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2016 (8) TMI 718 - AT - Service TaxClaim of refund of service tax on bad debts recovered - period of limitation - The period being prior to 15-03-2005 was governed by Notification No.21/2003-ST dated 20-11-2003 exempting the taxable services from the levy of service tax in respect of which payments were received in convertible foreign exchange. That the payment having received from Onconova, in convertible foreign exchange, the services provided by appellant was not liable to service tax. The appellants then filed refund claim on 15-10-2009 in the prescribed Form-R for refund of the Service Tax amount erroneously paid by the appellants. Held that - In the present case, the appellants have been all along contesting that the consideration received by them for export of service is not taxable. They deposited the amount only due to pressure from department and investigation was started by DGCEI. The Hon ble High Court of Karnataka in the case of CCE(Appeals) Bangalore Vs KVR Construction 2012 (7) TMI 22 - KARNATAKA HIGH COURT has taken a similar view in a a similar set of facts. Following the proposition laid by the Hon ble High Courts of Kerala and Karnataka, when there is no levy in accordance with the provisions of service tax law the claim for refund cannot be denied on the ground of limitation in terms of Section 11(B) of Central Excise Act. - Refund allowed.
Issues involved:
1. Liability to pay service tax on consideration received for services provided. 2. Rejection of refund claim on grounds of being time-barred. Analysis: Issue 1: Liability to pay service tax on consideration received for services provided The appellants provided consultancy services to an overseas company and received payment in foreign currency. The dispute arose regarding the applicability of service tax on the consideration received. The Notification No.21/2003 exempted taxable services from service tax if payments were received in convertible foreign exchange. The appellants contended that the services provided were export of services and hence not liable to service tax. The Circular No. 56/5/2003 clarified that export of services remained tax-free even after the withdrawal of certain notifications. The Tribunal in a similar case held that service tax cannot be demanded if services were exported and payment was received in foreign exchange. The judgment was relied upon by the appellants to support their argument. The appellate authority, considering the facts and legal provisions, concluded that the demand for service tax and penalty was unsustainable. Therefore, the order imposing service tax and penalty was set aside in favor of the appellants. Issue 2: Rejection of refund claim on grounds of being time-barred The appellants filed a refund claim for the service tax paid along with interest, contending that no service tax was payable as the services provided were not taxable. The claim was rejected as time-barred under Sec. 11(B) of the Central Excise Act, 1944. The appellants argued that the amount paid was not service tax but deposited erroneously under pressure from the department. They relied on a judgment by the Hon'ble High Court of Kerala to support their position. The High Court's judgment distinguished between mistake of fact and mistake of law regarding tax payments. The appellate authority, considering the arguments and legal precedents, held that if there was no levy in accordance with service tax law, the refund claim cannot be denied on the ground of limitation. Therefore, the order rejecting the refund claim was deemed unsustainable, and the appellants were entitled to a refund of the amount deposited. In conclusion, both appeals were allowed in favor of the appellants, providing them with consequential reliefs.
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