M/S Krishna Construction Co. vs. Commissioner Of Central Goods And Services Tax And Another

Facts

M/s. Krishna Construction Co. (the appellant) filed an appeal before the High Court against an order of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT). The CESTAT had dismissed the appellant's claim for refund of service tax, finding it barred by time. The appellant had rendered services to CPWD during 2015-16. Section 102 of the Finance Act, 2016, made these services non-taxable, entitling the appellant to a refund. The appellant claimed that they had passed on the tax liability to CPWD, which subsequently recovered the amount from the appellant. The appellant argued for a right to claim refund despite the principle of unjust enrichment.

Held

The Court held that the appellant's submission was misconceived. Based on the appellant's own admission that they had passed on the tax liability to CPWD, the right to claim a refund would have arisen to CPWD, the consumer, not the appellant. The subsequent recovery of the amount by CPWD from the appellant was deemed a pure contractual dispute between them and did not create any right for the appellant to claim a refund of the deposited service tax from the service tax authorities. The Court noted that the dispute between the appellant and CPWD was alien to the service tax authority, which was neither a party to that dispute nor could the conduct of CPWD give rise to a refund claim under the Act. The Court left it open for the appellant to pursue other remedies against CPWD.

Key Issues

1. Whether the appellant is entitled to a refund of service tax paid on services rendered to CPWD during 2015-16, which were subsequently made non-taxable by Section 102 of the Finance Act, 2016, notwithstanding that the tax liability was allegedly passed on to CPWD and subsequently recovered by CPWD from the appellant. Petitioner's contention: The appellant argued that they were entitled to a refund as the services became non-taxable. They asserted a right to claim refund despite the principle of unjust enrichment, as CPWD had recovered the tax amount from them after the services were rendered non-taxable. The appellant contended that the subsequent recovery by CPWD created a right for them to claim the refund. Revenue's contention: The revenue argued that the appellant's submission was misconceived. They contended that since the appellant admitted to passing on the tax liability to CPWD, the right to claim refund would have arisen only to CPWD, the consumer. The subsequent recovery by CPWD was considered a dispute between the appellant and CPWD, a pure contractual matter not giving rise to a refund claim under the Act.