2017 (3) TMI 791 - AT - Service Tax

Refund claim - denial on account of time bar u/s 11B of the CEA, 1944 - during the period under consideration, the liaisoning Services provided by appellant were not subject to Service Tax, a refund claim was filed - Held that - no tax was due against the assessee-Appellants as the services provided by them were not subject to tax. At the relevant time, there was no authority/provision to collect the tax from the assessee- Appellants. Hence, this is an amount which was deposited in good faith - in the instant case also, the assessee-Appellants were not subjected to Service Tax. Therefore, mere payment made by the assessee-Appellants will neither validate the nature of payment nor the nature of transaction. The assessee-Appellants were rendering liaisoning service . The said services were not liable to Service Tax at the relevant time. Hence, the Department would not be in a position to collect service tax on the said activities since the same is not leviable - the Government will have no authority to retain the said amount and will have to be refunded. It is not a case of refund of tax, but return of deposit for which limitation (Section 11B of the Act) is not applicable. Appeal allowed - decided in favor of assessee-appellant.

Issues Involved:
1. Whether the 'Liaisoning Services' provided by the assessee-Appellants were subject to Service Tax.
2. Whether the refund claim filed by the assessee-Appellants was time-barred under Section 11B of the Central Excise Act, 1944.
3. Whether the amount deposited by the assessee-Appellants can be considered as a deposit or tax.
4. Whether the principle of unjust enrichment applies in this case.

Issue-wise Detailed Analysis:

1. Whether the 'Liaisoning Services' provided by the assessee-Appellants were subject to Service Tax:
The assessee-Appellants were registered for providing "Business Auxiliary Service" under Section 65 of the Finance Act, 1994 and were providing liaisoning services to M/s Dongfang Electric Corporation, China. During the period under consideration (01.06.2005 to 31.01.2007), these services were not subject to Service Tax. The Tribunal noted that "the assessee-Appellants had provided the 'Liaisoning Services', which were not subject to Service Tax as per the Finance Act, 1994."

2. Whether the refund claim filed by the assessee-Appellants was time-barred under Section 11B of the Central Excise Act, 1944:
The refund claim was initially rejected by the lower authorities as time-barred under Section 11B. However, the Tribunal observed that the amount deposited was not towards a tax but merely a deposit made by mistake or under pressure. Hence, Section 11B was not applicable. The Tribunal cited several case laws, including *Mera Baba Realty Associate (P) Ltd. vs Commissioner of Service Tax, Delhi*, where it was held that the one-year limitation under Section 11B does not apply when the collection is without authority of law. The Tribunal concluded that "the claim has been made within the period of three years prescribed by Hon'ble Delhi High Court."

3. Whether the amount deposited by the assessee-Appellants can be considered as a deposit or tax:
The Tribunal determined that the amount deposited by the assessee-Appellants could not be considered as Service Tax. It was noted that "mere payment of amount would not make it a Service Tax payable by them." The Tribunal emphasized that "the amount deposited by the assessee-Appellants by mistake/good faith cannot be termed as 'Tax'."

4. Whether the principle of unjust enrichment applies in this case:
The Tribunal found that there was no unjust enrichment as the amount was paid from the assessee-Appellants' own pocket and not recovered from DEC, China. The Tribunal cited the Chartered Accountant's certificate and an affidavit from the Director of the assessee-Appellants' company confirming that no Service Tax was charged in the invoice raised on DEC, China. The Tribunal stated, "no case of unjust enrichment is made out."

Conclusion:
The Tribunal concluded that the amount deposited by the assessee-Appellants was not a tax but a deposit made under a mistaken notion. Therefore, the limitation under Section 11B of the Central Excise Act, 1944 did not apply. The Tribunal set aside the impugned orders and directed the jurisdictional Commissioner to return the deposited amount, stating, "we are of the view that the assessee-Appellants are entitled to get the refund and the same is not hit by the limitation prescribed under Section 11B of the Central Excise Act, 1944 read with Section 83 of the Finance Act, 1994." Both appeals filed by the assessee-Appellants were allowed.

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