Full Judgment
2. As per facts on record appellant claimed refund of service tax paid on gross amount of bills before discount raised against M/s. Emami Ltd. on the ground that service tax was payable on the gross amount actually charged i.e. after discount. The said refund was sanctioned by the Deputy Commissioner vide his order dt. 9.10.01 and 29.11.01 and was actually paid to the appellant on 13.12.2001. The Commissioner vide his impugned order has held such refunds to be erroneous on the ground that the same were recovered by the appellant from their customers and the subsequent adjustment by way of credit notes cannot be considered to conclude that the burden of duty has not been passed on to the buyers or the ultimate consumer. As such he has held that grant of refund resulted in unjust enrichment to the appellant and accordingly ordered for recovery of the same under Section 73 of the Finance Act, 1994.
3. After hearing both the sides I find that the appellant advanced the following arguments before the appellate authority, in support of their submission that the Tribunal's decision in the case of Commissioner of Central Excise, Madras v. Addison & Co. or Larger Bench decision in the case of Grashim Inds. (Chemical Divn.)v.Commissioner of Central Excise Bhopal will not apply to refund of service tax.
[i] The decision of the Tribunal referred to in the show casue notice was in context of Central Excise duty and not service tax paid in excess of what was liable to be on the value of taxable service realized by them. In the Central Excise law, duty was payable at the time of clearance of goods from the factory, irrespective of the fact whether the payment for the goods was ultimately recovered or otherwise. The service tax is liable to be paid not upon rendering of service, (value of clearance of goods) but only on realization of payment of services rendered. In case no payment is realised, no service tax was payable. If the value of taxable service realised was less than the billed amount the service tax was payable only on such lesser amount as per CBEC's Circular No. B.II/3/98/TRU dt. 7.10.98. The Tribunal's judgement stressed on the event of clearance of the goods on payment of duty. The service tax liability did not arise at the time of rendering of service but after the value of service being realised. Till the payment was received, service tax was not liable to be paid. The realization of the value of service and service tax was not connected to the passing on of the tax burden to the consumer or buyer of service.
The Tribunal's observation, therefore, that post clearance adjustments not being the concern of the Central Excise authorities was not applicable in their case. Post clearance transaction in the case of service tax was of utmost importance in determining the service tax liability, unlike Central Excise duty.
[ii] As per Rule 6(3) of Service tax Rules, 1994, adjustment of service tax paid in excess against the service tax liability was adjustable for the subsequent period in respect of taxable service which was not provided either wholly or partially for any reasons had been provided if the assessee had refunded the value of taxable service and the service tax thereon to the person from whom they were received. The Service Tax law itself recognizes post clearance transaction by way of refund of value of taxable service and the Service Tax thereon to the person by whom it was received. The ratio of the judgement was, therefore, inapplicable.
[iii] In case of service tax, no duty was passed over at the time of clearance of the good. i.e. rendering of service. In case of service taqx, the duty is realised from the buyer of services and then paid to the credit of the government. The amount was collected from the buyers in excess of the service tax. This fact has not been disputed by the show cause notice. Refund claim from the amount of service tax collected from the buyer on account of service tax, without realizing any value of taxable service to that extent has been claimed. The refund of service tax was not treatable at par with the refund claim of Central Excise duty. The Order-in-Original was passed granting refund after due process of law considering unjust enrichment as well, (iv) In the case of excess service tax paid by them were refunded to their client i. e. M/s. Emami Ltd. by way of credit to their account and incidence of service tax was not passed on to the client.
4. The above contention of the appellant's have not been accepted by the Commissioner on the ground that the provisions of section 11B are applicable to Service Tax Rules so far as refund of service tax paid in excess or otherwise is concerned. In the present case appellant had reimbursed the excess service tax paid by them by way of credit notes to their clients. By relying upon the Tribunal's decision, he has held that once the burden of duty has been passed on to the buyer or the ultimate consumer, subsequent reimbursement of the same by way of credit notes will not be of any advantage to the assessee.
5. After considering the submissions made by both the sides I find that the decisions relied upon by the Commissioner are admittedly in the context of Central Excise duty where the taxable event is clearance of the goods from the factory gate and the value adopted is the value assessed at the time of clearance, whereas in the case Service Tax the taxable event, is not the time of rendering of services but the same is realization of payment for the services so rendered. If on rendering of service and in spite of raising the bills, no payment are received, liability to pay tax on such services will not arise. As such, it is clear that the tax liability has nexus with the realization of the payments for such services and the value of such payments. If an amount lower than the raised billed is realized, service tax would be payable on the lower amount and assessee is required to pay tax on that amount only. This is clear from CBEC Circular No. B-11/3/98/TRU dt.7.10.98.
Para 4.5 of the said circular provided that where some times the final payment due is simply negotiated at a lesser amount than the originally billed and the amount received is less than the gross amount charged/billed to the client, the service tax assessee should be required to amend the bills either by rectifying the existing bill or by issuing a revised bill and by properly endorsing such changes in the billed amount. There is no dispute that in the present case realization for the services was less than the billed amount, thus entitling the asseessee to pay duty at the net amount received after discount.
6. In terms of provisions of Rule 6(3) of Service Tax Rules, a facility is provided for adjusting excess payment of service tax by the assessee where the assessee has paid to the credit of Central Government Services in respect of a taxable service, which is not so provided by him either wholly or partially for any reason. As such, it is clear that the service tax recognizes post clearance transaction by way of refund of value of taxable service and the tax paid thereon.
In such a scenario the Tribunal's decision, which are given in the context of Central Excise law, will not apply to service tax matters.
Inasmuch as the appellants have admittedly paid back excess service tax paid by them to their customers, they would be entitled to adjustment of the same in terms of the provisions of Rule 6 of Service Tax Rules and this having been done by them, they would be entitled to the refund of the excess tax paid by them. Accordingly, I set aside the impugned order and allow the appeal with consequential relief to the appellants.