2018 (6) TMI 130 - AT - Service Tax

Refund of service tax paid erroneously - rejection of claim as time barred - period of limitation - appellant has discharged the service tax liability on the amounts disbursed to the Managing Director as salary - no service involved, employer-employee relationship - Held that - It is an admitted fact that the appellant has discharged the service tax liability on the amounts disbursed to the Managing Director as salary. Adjudicating authority in the order-in-original has clearly recorded that this amount which has been disbursed to the Managing Director would not fall under the category of services, as there exists an employer-employee relationship between the appellant and the Managing Director. If that be so, provision of section 11B would not be attracted. Reliance placed in the case of Parijat Construction v. CCE 2017 (10) TMI 659 - BOMBAY HIGH COURT , where it was held that the provision of section 11B of Central Excise Act, 1944 will not be applicable, as service tax liability does not arise. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Refund claim filed beyond the period of limitation under Section 11B of the Central Excise Act, 1944.

Analysis:
The appellant filed a refund claim for erroneously paid service tax during July 2012 to December 2015 on amounts disbursed to the Managing Director as salary. The adjudicating authority partially allowed the refund claim but rejected a part of it as time-barred under Section 11B. The first appellate authority upheld the decision. The appellant argued that the services rendered by the Managing Director to the company were not taxable services but part of the employment relationship. The appellant relied on the judgment in the case of Parijat Construction to support this argument.

The Departmental Representative contended that the provisions of Section 11B were applicable as per the judgment in the case of Andrew Telecom (I) Pvt. Ltd. The main issue was whether the refund claim was time-barred under Section 11B(1) of the Central Excise Act, 1944. The Member (Judicial) analyzed the submissions and found that the authorities erred in rejecting the refund claim as time-barred. The Member noted that the Managing Director's salary did not constitute a taxable service due to the employer-employee relationship. Citing the judgment in Parijat Construction, the Member concluded that Section 11B did not apply in such cases.

The Member referred to the judgment in Parijat Construction, emphasizing that the limitation under Section 11B does not apply to a refund claimed for service tax paid under a mistake of law. Since the issue was settled by the jurisdictional High Court in favor of the assessee, the Member set aside the impugned order and allowed the appeal with consequential relief. The decision was based on the principle that the service tax liability did not arise due to the nature of the payments to the Managing Director.