CESTAT Orders Full ₹71.55 Lakh Service Tax Refund to Surat Housing Society, Rejects Revenue’s Technical Objections

June 18, 2026 : In a significant ruling on service tax refunds and the doctrine of unjust enrichment, the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Ahmedabad, has directed the Revenue Department to refund the entire ₹71.55 lakh collected from a Surat-based residential housing society, holding that technical discrepancies in service tax registration codes cannot be used to deny a legitimate refund.

The dispute arose from service tax demands raised against Ashirwad Palace, a residential complex in Surat, whose maintenance activities were carried out through entities known as Ashirwad Palace Building Maintenance and Ashirwad Palace Common Maintenance. The matter eventually reached the Tribunal after the Commissioner (Appeals) rejected part of the refund claim and simultaneously allowed the Revenue’s appeal on the ground of unjust enrichment.

According to the record, the housing society sought a refund of ₹71,55,508 after an earlier appellate order had held that service tax was not payable on maintenance charges collected from members due to the principle of mutuality. However, while the adjudicating authority sanctioned ₹36.11 lakh, it rejected the balance ₹35.44 lakh on the ground that the amount had allegedly been deposited under a different service tax registration code associated with Ashirwad Palace Common Maintenance. The Revenue subsequently challenged even the sanctioned portion, arguing that the issue of unjust enrichment had not been properly examined.

Before the Tribunal, the appellant argued that both maintenance entities formed part of the same residential complex and that the Department itself had treated “Ashirwad Palace” as a single entity while issuing the original show cause notice and recovering the tax. The appellant contended that the Department could not later split the same entity into two separate units merely to deny a refund. It was also submitted that the entire amount had already reached the Government treasury and that the difference in registration codes was, at best, an accounting irregularity.

The Tribunal examined whether the refund of ₹35.44 lakh could be denied under Section 11B of the Central Excise Act, 1944 and whether the claim was barred by the doctrine of unjust enrichment. Referring to precedents of the Gujarat High Court and earlier CESTAT decisions, Judicial Member Dr. Ajaya Krishna Vishvesha observed that once the money had been deposited into the Government account, procedural or technical defects relating to registration codes could not defeat a substantive right to refund.

The Tribunal relied heavily on the Gujarat High Court’s decision in Devang Papers Mills Pvt. Ltd. v. Union of India, where credit for duty paid under an incorrect registration code was directed to be granted because the amount had indisputably reached the Government exchequer. Applying the same principle, CESTAT held that the Revenue could not treat Ashirwad Palace as a single entity while demanding and appropriating tax but classify it as two separate entities when processing a refund claim.

In an important observation, the Tribunal stated that “technical bookkeeping errors cannot override the substantive statutory right of the assessee to claim refund of an amount which has been wrongly held to be not payable.” It further noted that the Department’s own show cause notice had sought appropriation of the entire amount collected from “Ashirwad Palace” without drawing any distinction between the two maintenance units.

The Tribunal also rejected the Revenue’s reliance on the doctrine of unjust enrichment. It held that amounts deposited during investigation are in the nature of pre-deposits and do not automatically attract the bar contained in Section 11B. Since the underlying service tax demand had already been set aside on the principle of mutuality, the amount retained by the Government could no longer be treated as valid tax. Referring to Article 265 of the Constitution of India, the Tribunal emphasized that “the state cannot retain money of assessee without authority of law.”

The order highlights the long-standing legal distinction between taxes collected as part of commercial transactions and amounts deposited during investigation. CESTAT noted that where a levy itself is found to be unsustainable, the question of passing on the tax burden to members does not arise. Consequently, the Tribunal found no basis for applying the principle of unjust enrichment in the present case.

The ruling is likely to have wider implications for taxpayers facing refund disputes arising from clerical mistakes, incorrect accounting codes, or registration-related discrepancies. The decision reinforces the principle that procedural lapses should not deprive an assessee of a lawful refund when the Government has already received the money and the underlying tax demand has been invalidated.

Allowing both appeals, CESTAT set aside the Commissioner (Appeals)’ orders and directed the Revenue to refund the entire amount of ₹71,55,508 to the appellant. The Tribunal further ordered that the unpaid balance of ₹35,44,329 be refunded along with applicable interest under Section 35FF of the Central Excise Act, 1944, as applicable to service tax matters, from the date of the refund application until realization. The order was pronounced on June 18, 2026.

Case Reference : Purushottam Nagar Cooperative Housing Society Ltd Vibhag 14 v. Commissioner of Central Excise and Service Tax, Surat-I