may .....

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India; (b) unspent advance deposits lying in balance in the applicant's account current maintained with the Collector of Central Excise; (c) refund of credit of duty paid on excisable goods used as inputs in accordance with the rules made, or any notification issued, under this Act; (d) the duty of excise paid by the manufacturer, if he had not passed on the incidence of such duty to any other person; (e) the duty of excise borne by the buyer, if he had not passed on the incidence of such d .....

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ledged by, and enforceable in, commercial law is the backbone of fiscal engagement. Credit and debit notes have been in use for centuries as acknowledgment of dues and debt; these are legally enforceable documents in commercial disputes. It affords a convenience when the financial engagement between two commercial entities is continuing, and not episodic or discrete, for adjustment in ledgers with settlements effected at intervals. Merely because it has the form and appearance of script on paper .....

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ence of consideration or of having borne the tax burden thus: '12. The question, then arise is, the question of fact, as to who is an ultimate person, who has borne the burden. Obviously, if it is established by the assessee, that the burden has not been passed on, or has been appropriately reversed, the ultimate person, who has suffered the burden, would be the assessee himself. 13. It is faced with this situation, that the submission made by the learned counsel for the revenue, was, that i .....

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ere the assessee is able to show, that the burden is not passed on, or it has been reversed, the claim of refund cannot be denied. 15. It is, then, contended by the learned counsel for the revenue, that mechanism of debit note and credit note, if countenanced, it will open the floodgates for pilferage of revenue. Firstly, we do not agree with the preposition, that it can open floodgates, inasmuch as, where false, fictitious or sham debit note and credit note are issued for adjustment, the revenu .....

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ger to impact the consideration made over and received for any goods supplied or service rendered. With credit notes being a conventional method of reflecting the change in consideration, and its authenticity not having been refuted, reliance has necessarily to be placed on the net effect that it has on the taxable transaction. Reversal of 'brokerage' carries with it the reversal of tax collected along with the excess 'brokerage.' We, therefore, need merely to ascertain if any of .....

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pra) and Sangam Processors (Bhilwara) Ltd. (supra) dealt with refund of duty collected in excess owing to alteration of rates of duty. The dispute here relates to alteration of value of taxable service which has been adjusted through a standard instrument of commercial settlement and which, concomitantly, adjusted the tax collected in excess. Taxation of services is, in any case, on a different footing than duty of excise on manufacture as far as the taxable event is concerned. Service tax, bein .....

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cited by Revenue do not, therefore, serve to support the findings in the impugned order. 11. We also notice that the original authority had not sought to reject the claim for refund on the ground of lack of evidence that CENVAT credit, that the recipients were entitled to, had been reversed. Therefore, invoking of this ground in the impugned order is tantamount to travelling beyond the show cause notice as held by the Hon'ble High Court of Jharkhand in McNally Bharat Engineering Co. Ltd. (su .....

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