Burden of Duty cannot be presumed to be passed indirectly to another person without any basis: CESTAT

Appellant is engaged in the business of trading cars and is an authorized dealer for Maruti Udyog Ltd. Two show-cause notices were issued to the Appellant demanding Service Tax on dealer margin, on the ground that the first free service was a part of the Appellant’s trading margin received from M/s Maruti, and also on handling charges, on which VAT was already paid by the Appellant. Through an adjudication process in the Order-in-Original such Service Tax demand to the tune of Rs. 11,11,997 along with interest under Section 75 and equal penalty under Section 78 of the Finance Act, 1994 was confirmed.

The Appellant made the payment in compliance with Section 35F and preferred an appeal before the Commissioner (Appeals) which was rejected. Appellant appealed to CESTAT and the tribunal ordered in his favor. He sought a refund amount of Rs. 21,26,143 which was indirectly denied and was sanctioned under Section 11B of the Central Excise Act and ordered to be transferred to the Consumer Welfare Fund established under Section 12C of the Central Excise Act 1944 read with Section 83 of the Finance Act on the ground that Appellant failed to establish that it was not unjustified enriched. Appellant challenged the legality of such order before the tribunal.

As per Section 35F of the Central Excise Act, for the purpose of filing an appeal, confirmed duty demand in the order to be appealed against along with interest and penalty are to be deposited with the adjudicating authority. The Appellant’s letter has been sent that borne testimony to the fact that such amount was deposited in confirmation of the order. It is not seen that such payment was made by the Appellant so as to acquire the right of appeal.

Tribunal relied on the decision of the Hon’ble Bombay High Court passed in Suvidhe Ltd. with a clear finding that the doctrine of unjust enrichment will not be applicable in respect of such deposit, which would apply to the present scenario. The Hon’ble Supreme Court had clarified that Section 11B, which deals with the claims of refund of duty, will not apply to a case where the amount in question was deposited in compliance with the interim order. If the amount is directed to be deposited not towards duty liability but as a condition for grant of interim relief or interim stay, then this question of unjust enrichment would not arise at all. In the instant case, it is for the purpose of making the Appellant eligible to appeal.

There is no such authority that would show that any amount being shown as expenditure would automatically get credited to the income side as if it is realized from a third party/person. Hence, the appeal was allowed and the order passed by the Commissioner of Central Tax (Appeals-II), Pune was set aside. Appellant is entitled to get a refund of the entire deposited amount of Rs. 21,26,143 along with applicable interest and the Respondent Department was directed to pay the same within 3 months.