The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has directed the refund of ₹55,91,185 after finding that the company paid the same service tax liability twice. The failure to report the first payment in an ST-3 return could not make the second payment tax legally due when the challans and accounting records established what had happened.
The Bench of Ajayan T.V. ( Judicial Member) and Vasa Seshagiri Rao (Technical Member) allowed consequential interest on the refund under Section 11BB of the Central Excise Act, 1944. It allowed the company’s appeal, dismissed the Revenue’s appeal, and upheld the earlier appellate order granting the refund.
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The respondent/assessee provides clearing and forwarding, and cargo handling services. It also received services from outside India, including services involving management and trademark fees, on which it paid service tax under the reverse charge mechanism.
For a liability relating to the financial year 2008–09, the company paid ₹55,91,185 through a challan dated 5 October 2009. That payment was inadvertently omitted from the relevant ST-3 return. During a subsequent departmental audit, the company paid the same amount again on 2 February 2011.
The second payment formed part of a larger challan for ₹1,31,70,733. Of that sum, ₹55,91,185 related to the liability already paid in 2009, while ₹75,79,548 related to financial year 2009–10. After discovering the duplication, the company filed a refund claim on 13 June 2011 for ₹68,41,747, comprising the second tax payment of ₹55,91,185 and ₹12,50,562 paid as interest.
The refund was initially rejected. One Commissioner (Appeals) order subsequently allowed it, which the Revenue challenged. A later appellate order confirmed rejection of the refund, prompting the company’s appeal. CESTAT heard the two appeals together because they arose from the same refund dispute.
The Revenue argued that the original payment had not been disclosed in the ST-3 return and that the company had not adequately established that both challans concerned the same taxable liability. It also raised questions about the accounting treatment, CENVAT credit and unjust enrichment.
The company relied on the payment challans, a reconciliation of its CENVAT credit, audited accounts and a statutory auditor’s certificate. It said the credit taken in February 2011 related to the original October 2009 payment, regular input services and the portion of the February 2011 challan concerning financial year 2009–10. According to the company, it had taken no credit for the duplicate ₹55,91,185 payment.
CESTAT found that the ₹55,91,185 paid in October 2009 had been included again in the February 2011 challan. It noted that the authorities’ own orders had referred to the later sum as a “duplicate payment” or “second payment”.
The Revenue had produced no material showing that the 2009 payment was refunded or adjusted against another liability. Nor had it established a separate taxable liability corresponding to the repeated payment in 2011. In those circumstances, the Tribunal held, omission of the first payment from the ST-3 return did not turn the second payment into tax that the company owed.
The Bench accepted the company’s CENVAT reconciliation and the statutory auditor’s certificate showing that credit had not been availed or utilised against the duplicate amount. It also rejected the objection concerning a wrong accounting head or service category, referring to a CBEC circular clarifying that payment under an incorrect accounting code should not require an assessee to pay service tax again.
On unjust enrichment, the Tribunal examined whether the company had passed the burden of the duplicate payment to someone else. The company’s audited financial statements showed the disputed amount as recoverable from the Department. The statutory auditor’s certificate supported its position that the amount had neither been taken as CENVAT credit nor passed on to a customer.
The Department brought no evidence showing that the duplicate payment had been recovered from a customer or otherwise passed on. The Bench therefore held that the company had discharged its burden on unjust enrichment.
CESTAT set aside the appellate order rejecting the company’s claim and held it entitled to a refund of ₹55,91,185, together with consequential interest under Section 11BB in accordance with law. The operative direction specifies the duplicate service tax amount; although the original claim also included ₹12,50,562 described as interest paid, the Tribunal’s final directions do not separately award a refund of that amount.
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