2018 (7) TMI 276 - HC - Service Tax

Refund claim - service tax paid under mistake of law - time limitation - applicability of Section 11B of the Central Excise Act - Whether the provisions of Section 11B of the Central Excise Act would be applicable to claim of refund made by an Assessee when the tax has been paid under mistake of law? - Held that - Undisputably, there was no liability on the petitioner to pay service tax. The Supreme Court of India, in the case of Union of India Vs. ITC Ltd. 1993 (7) TMI 75 - SUPREME COURT OF INDIA has held that the Assessee s claim to refund would not be disallowed solely because it seemed barred by limitation. The provisions of section 11B of the Central Excise Act, 1944 would, therefore, not be applicable to an application seeking refund thereof. The petitioner was therefore, wholly justified in making the application for refund under a mistake of law and not under section 11B of the Central Excise Act, 1944 - Since the provisions of section 11B of the Act are not applicable to the claim of refund made by the petitioner, the limitation prescribed under the said provision would also not be applicable and the general provisions under the Limitation Act, 1963 would be applicable. The Application under Section 11B cannot be rejected on the ground that is bared by limitation, provided for under Section - The claim for return of money must be considered by the authorities - appeal allowed.

Issues Involved:
1. Applicability of Section 11B of the Central Excise Act to refund claims made under a mistake of law.
2. Limitation period for refund claims under Section 11B.
3. The authority's obligation to refund excess tax paid by mistake.
4. Compliance with Article 265 of the Constitution of India regarding tax collection.

Detailed Analysis:

1. Applicability of Section 11B of the Central Excise Act to refund claims made under a mistake of law:
The primary issue in this case was whether Section 11B of the Central Excise Act applies to refund claims when the tax was paid under a mistake of law. The appellant contended that they were not liable to pay service tax as per Rule 6A of the Service Tax Rules and sought a refund of the excess tax paid. The Assistant Commissioner and subsequent appellate authorities rejected the refund claim for a portion of the amount on the grounds of limitation under Section 11B. However, the court referenced the Supreme Court's decision in Union of India Vs. ITC Ltd., which held that excess tax recovered without authority of law must be refunded, subject to statutory provisions. The court concluded that Section 11B does not apply to refunds claimed under a mistake of law.

2. Limitation period for refund claims under Section 11B:
The Assistant Commissioner and the Commissioner of Central Excise (Appeals-I) disallowed the refund claim of ?4,39,683/- as it was filed beyond the one-year limitation period prescribed under Section 11B. The court noted precedents, including the Gujarat High Court's ruling in Oil and Natural Gas Corporation Ltd. Vs. Union of India, which held that the limitation period under Section 11B does not apply to claims made under a mistake of law. Instead, the general provisions of the Limitation Act, 1963, would apply, where the period of limitation begins when the applicant discovers the mistake. Thus, the court held that the appellant's refund claim was not barred by limitation.

3. The authority's obligation to refund excess tax paid by mistake:
The court emphasized that authorities are obligated to refund any excess tax paid by mistake, as retaining such amounts would violate Article 265 of the Constitution of India, which mandates that no tax shall be levied or collected except by authority of law. The court cited the Bombay High Court's decision in Parijat Construction Vs. Commissioner Excise, Nashik, which reinforced that limitation under Section 11B does not apply to refunds of taxes paid under a mistake of law.

4. Compliance with Article 265 of the Constitution of India regarding tax collection:
The court underscored that allowing the Revenue to retain excess service tax paid by the appellant would contravene Article 265 of the Constitution. The court directed that the application under Section 11B could not be rejected on the grounds of being barred by limitation and that the authorities must consider the claim for the return of the excess amount paid.

Conclusion:
The court concluded that the appellant's claim for a refund of ?4,39,683/- could not be barred by limitation and must be refunded. The judgment reinforced the principle that tax authorities must refund excess amounts paid under a mistake of law, and such claims are not subject to the limitation period under Section 11B of the Central Excise Act. The Civil Miscellaneous Appeal was ordered accordingly, with no order as to costs.

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