2018 (12) TMI 1118 - HC - Service Tax

Refund claim of service tax - validity of period of limitation of 6 months - exemption grated with retrospective effect - vires of Section 103 of the Finance Act, 1994 - Construction of Port Services - N/N. 25/2012 ST dated 20.06.2012. Held that - Section 103 was introduced in the Finance Act, 1994 with a specific purpose of granting exemption from service tax of certain services with retrospective effect. This covers the period between 01.04.2015 to 29.02.2016. Since this exemption was granted with retrospective effect, the question of refund would arise. It is in this context, sub section (2) of Section 103 envisages refund of the tax already collected and deposited. Sub section (3) however, provides a limitation of making refund application and as noted starts with nonobstinate clause. The period of limitation of six months for making the refund application is, therefore, notwithstanding anything contained in the chapter, in which the said provision is contained. Section 103 of the Act is thus a complete mechanism for recognition of exemption, refund of the tax so exempted with retrospective effect and the mechanism for claiming such refund. Such limitation period cannot be interpreted as merely directory, particularly when sub section (3) in addition to providing the period of limitation, overrides any other provisions of the chapter, which may be to the contrary. Courts have often hold that period of limitation for claiming refund is mandatory - Further, the contention that sub section (3) of Section 103 retains the period of limitation of one year prescribed in the Excise Act and is aimed to protect such refund application which cover the period beyond such period, cannot be accepted. Petition disposed off.

Issues Involved:

1. Constitutionality of sub-section (3) of Section 103 of the Finance Act, 1994.
2. Validity of the six-month limitation period for refund applications under Section 103.
3. Interpretation of Section 103 in relation to the requirement of obtaining a certificate from the Ministry.
4. Applicability of limitation periods from other statutory provisions like the Central Excise Act.

Issue-wise Detailed Analysis:

1. Constitutionality of sub-section (3) of Section 103 of the Finance Act, 1994:

The petitioners challenged the constitutionality of sub-section (3) of Section 103, arguing that it imposed an impossible condition by requiring the refund application to be filed within six months, which was often consumed by the Ministry in issuing the necessary certificate. The court, however, did not find the provision unconstitutional. Instead, it adopted a reasonable interpretation that the time consumed by the Ministry in processing and granting the certificate must be ignored for computing the limitation period for making the refund application. This approach was taken to save the provision from the vice of unconstitutionality, as it would be unreasonable to expect the petitioners to perform tasks beyond their control.

2. Validity of the six-month limitation period for refund applications under Section 103:

The court upheld the six-month limitation period prescribed in sub-section (3) of Section 103, stating that this period is mandatory and not merely directory. The court emphasized that Section 103 is a complete mechanism for recognizing exemption, refunding the tax so exempted with retrospective effect, and providing the procedure for claiming such refunds. The limitation period prescribed in sub-section (3) overrides any other provisions of the chapter, making it a self-contained code. The court referenced the Supreme Court's decision in ALD Automotive Pvt. Ltd. Vs. Commercial Tax Officer, which held that limitation periods for claiming benefits or concessions under statutory schemes are mandatory.

3. Interpretation of Section 103 in relation to the requirement of obtaining a certificate from the Ministry:

The court clarified that the requirement to obtain a certificate from the Ministry, as stipulated in sub-section (1) of Section 103, and the six-month limitation period for filing refund applications, as per sub-section (3), are distinct conditions that must both be fulfilled. However, the court recognized the practical difficulty of obtaining the certificate within the six-month period and thus ruled that the time taken by the Ministry to issue the certificate should be excluded when calculating the six-month limitation period for filing the refund application. This interpretation was intended to avoid arbitrary outcomes and ensure fairness.

4. Applicability of limitation periods from other statutory provisions like the Central Excise Act:

The petitioners argued that sub-section (3) of Section 103 should be interpreted in light of the one-year limitation period for refund claims under Section 11B of the Central Excise Act. The court rejected this argument, stating that Section 103 of the Finance Act, 1994, is a self-contained code with its own specific limitation period for refund claims. The court noted that the statutory language and the context of Section 103 indicate that the six-month limitation period is exclusive and cannot be extended by referring to other statutory provisions. The court referenced the Gujarat High Court's decision in Willowood Chemicals Pvt. Ltd. Vs. Union of India, which upheld the limitation provision for claiming credit of past taxes under a different statutory scheme.

Conclusion:

The court concluded that the impugned orders rejecting the petitioners' refund claims were valid, as the refund applications were filed beyond the mandatory six-month limitation period. The petitions were disposed of accordingly, with a clarification that the petitioners' appeals on the merits of the refund claims before the appellate Tribunal were not affected by this judgment. The court's reasoning differed from the authority's, but the ultimate decision to reject the refund claims was upheld.

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