The Hon’ble CESTAT Delhi vide its order dated 11th April 2022 in the matter of M/S Rajasthan Financial Corporation Versus Commissioner Of CGST, Jaipur in Service Tax Appeal No. 50007 of 2022 held that the bar of unjust enrichment is not applicable to the refund of penalty.

The Appellant preferred the appeal before the Hon’ble CESTAT, Delhi assailing the impugned order whereby the refund of the penalty deposited by the Appellant was rejected by the Ld. Commissioner (Appeals) on the ground of unjust enrichment.

Facts:

  • The proceedings were initiated against the Appellant with an issuance of Show Cause notice proposing demand of Service Tax under the category of ‘Banking and Financial Services’, subsequently on adjudication the demand was confirmed along with imposition of equivalent penalty and interest.
  • That for the subsequent period also proceedings were initiated and demand was confirmed along with imposition of penalty and levy of interest.
  • The Appellant paid the amount of penalty and challenged the order before the Ld. Commissioner (Appeals) who after considering the submissions made, dropped the penalty extending benefit of Section 80 to the Appellant, however for the rest of demand the Appellant’s appeal is pending before the same tribunal.
  • The revenue against the aforesaid order of ‘dropping penalty’ filed an appeal before the same tribunal which was dismissed vide its Final Order 52123-52124 of 2021 dated 24.12.2021.
  • Thereafter, the appellant filed the refund claim of the aforesaid amount of penalty deposited by them, which was initially rejected on the two grounds as follows:
  1. the penalty has been paid under the wrong head:
  2. they have failed to pass the bar of unjust enrichment.
  • On appeal being preferred against the said order the Ld. Commissioner (Appeals) conceded with all other aspects, however rejected the refund claim on the ground of unjust enrichment while passing the impugned order.

Appellant’s Submissions:

  • It was submitted on the behalf of the Appellant that there is no such provision in law wherein the appellant is required to pass the bar of unjust enrichment for refund of penalty.
  • The Appellant further relying on Commissioner of Customs (Import), Mumbai vs. Be Office Automation Pvt Ltd. 2016 (334) ELT 158 Tri- Mum), Anand Silk Mills vs. Commissioner of Customs (Import) Nhava Sheva-2010-TIOL-570- CESTATMUM, Ratan Udyog vs. Commissioner of Cus. (Acc & Export), Mumbai-2014 (313) ELT 764 (Tri – Mum) & Bombay High Court decision in the matter of United Spirits Ld. Vs. Commissioner of Customs (Import), Mumbai-2009(240) ELT 513 (Bom)., prayed for setting aside the impugned order of rejection of refund.

On the other hand, the learned authorised representative for the Department supported the impugned order.

Held:

  • The Hon’ble CESTAT after considering the submissions made from the both sides and examining the impugned order observed that the Ld. Commissioner (Appeals) failed to appreciate the facts as the refund in present case is of penalty not of duty.
  • Further, there is no provision in law where the appellant is required to pass the bar of unjust enrichment for claiming the refund of penalty.
  • Thereafter the Hon’ble Bench following the decisions of the Tribunal in the case of Be Office Automation Pvt Ltd., Anand Silk Mills vs. Commissioner of Customs (Import) Nhava Sheva, Ratan Udyog vs. Commissioner of Cus. (Acc & Export), Mumbai, held that bar of unjust enrichment is not applicable to the facts of the case.

The Hon’ble Bench with the following findings set aside the impugned order and allowed the appeal with consequential relief.

 

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