2026-VIL-469-CESTAT-DEL-ST
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SERVICE TAX CESTAT Cases

Service Tax - Refund of service tax paid on exempted services, Recovery of refund already paid - Refund of service tax paid on exempted services rendered to Military Engineering Services (MES) during the relevant period - Appellant applied for refund of the service tax paid, which was initially sanctioned but then rejected by the authorities on the ground that the burden of the service tax had been passed on to the MES, and therefore, the refund could not be granted to the appellant under the doctrine of unjust enrichment - Whether the appellant is entitled to the refund of service tax paid on the exempted services, even though the burden of such tax was passed on to the customer (MES) - HELD - The appellant is entitled to the refund on merits as the services were exempted from service tax. However, the provisions of unjust enrichment under Section 11B of the Central Excise Act, 1944 (made applicable to service tax) would apply in the present case as the appellant had passed on the burden of service tax to the MES. The principles of unjust enrichment would apply to all cases of refund where the burden of tax has been passed on to the customer - The NOC issued by the MES authorizing the appellant to claim the refund has no legal validity as it is contrary to the provisions of Section 11B and the judgment of the Supreme Court in Mafatlal Industries Ltd. v. UOI – However, the direction to the appellant to deposit the refund amount that was already paid to him is set aside, as there is no provision in Section 11B to recover an erroneously sanctioned refund. The remaining refund amount be credited to the Consumer Welfare Fund as per the provisions of Section 11B - The appeal is partly allowed
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