2018 (2) TMI 325 - AT - Service Tax

Refund claim - appellant had erroneously paid the service tax on services exported in terms of Rule 3(2) of the Export of Service Rules - denial on the ground of time limitation - Section 11B of CEA 1944 - Held that - it is an admitted position that the appellant has exported these services on which service tax was not applicable during the material time but the appellant has paid the service tax as an advance as he was under the impression that service tax is payable on the Export of Services rendered by him - in view of the fact that the service tax was not paid as tax but as an advance, therefore the period of limitation as prescribed u/s 11B of the CEA will not be applicable - appeal allowed - decided in favor of appellant.

Summary

Issues:
Refund claim rejection based on limitation under Section 11B of Central Excise Act 1944.

Analysis:
The appellant filed a refund claim for an amount of ?35,05,699 on the grounds of erroneously paying service tax on services exported. The Assistant Commissioner granted a partial refund of ?23,23,893 but rejected the balance claim of ?11,81,804 citing limitation under Section 11B. The Commissioner (Appeals) upheld the rejection, leading to the present appeal.

The appellant argued that the impugned order lacked proper application of mind and failed to consider relevant facts and legal precedents. They contended that the service tax was paid in advance, not as tax, as it was erroneously believed to be applicable on exported services. The appellant highlighted that the amount was shown as an advance in ST-3 returns, indicating it was a deposit. They also emphasized their lack of awareness regarding the procedure for paying tax under protest.

In support of their arguments, the appellant cited the decision of the Hon’ble Supreme Court in Vedanta Limited Vs. CCE, which dealt with refund limitation in a customs duty context. Additionally, they referenced several other decisions to strengthen their case.

The Assistant Commissioner, represented by the learned AR, reiterated the findings of the impugned order during the hearing.

Upon review, the Tribunal acknowledged that the appellant had paid the service tax as an advance under the mistaken belief of its applicability to exported services. The Tribunal noted that since the tax was paid as a deposit and not as actual service tax, the limitation under Section 11B of the Central Excise Act would not apply. Relying on the precedents cited by the appellant, the Tribunal concluded that the impugned order was unsustainable in law. Consequently, the Tribunal set aside the order, allowing the appeal with any necessary consequential relief.

In the final pronouncement on 09/01/2018, the Tribunal ruled in favor of the appellant, emphasizing the distinction between tax payment and advance deposit to justify the refund claim acceptance despite the limitation under Section 11B.