Service Tax / Refund · F2J-C-2870
The Madras Club v. Commissioner of GST and Central Excise
VALIDATED · ACTUAL COURT DOCUMENTSource transparency: The local PDF is an actual court document retained from the complete public source. The official court portal is recorded separately. Verify the official record and subsequent history before reliance.
Holding (ratio)
Unjust enrichment bars refund only to the extent the tax burden was passed on. The portion borne by the taxpayer itself remained refundable.
Scope limits
The holding is confined to the issues actually decided in the retained judgment; no view is attributed to the court on questions expressly left open or remanded.
Sources and completeness
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- Complete searchable public court copy, retained unchanged
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- PDF pages
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- Extracted words
- 2,238
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Complete searchable judgment text
2026:MHC:3704
CMA No. 1327 of 2021
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 01-09-2026
CORAM
THE HON'BLE DR.JUSTICE ANITA SUMANTH
AND
THE HON'BLE MR.JUSTICE C.KUMARAPPAN
CMA No. 1327 of 2021
M/s. The Madras Club
Rep. By its General Manager & Asst. Secretary,
Mr. M.J. Raja Pandiyan,
No.8, Adyar Club Gate Road,
Chennai 28.
..Appellant(s)
Vs
The Commissioner of GST & Central Excise,
Chennai South Commissionerate,
No.690, E.V.R. Periyar Maligai,
Nandanam, Chennai 35.
..Respondent(s)
Prayer: This Civil Miscellaneous Appeal filed under Section 35G of the
Central Excise Act, 1944, to set aside the Impugned Final Order No.40782 of
2020 dated 08.09.2020 passed in Appeal No.ST/41796/2019-SM by the Hon’ble
Customs Excise and Service Tax Appellate Tribunal Chennai and allows the
refund together with applicable interest thereon with consequential relief.
For Appellant(s): Mr.R.Anishkumar
For Respondent(s): Mr.Sai Srujan Tayi
Standing Counsel
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CMA No. 1327 of 2021
JUDGEMENT
(Judgment of the Court was delivered by C.KUMARAPPAN, J.)
The present Civil Miscellaneous Appeal has been filed against the Final
Order No.40782 of 2020, dated 08.09.2020, in Appeal No.ST/41796/2019-SM,
passed by the Customs, Excise and Service Tax Appellate Tribunal, Chennai
(hereinafter referred to as “the CESTAT” for the sake of convenience).
2. The brief facts which are necessary for the disposal of the present Civil
Miscellaneous Appeal are that the appellant is registered with the Service Tax
Department for providing “Membership of Club or Association Service”. While
so, a demand was raised against the appellant for a sum of Rs.29,24,687/-
towards the subscription amount received by the appellant from its members.
The said demand was challenged before the First Appellate Authority, namely,
the Commissioner (Appeals), and the First Appellate Authority, vide order
dated 15.12.2009, set aside the said demand. The said order was subsequently
upheld by the CESTAT. In pursuance thereof, the appellant claims a sum of
Rs.15,51,086/-, which was paid by the appellant pursuant to the said demand. It
is the case of the appellant that, once the demand was set aside, the appellant is
entitled to have the refund of the said amount.
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CMA No. 1327 of 2021
3. At the time of admission of this Court formulated the following
substantial questions of law, vide order dated 17.04.2021:-
(i) Whether the order passed by the CESTAT is perverse?
(ii) Whether the CESTAT is right in ignoring Chartered
Accountant's Certificate which confirms the claimed refund
amount is lying in Books of account as Service Tax receivable
from the Government?
(iii) Whether the CESTAT is right in including the
appellant's refund claim attracts "Principle of
UnjustEnrichment" for the amount partly collected towards
deposit?
(iv) Whether the CESTAT is right in rejecting the
appellant's refund claim for Rs.15,51,086/- which was paid
pursuant to an unlawful demand without authority of law?
(v) Whether the CESTAT is right in permitting the
respondent's department to retain the amount contrary to the
Article 265 of Constitution of India?
(vi) After the Hon'ble Supreme Court Judgment in State of
West Bengal and Others v. Calcutta Club Ltd. [2019-
TIOL-449SC -ST.LB] whether the CESTAT can treat Club and
its Members are different entities to decide the issue of "Unjust
enrichment" under section 11B of Central Excise Act,1944
(vii) Whether the appellant is entitled for the interest form
the date of deposit or to what extent? "
4. Heard the learned counsel appearing for both sides on the above
questions of law and perused the materials available on record.
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CMA No. 1327 of 2021
5. The learned counsel appearing for the appellant would submit that the
CESTAT has erroneously dismissed the claim of the appellant on the premise
that the appellant had passed on the tax amount to its members. He would
submit that, according to the Auditor’s Certificate, in the books of account, the
said amount is shown as the amount refundable to the members, but such
material aspect was not considered by the authority. It is also the contention of
the learned counsel for the appellant that the Auditor’s Certificate is a relevant
document for determining the entitlement to refund, whereas the Appellate
Authority has failed to consider the same. He would further place reliance upon
the judgment of the Hon’ble Bombay High Court in Hindustan Petroleum
Corporation Ltd. v. Commissioner of CGST & Central Excise, Navi Mumbai
Commissionerate, reported in 2019 (365) E.L.T. 319 (Bom.), and the judgment
of the CESTAT, Chennai, in Commissioner of Customs, Chennai-IV v. Adyar
Gate Hotel, reported in 2018 (359) E.L.T. 228 (Tri.-Chennai), to contend that
the Auditor’s Certificate is a relevant document while considering the nature of
the accounts. It is his further contention that, despite production of the Auditor’s
Certificate, the respondent authority has failed to consider the same, which is
contrary to law.
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CMA No. 1327 of 2021
6. Per contra, the learned Standing Counsel appearing for the respondent
strongly opposed the said contention and would submit that it is an admitted
position that the appellant themselves had categorically admitted that they had
collected the tax from their members. Having collected the tax from the
members and thereafter seeking refund from the Department would amount to
unjust enrichment. It is also the contention of the learned Standing Counsel that
the Auditor’s Report clearly discloses that the appellant had collected the tax
amount and passed on the duty element to its members. Having admitted the
same, the appellant is not entitled to seek refund of the said amount from the
Department.
7. We have given our anxious consideration to the submissions made on
either side.
8. It is well-settled principle of law that, any refund to be made under
Section 11B of the Central Excise Act, 1944 would be subject to the doctrine of
unjust enrichment. The Hon’ble Supreme Court has, time and again,
categorically held that, when the tax component has already been recovered
from their customers or passed on to other persons, then the taxpayer, is not
entitled to seek restitution from the State. The right to restitution is neither
automatic nor unconditional. In an oft-quoted judgment of the Hon’ble Supreme
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CMA No. 1327 of 2021
Court in Mafatlal Industries Ltd. v. Union of India, reported in (1997) 5 SCC
536, it has been held as follows:-
“108. (iii) A claim for refund, whether made under the
provisions of the Act as contemplated in Proposition (i) above or
in a suit or writ petition in the situations contemplated by
Proposition (ii) above, can succeed only if the plaintiff-petitioner
alleges and establishes that he has not passed on the burden of
duty to another person/other persons. His refund claim shall be
allowed/decreed only when he establishes that he has not passed
on the burden of the duty or to the extent he has not so passed on,
as the case may be. Whether the claim for restitution is treated as
a constitutional imperative or as a statutory requirement, it is
neither an absolute right nor an unconditional obligation but is
subject to the above requirement, as explained in the body of the
judgment. Where the burden of the duty has been passed on, the
claimant cannot say that he has suffered any real loss or
prejudice. The real loss or prejudice is suffered in such a case by
the person who has ultimately borne the burden and it is only that
person who can legitimately claim its refund. But where such
person does not come forward or where it is not possible to
refund the amount to him for one or the other reason, it is just
and appropriate that that amount is retained by the State i.e. by
the people. There is no immorality or impropriety involved in
such a proposition.
The doctrine of unjust enrichment is a just and salutary
doctrine. No person can seek to collect the duty from both ends.
In other words, he cannot collect the duty from his purchaser at
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CMA No. 1327 of 2021
one end and also collect the same duty from the State on the
ground that it has been collected from him contrary to law. The
power of the court is not meant to be exercised for unjustly
enriching a person. The doctrine of unjust enrichment is,
however, inapplicable to the State. State represents the people of
the country. No one can speak of the people being unjustly
enriched.”
9. As per the above judgment, for a taxpayer to claim refund, he must
establish the actual loss or prejudice suffered by him. In the case in hand, even
according to the Auditor’s Certificate, the appellant has recovered a sum of
Rs.9,09,717/- from its members and only a sum of Rs.6,41,369/- remains
pending collection from the members. As held by the Hon’ble Supreme Court in
Mafatlal Industries Ltd. (cited supra), the doctrine of unjust enrichment is a just
and salutary principle, and no person can claim a refund when he has already
collected the tax amount from other persons. If that be so, the right of the
taxpayer to seek refund would stand eclipsed to the extent of the amount already
recovered from others.
10. The Hon’ble Supreme Court has further held that, though the tax have
been mistakenly collected, retention of such mistakenly collected tax, in the
above context, would not amount to immorality or impropriety, as ultimately
the amount would be utilised for the benefit of the people of the State.
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CMA No. 1327 of 2021
Therefore, the appellant cannot raise a plea of unjust enrichment against the
State.
11. The learned counsel for the petitioner has relied upon various
judgments to impress upon this Court that the Auditor’s Report is a relevant
document. We are not in disagreement with the above submissions. But the
reliance upon the Auditor’s Report depends upon its veracity and authenticity.
12. With the above backdrop, if we look into the Auditor’s Certificate,
though the entire amount is shown in the accounts as refundable, a sum of
Rs.9,09,717/- has already been received from the appellant’s members.
Therefore, in respect of the portion of the amount in a sum of Rs.9,09,717/-, the
appellant has already passed on the burden to its members. However, the
remaining sum of Rs.6,41,369/- is yet to be received from the members. In other
words, no burden has been passed on to the members to the extent of
Rs.6,41,369/-. Therefore, the appellant is entitled to have refund only to the
extent of Rs.6,41,369/-.
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CMA No. 1327 of 2021
13. In view of the above legal position, Questions of Law Nos.1 to 5 are
answered in terms of the observations made hereinabove in this judgment, and
Questions of Law Nos.6 and 7 are answered in favour of the assessee.
Accordingly, the impugned order dated 08.09.2020 is set aside, and the
authorities are directed to refund a sum of Rs.6,41,369/- to the appellant,
together with applicable interest in terms of Section 11BB of the Central Excise
Act, 1944. The said amount shall be paid within a period of eight weeks from
today.
14. In the result, this Civil Miscellaneous Appeal is partly allowed to the
extent indicated above. There shall be no order as to costs.
(A.S.M.,J.) (C.K.,J.)
01-09-2026
Index: Yes
Speaking Order
Neutral Citation: Yes
KV
To
The Commissioner of GST & Central Excise,
Chennai South Commissionerate,
No.690, E.V.R. Periyar Maligai,
Nandanam, Chennai 35.
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2026:MHC:3704
CMA No. 1327 of 2021
DR.ANITA SUMANTH J.
AND
C.KUMARAPPAN J.
KV
CMA No. 1327 of 2021
01-09-2026
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