CA Certificate Alone Not Conclusive on Unjust Enrichment: CESTAT

The Hyderabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has remanded two connected appeals involving refund claims aggregating over Rs. 5.64 crore, holding that mere production of a Chartered Accountant (CA) certificate and issuance of credit notes are not, by themselves, conclusive proof that the bar of unjust enrichment has been crossed. The Bench of Angad Prasad (Judicial Member) and A.K. Jyotishi (Technical Member) passed the Final Order on February 27, 2026, directing the original Refund Sanctioning Authority (RSA) to re-examine the quantification of refund and the issue of unjust enrichment in accordance with law. The appellant-company had provided services to Ushodaya Enterprises Ltd., including activities relating to “space selling services” and “newspaper promotion services.” The department had classified these services under Business Auxiliary Service (BAS) and demanded service tax accordingly. In an earlier round of litigation, the Tribunal had held that services relating to “sale of space” were not taxable prior to May 1, 2006, when the specific taxable entry came into force. Consequently, the Tribunal had ruled that service tax paid for the period July 9, 2004 to February 28, 2006 on space selling activities was not legally leviable and was refundable, subject to proper quantification, and crossing the bar of unjust enrichment. Following that order, the appellant filed refund claims for two periods July 2004 to February 2006 – ₹1.04 crore (consequential to the earlier Tribunal order) and July 2006 to March 2010 – ₹4.60 crore Both claims were rejected by the departmental authorities and the rejection was upheld in appeal, leading to the present proceedings before the Tribunal. For the earlier period, the Tribunal noted that the original demand had been a consolidated one under BAS, covering both space selling and newspaper promotion activities. Since only the space selling component was held to be non-taxable, the refund required segregation and precise quantification. However, the appellant had produced only ST-3 returns and challans, which reflected consolidated tax payment under BAS without a service-wise breakup. The Tribunal observed that invoices raised for the two activities separately would be crucial to determine the exact amount attributable to space selling services. In the absence of such primary documents, the RSA could not properly quantify the refund. On unjust enrichment, the appellant relied on issuance of credit notes to Ushodaya Enterprises Ltd., and a CA certificate stating that the service tax burden had been refunded. The department contended that such documents were insufficient to rebut the statutory presumption under Section 12B that tax incidence has been passed on to the ultimate consumer. The Tribunal relied on the Supreme Court’s ruling in CCE v. Addison & Co Ltd, which held that refund cannot be granted if the claimant has passed on the duty burden and that unjust enrichment principles apply strictly. The Bench emphasized that a CA certificate, without supporting documentary evidence, and credit notes issued post facto, are not automatically conclusive proof that the tax burden was not passed further down the chain to ultimate consumers. Accordingly, the matter for this period was remanded to the RSA for fresh examination of service-wise quantification, and whether the incidence of tax was actually not passed on to the ultimate customer. The second appeal raised an additional legal issue. During this later period, “sale of space or time for advertisement” had become a specific taxable entry. However, the appellant had continued to classify its activities under BAS in its ST-3 returns and paid tax accordingly (albeit under protest). In refund proceedings, the appellant sought to effectively reclassify the services and claim refund without first revising or getting the self-assessment modified. The department relied on the Supreme Court’s decision in ITC Ltd v. CCE, Kolkata, which held that refund proceedings are in the nature of executionary proceedings and cannot be used to indirectly alter or bypass an assessment order, including self-assessment. The Tribunal agreed that mere endorsement of “under protest” on ST-3 returns does not automatically amount to reassessment, and refund claims cannot be entertained without appropriate modification or reassessment of the original returns, where required under law. However, considering that the issue of classification had earlier been litigated and clarified only after the Tribunal’s prior order, the Bench granted liberty to the appellant to seek reassessment in accordance with statutory provisions. For both appeals, the Tribunal remanded the matter to the Refund Sanctioning Authority with directions to examine the feasibility of reassessment or revision of ST-3 returns, where required; recompute the admissible refund after proper service-wise segregation; re-evaluate unjust enrichment with supporting documentary evidence beyond a CA certificate; and apply Section 11B of the Central Excise Act (as made applicable to service tax). Case Details Case Title: M/s Margadarsi Marketing Pvt Ltd Versus Commissioner of Central Excise & Service Tax, Hyderabad - IV Citation: JURISHOUR-184-HC-2026(Ker) Case No.: Service Tax Appeal No. 3478 of 2012 Date: 27.02.2026 Counsel For Appellant: Ch. Sumanth, Advocate Counsel For Respondent: V.R. Pavan Kumar, AR Click Here To Read Order Read More: Extended Limitation Can’t Be Invoked Where Dept. Had Prior Knowledge: CESTAT Quashes Excise Duty Demand

CA Certificate Alone Not Conclusive on Unjust Enrichment: CESTAT

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