2015 (7) TMI 635 - HC - Service Tax

Refund claim - no service tax is leviable for the service - whether the petitioner is entitled for refund of the amount claimed after one year from the relevant date apart from the question relating to alternate remedy available to the petitioner. - Held that - The question of alternative remedy would arise if service tax is otherwise leviable under the Central Excise Act. Herein, in this case, there is no dispute with regard to the fact that no service tax is leviable for the service extended by the petitioner to the Muscat Bank SAOG. Thus, the writ petition is maintainable when the amount is arbitrarily withheld without any justification under law as the refund claimed by the petitioner is not relatable to Section 11B of the Central Excise Act. Similar view was also taken by the Karnataka High Court in K.V.R. Constructions v. Commissioner of Central Excise (Appeals) and another 2009 (8) TMI 150 - KARNATAKA HIGH COURT and by the Madras High Court in Natraj and Venkat Associates v. Asst.Commr. Of S.T., Chennai-II 2009 (10) TMI 36 - MADRAS HIGH COURT - refund allowed - Decided in favour of assessee.

Summary

Issues:
Challenge to rejection of claim for refund of service tax payment beyond one year from relevant date; Interpretation of Section 11B of the Central Excise Act for refund claims; Determination of service tax liability for payments received from a foreign entity; Applicability of alternate remedy in case of mistaken service tax payment.

Analysis:
The petitioner, a financial services company, challenged the rejection of their refund claim for service tax paid mistakenly on payments received from a foreign bank. The claim was rejected citing Section 11B of the Central Excise Act, which sets a one-year limit for refund applications. The petitioner argued that the service provided was outside the taxable territory as per Place of Provision Rules, thus not liable for service tax. They relied on a Karnataka High Court judgment stating that payments made by mistake do not fall under Section 11B. The Department contended that even mistaken payments must follow Section 11B for refunds, referencing a Supreme Court case categorizing refund claims under different scenarios. The court noted that the service provided was not taxable, making the refund claim valid beyond the one-year limit under Section 11B.

The court emphasized that the mistaken payment did not have the color of legality for service tax levy, distinguishing it from cases falling under Section 11B. The Department argued for an alternative remedy, but the court found the refund claim not covered by Section 11B due to the absence of service tax liability. Referring to precedents from Karnataka and Madras High Courts, the court allowed the writ petition, directing the Department to process the refund within two months. The judgment highlighted that in cases where service tax is not leviable, Section 11B does not apply, supporting the petitioner's claim for a refund beyond the statutory time limit.

In conclusion, the court ruled in favor of the petitioner, granting the refund of the mistakenly paid service tax amount. The judgment clarified the application of Section 11B in cases of mistaken service tax payments and affirmed the availability of a writ remedy when service tax liability is absent, despite the Department's argument for an alternate remedy.