Custom, Excise & Service Tax Tribunal
M/S. Keihin Fie Pvt. Ltd vs Commissioner Of Central Excise, Pune-I on 12 February, 2009
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. APPEAL NO. ST/168,169/08 (Arising out of Order-in-Appeal No. PI/BBP/135 to 137/08 dated 25/4/08 passed by the Commissioner (Appeals) Central Excise, Pune-I) For approval and signature: Honble Shri A.K. Srivastava, Member (Technical) ============================================================
1. Whether Press Reporters may be allowed to see : No
the Order for publication as per Rule 27 of the
CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the : Yes
CESTAT (Procedure) Rules, 1982 for publication
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3. Whether Their Lordships wish to see the fair copy : Yes
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4. Whether Order is to be circulated to the Departmental : Yes
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M/s. Keihin Fie Pvt. Ltd.
:
Appellants
VS
Commissioner of Central Excise, Pune-I
Respondents
Appearance
Shri S.A. Gundecha, Advocate For Appellants
Shri Manish Mohan Authorized Representative (SDR)
CORAM:
Shri A.K. Srivastava, Member (Technical)
Date of hearing : 12/02/2009
Date of decision : 02/2009
ORDER NO.
Per : Shri A.K. Srivastava, Member (Technical)
These appeals have been filed by M/s. Keihin Fie Pvt. Ltd., Pune against the Orders-in-Appeal both dated 25.4.2008 passed by the Commissioner (Appeals), Central Excise Pune-I. The Commissioner (Appeals) vide the impugned orders, has upheld the Orders-in-Original both dated 20.12.2007 passed by the Assistant Commissioner (Service Tax Cell), Central Excise, Pune-I by which the Assistant Commissioner has rejected the refund claims of Rs. 2,47,667/- and Rs. 86,109/- on the ground of unjust enrichment.
2. Heard both the sides and perused the records.
3. Since the issue involved in both the appeals relates to the applicability of the unjust enrichment clause, these are being taken up for disposal by a common order.
4. Appeal No. ST/168/08 Amount involved Rs. 86,109/-.
The admissibility of refund claim on merits is not under dispute. It has been held that the service tax is not leviable on the actual expenses, incurred by the foreign consultant while imparting training to the appellants personnel in Japan and subsequently reimbursed by the appellants, under the category of consulting Engineering services. Consequently, the appellants became entitled to the refund of Rs. 89,109/- paid as tax vide TR 6 challan No. ST-007 and ST-003 both dated 9.10.2003, on such expenses reimbursed. It is the contention of the appellants that the amount paid by them was in respect of the services rendered by Keihin Corporation, Japan to them and, therefore, it was connected with the input services and they (i.e., the appellants), in view of the fact that the service provider was not having office/establishment in India, were treated as person liable to pay tax in view of the specific provisions of rule 2(1) (d) (iv) of the Service Tax Rules. Therefore, according to the appellants, the payment of tax (made by mistake) was relating to the services received and hence the refund amount needs to be treated as pertaining to input Service Tax Credit. The appellants, therefore, pleaded that the bar of unjust enrichment is not applicable to their case in terms of clause (c) to proviso Section 11B(2) of the Central Excise Act, 1944, which has been made applicable to service tax refunds by virtue of Section 83 of the Finance Act, 1994. According to the said clause (c), the refund of the input service credit is statutorily out of the purview of unjust enrichment. I have carefully considered the above submissions of the appellants. I am not inclined to agree with the same. The reason being that the actual expenses, incurred by the foreign consultant while imparting training to the appellants personnel in Japan and subsequently reimbursed by the appellants, were held to be not towards consulting engineering services as these expenses related to living, food and travel provided to appellants technicians in Japan. Hence no service tax was leviable on it. Therefore, whatever amount, which was paid as tax on these expenses incurred and reimbursed, was not towards any service rendered. Hence, it is not service tax and no credit for the same is available as input service credit. Amount being not input service credit, the said clause (c) is not attracted and the refund claim will be governed by the doctrine of unjust enrichment.
5. As regards passing the test of unjust enrichment, the appellants have contended that the certificate obtained by them from the Cost Accountant about the treatment granted to the amount claimed as refund receivable from the Department was the amount written off, as per the accounting requirement as a loss by debiting the same to the Profit and Loss Account and was not debited as an expenditure to the Profit and Loss Account. They stated that there is difference between charging the amount of duty as an expenditure to the Profit and Loss Account and writing off refund receivable as loss by debit to Profit and Loss Account. The appellants maintained that as per the accounting standards prescribed by the institute of Chartered Accountant of India and the provisions of the Companies Act, 1956, only expenses are required to be reflected/debited to the Profit and Loss Account. They submitted that as per the basic principles of double entry accounting and the mercantile system of accounting even the losses incurred have to be debited to the Profit and Loss Account and cannot be treated as intangible asset or deposit to be reflected on asset side of the Balance Sheet. They submitted that when the assessee decides to treat a particular payment as non-recoverable payment as per the above principles, he is required to reduce the profit for that period appropriately and such result achieved by debiting the same amount to the Profit and Loss Account and cannot be achieved by treating the same as an asset or deposit.
6. I have carefully considered the above submissions of the appellants. However, I do not find them to be tenable as any payment, if debited to Profit and Loss Account is to be considered as the revenue expenditure and shall amount to addition to the cost of the finished goods. It is admitted fact that in this case the appellants have debited the impugned amount to the Profit and Loss Account and thus the cost of the finished goods has increased to this extent. The sound accounting principles require that against the current years receipts, the true cost, which has been incurred for earning such receipts, has to be charged. This has been upheld by the Honble Gujarat High Court in case of DCW Ltd. & Anr. Vs. Union of India reported in 2006 (72) RLT 103 (Guj.). The relevant extract of para 22 is reproduced as below.
The underlying commercial principle which has been statutorily given recognition is that against the current years receipts the true cost which has been incurred for earning such receipts has to be charged.
7. Section 11B(1) of the Central Excise Act,1944, clearly provides that it is not the duty as such but the incidence of such duty which has to be shown to have not been passed on to any other person. The Honble Supreme Court in the case of Solar Pesticides reported in 2000 (116) ELT 401 SC, at para 17 has laid down the principle that it is not the duty as such but the incidence of such duty , if passed on directly or indirectly, the refund is hit by the unjust enrichment clause. Accordingly, I hold that in this case the impugned amount has been passed on to the other person, as it has been debited to the Profit and Loss Account amounting to increase in the cost.
8. Appeal No. ST/169/08 Amount involved Rs. 2,47,667/-.
The disputed amount of Rs. 2,47,667/- was paid on 9.10.2003. The admissibility of refund claim on merits is not under dispute in this case also. However, the facts are slightly different. In this case, the amount of expenses have been incurred by the personnel of M/s. Keihin, Japan during their visit to India and paid or reimbursed on actual basis by the appellants. These expenses relate to Traveling fee, Business Trip, Living Expenses, Daily Expenses, Stay Expenses etc. of the personnel of M/s. Keihin, Japan in India. These expenses, incurred and reimbursed, were held to be not towards consulting engineering services and hence were held to be not leviable to service tax.
9. The same argument have been advanced by the appellants in this case also. My observations and conclusions arrived at in relation to Appeal No. ST/168/08 will mutatis-mutandis apply to this case also.
10. The impugned orders passed by the Commissioner (Appeals) are upheld. The appeals filed by appellants are rejected.
(Pronounced in court on 02/2009)
A.K. Srivastava
Member (Technical)
Sm
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