2011 (1) TMI 46 - HC - Service Tax

Refund Forced payment of service tax deemed protest period of limitation - A conspectus consideration of the facts only go to show that the payment made by the first respondent/assessee was not voluntary and was forced to make the said payment. In such circumstances, the said payment can only be construed as one made under protest. When once the said conclusion based on the above facts are inevitable, then the second proviso to sub section 1 of Section 11B of the Central Excise Act, automatically comes into play. Therefore, the conclusion of the Tribunal in having held that the first respondent made the payment under protest was well justified and the order of the Tribunal in holding that the application made by the first respondent/assessee for refund of the payment made in its application dated 18.08.2006 cannot be thrown out on the ground of limitation.

Summary

Issues:
Refund of service tax paid by the assessee for GTO service availed between 16.11.1997 and 01.06.1998; Challenge to the order of the Tribunal dated 18.01.2008; Applicability of exemption to small scale industries from payment of service tax; Appeal against the order setting aside the refund and ordering recovery with interest; Question of law on limitation in the appeal.

Issue 1: Refund of service tax paid by the assessee for GTO service

The first respondent, a small scale industry, availed GTO service and was demanded service tax retrospectively. The Assistant Commissioner dropped the proceedings and granted a refund under Section 11B of the Act. However, the Commissioner set aside the refund order, leading to an appeal by the assessee. The Tribunal held that the payment was made under protest, justifying the refund claim. The Tribunal's decision was based on relevant facts and considerations, concluding that the refund was valid. The High Court upheld the Tribunal's decision, dismissing the appeal as the payment was made under protest, invoking the second proviso to Section 11B of the Central Excise Act.

Issue 2: Challenge to the order of the Tribunal dated 18.01.2008

The appellant, the Commissioner of Service Tax, challenged the Tribunal's order that set aside the refund order and ordered recovery with interest. The appellant contended that the question of limitation was a substantial issue for consideration. However, after examining the orders and submissions, the High Court found no grounds to entertain the appeal. The Court noted that the payment by the assessee was forced, not voluntary, and was made under protest. Consequently, the Tribunal's decision to allow the refund was upheld, and the appeal was dismissed.

Issue 3: Applicability of exemption to small scale industries from payment of service tax

The assessee, being a registered small scale industry, claimed exemption from service tax under a Notification dated 05.11.1997. Despite the exemption, a demand for service tax was raised, leading to the refund claim. The Tribunal found that the payment was made under protest and allowed the refund. The High Court concurred with the Tribunal's decision, emphasizing that the payment was not voluntary and fell under the second proviso to Section 11B of the Act, justifying the refund.

Issue 4: Appeal against the order setting aside the refund and ordering recovery with interest

The Commissioner, through Section 84 of the Finance Act, 1994, set aside the refund order and directed recovery with interest. The assessee appealed to the Tribunal, which rejected the appellant's arguments on limitation and other grounds. The High Court upheld the Tribunal's decision, emphasizing that the payment was made under protest, entitling the assessee to the refund under Section 11B of the Act. The appeal was dismissed, and the Tribunal's order was upheld.

Issue 5: Question of law on limitation in the appeal

The appellant raised a question of law on limitation regarding the refund claim. The High Court analyzed the timeline of events, noting that the payment by the assessee was not voluntary but made under protest. As per the second proviso to Section 11B of the Central Excise Act, the Court concluded that the refund was justified, and the Tribunal's decision to allow the refund was upheld. The appeal was dismissed based on the grounds that the payment was made under protest, and there was no substantial question of law to entertain the appeal.