2014 (12) TMI 333 - AT - Service Tax

Denial of refund claim - bar of limitation - Unjust enrichment - Held that - Rule 4 of the Export of Service Rules provides for export of service without payment of tax as export of service is not exigible to tax. Further, Rule 5 provides for mechanism for rebate in case the tax has been paid mistakenly or by way of abundant caution. Thus, the amount of tax deposited by the assessee herein is not tax but in the nature of deposit. The same not being tax, there is no time limit for refund of deposit as Section 11B applies to refund of duty/tax only. Further, I find that the ruling in the case of Precision Controls (2004 (7) TMI 498 - CESTAT, CHENNAI) relied upon by the Revenue relates to export of goods and refund under the Central Excise Rules, 1944 and the same is not applicable in the facts of the present case. Thus, the appeal of the Revenue is dismissed - Decided against assessee.

Summary

Issues:
1. Time-barred refund claim under Section 11B of the Central Excise Act.
2. Doctrine of unjust enrichment.
3. Applicability of Section 11B to Service Tax.
4. Export of service not chargeable to Service Tax.
5. Interpretation of Rule 4 and Rule 5 of the Export of Service Rules.

Issue 1: The appeal involved a dispute regarding a refund claim made by the respondent-assessee for Service Tax paid on exported services. The claim was rejected as time-barred under Section 11B of the Central Excise Act, citing unjust enrichment. The Commissioner (Appeals) allowed the claim, stating that the conditions for refund were met, and the time limit under Section 11B did not apply as per Notification No. 11/2005. The Tribunal upheld the appellate order, emphasizing that the export of service is not taxable, and the deposit made by the assessee was not subject to the time limit for tax refunds.

Issue 2: The doctrine of unjust enrichment was raised as a ground for rejecting the refund claim. The Commissioner (Appeals) found that the doctrine did not apply to export of services under Notification No. 11/2005. The Tribunal concurred, stating that exports are excluded from the purview of unjust enrichment, leading to the dismissal of the Revenue's appeal.

Issue 3: The Revenue contended that Section 11B of the Central Excise Act, which mandates a one-year time limit for refund claims, should apply to Service Tax refunds. The Tribunal disagreed, holding that the provisions of Section 11B did not override the conditions specified in Notification No. 11/2005, which did not prescribe a time limit for refund claims related to exported services.

Issue 4: The respondent argued that export of service is not subject to Service Tax, and the deposit made was not tax but a refundable amount. The Tribunal agreed, stating that Rule 4 of the Export of Service Rules allows for tax-free exports, and Rule 5 deals with rebates for taxes paid mistakenly. Consequently, the time limit under Section 11B did not apply to the deposit made by the assessee.

Issue 5: The interpretation of Rule 4 and Rule 5 of the Export of Service Rules was crucial in determining the taxability of exported services and the eligibility for refunds. The Tribunal clarified that Rule 4 allows tax-free exports, while Rule 5 provides for rebates in specific cases. This distinction was pivotal in establishing that the deposit made by the assessee was refundable and not subject to the time limit for tax refunds.

In conclusion, the Tribunal dismissed the Revenue's appeal, upheld the Commissioner (Appeals) decision, and granted the respondent assessee consequential relief in accordance with the law, emphasizing the non-taxable nature of the exported services and the applicability of specific rules governing refunds in such cases.