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Case: M/s Shriram General Insurance Co. Ltd. v. Commissioner of CGST, Jaipur
Forum: CESTAT, New Delhi – Principal Bench, Court No. III
Appeal: Service Tax Appeal No. 50092 of 2022
Final Order: 51151/2026
Date of Decision: 08 July 2026
Coram: Hon’ble Ms. Binu Tamta, Member (Judicial) and Hon’ble Mr. P.V. Subba Rao, Member (Technical)
Background
The Customs, Excise & Service Tax Appellate Tribunal, New Delhi, has allowed the appeal of M/s Shriram General Insurance Co. Ltd. concerning refund of Krishi Kalyan Cess (KKC) and Swachh Bharat Cess (SBC) arising from cancellation or alteration of insurance policies during the GST regime.
The insurer had originally paid service tax along with the applicable cesses on premiums received under the Finance Act, 1994. Subsequently, certain insurance policies were cancelled or altered for reasons including cheque dishonour, cancellation at the client’s request and reduction of risk. As the services were consequently not provided either wholly or partly, proportionate premium amounts together with the tax component were refunded.
The appellant sought refund of ₹28,57,192 towards KKC and SBC under Section 142(5) of the CGST Act, 2017. The claim had been rejected on the grounds of limitation and unjust enrichment.
Core Issue
The principal question before the Tribunal was whether a refund claim for KKC and SBC filed under Section 142(5) of the CGST Act, 2017 could be rejected as time-barred under Section 11B of the Central Excise Act, 1944 or on the ground of unjust enrichment.
A related issue was whether KKC and SBC, being components associated with the service tax levy on the original transaction, could be treated differently when refund of the corresponding service tax had already been held admissible.
Tribunal’s Observations
The Tribunal noted that the dispute was already covered by earlier decisions, including decisions rendered in the appellant’s own case. The Revenue also conceded that the issue stood covered in favour of the appellant.
On unjust enrichment, the Tribunal relied upon the requirements of Rule 6(3) of the Service Tax Rules, 1994 and Section 142(5) of the CGST Act, 2017. Where services were not ultimately provided and the corresponding amount was returned, the tax paid in respect of such unprovided services could not be retained merely on the basis of unjust enrichment.
In the insurance transactions under consideration, premium amounts were received through financiers or corporate agents. Upon cancellation of policies, the proportionate premium together with the tax component was returned through the financier or agent and ultimately reached the insured. The Tribunal therefore held that the refund claims were not hit by the bar of unjust enrichment.
The Tribunal further reiterated the settled position regarding limitation for claims under Section 142(5). Refund of tax paid under the existing law in respect of services that were ultimately not provided is to be dealt with under the transitional provision and paid in cash. While Section 142(5) makes such refund subject to Section 11B(2) of the Central Excise Act concerning unjust enrichment, the Tribunal held that the claim could not be rejected merely by applying the limitation prescribed under Section 11B.
The Tribunal also observed that once a service is cancelled and the consideration is refunded, there is no incidence of service on which the tax can ultimately survive. Rule 6(3) of the Service Tax Rules specifically contemplated credit where payment was received for a service that was subsequently not provided wholly or partly.
Verdict
CESTAT set aside the impugned order and held that Shriram General Insurance Co. Ltd. was eligible for refund of KKC and SBC.
The Tribunal held that the refund could neither be rejected as time-barred nor denied on the principle of unjust enrichment in the facts of the case. Consequently, the appeal was allowed.
Between Fine Lines
The decision reinforces the transitional protection contained in Section 142(5) of the CGST Act for taxes paid under the pre-GST regime where the underlying service is subsequently not provided. The ruling is particularly significant in holding that the limitation contained in Section 11B cannot, by itself, defeat such a refund claim and that unjust enrichment must be examined on the actual flow of the refunded consideration.
It also confirms that where the premium and corresponding tax burden are ultimately returned to the insured through the established commercial channel, the Revenue cannot retain the tax merely because the refund moved through an intermediary such as a financier or corporate agent.