2015 (2) TMI 752 - AT - Service Tax

Denial of refund claim - receipt of donation from caterers - Bar of limitation - Held that - As regards the refund of ₹ 47,029/- already sanctioned under Section 11B it is quite clear that interest has to be paid under Section 11BB of the Central Excise Act as made applicable to Service Tax - In the case of refund which was rejected, I note that the appellant requested for an assessment order in respect of the tax which they were persuaded to pay. This request was made within three months of the date of payment of Service Tax. Had they received the assessment order/adjudication order under the Finance Act confirming the tax payment, they would have applied for refund under Section 11B as made applicable to Finance Act, 1994. Notwithstanding this aspect, it has been held in various judgements pursuant to the Hon ble Apex Court judgement in the case of M/s Mafatlal Industries 1996 (12) TMI 50 - SUPREME COURT OF INDIA and as held in the judgement of KVR Construction (2012 (7) TMI 22 - KARNATAKA HIGH COURT), that the time bar under 11B will apply only if the demand has been made or paid as duty under the law. In the present case no such demand was made under law by a demand or order. Rather the tax which was collected was not payable in law and appellants were persuaded to pay the amount. Therefore, the appellant is entitled to refund along with appropriate interest payable under law. - Decided in favour of assessee.

Summary

Issues Involved:
- Appeal against rejection of refund claim
- Time bar for refund claim
- Applicability of interest on sanctioned refund
- Interpretation of Section 11B for refund claims

Analysis:
1. Appeal against rejection of refund claim:
The appellant, a Charitable Trust, appealed against the Order of Commissioner (appeals) upholding the rejection of a refund claim of &8377; 71,759/- as time-barred. The Trust had two halls rented out for functions and received donations from caterers and decorators. Initially asked to pay Service Tax on these donations, subsequent litigation clarified that such donations were not taxable. The Trust filed two refund claims, with one being sanctioned and the other rejected due to being time-barred.

2. Time bar for refund claim:
The appellant argued that the refund claim, which was rejected as time-barred, should not be subject to the time limit under Section 11B since the tax collected was not legally payable. They referred to a letter requesting an assessment order within three months of paying the Service Tax. The Tribunal noted that the demand was not made under law through a demand or order, as the tax was not legally due, and the appellant was entitled to the refund with appropriate interest under law.

3. Applicability of interest on sanctioned refund:
Regarding the sanctioned refund of &8377; 47,029/-, the Tribunal held that interest must be paid under Section 11BB of the Central Excise Act, as applicable to Service Tax. The Tribunal ordered the payment of interest on the sanctioned refund amount.

4. Interpretation of Section 11B for refund claims:
The Tribunal analyzed the application of Section 11B to the refund claims. It emphasized that the time bar under Section 11B would only apply if the demand had been made or paid as duty under the law. Citing precedents and the decision in the case of M/s Mafatlal Industries, the Tribunal concluded that the time bar would not apply in cases where the tax was not legally payable, and the appellant was entitled to the refund along with the appropriate interest as per law.

In conclusion, the Tribunal allowed the appeal, directing the payment of interest on the sanctioned refund and granting the refund for the rejected claim due to the tax not being legally payable.