2019 (4) TMI 481 - AT - Service Tax

Refund of service tax - service tax paid under mistake of law - applicability of provisions of Section 11B of Central Excise Act - Held that - The limitation period prescribed u/s 11 B of the Central Excise Act is not applicable to the refund claims for service tax paid under mistake of law. As the Section 11 B is applicable only qua the deposit of duty of excise and where the amount is deposited under mistake i.e. due to non-leviability or exemption, the said payment cannot be clothed with the description of duty of excise - Commissioner (Appeals) has committed an error while confirming the findings about the impugned refund to be barred by limitation, in view of Section 11B of Central Excise Act. Principles of natural justice - Held that - Admittedly the appellant herein is the service recipient and paid, under a mistake, a duty under reverse charge mechanism. Normally, it is the service provider, who has to pay the service tax, as a recipient of services, when it is the obligation of the appellant to discharge the service tax, the question of recovering the same from service provider does not arise. As such, there is no question of the impugned refund to be hit by the issue of unjust enrichment. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Appellant filed a refund claim for service tax paid under reverse charge mechanism for transport of agricultural produce, which was rejected.
- Appellant challenged the rejection of the refund claim before the Appellate Tribunal CESTAT New Delhi.

Analysis:
1. Issue of Refund Claim Rejection:
- The appellant, a service recipient under reverse charge, filed a refund claim for service tax paid for transport of agricultural produce, which was rejected initially.
- The appellant contended that they were not liable to pay tax under reverse charge as the service was exempted under Notification No. 3/2013 dated 01.03.2013.
- The Department relied on Section 11B of the Central Excise Act to reject the refund claim as time-barred and questioned the evidence provided by the appellant regarding tax burden consideration.
- The Tribunal observed that the appellant was not liable to pay tax under reverse charge for transporting agricultural produce as per the notification, and the tax was paid under a mistake of law.

2. Applicability of Section 11B of Central Excise Act:
- The Tribunal deliberated on whether Section 11B would be applicable to a refund claim made under a mistake of law.
- It was noted that the appellant was not obligated to pay service tax for transporting agricultural produce, and the recovery made by the Department without legal authority should be refunded.
- Citing legal precedents, the Tribunal emphasized that when duty is paid under a mistake of law, the taxpayer is entitled to claim a refund.
- The Tribunal referred to judgments highlighting that the limitation period under Section 11B does not apply to refund claims for service tax paid under a mistake of law.

3. Unjust Enrichment and Refund Claim:
- The Tribunal addressed the issue of unjust enrichment raised by the Commissioner (Appeals) in one of the appeals.
- It was clarified that as the appellant, as a service recipient, paid duty under reverse charge mechanism, the question of recovering the amount from the service provider does not arise.
- Relying on a previous decision, the Tribunal concluded that the refund claim was not subject to unjust enrichment.

4. Final Decision:
- After considering all arguments and legal provisions, the Tribunal set aside the orders under challenge and allowed the appeals, granting relief to the appellant.
- The Tribunal emphasized that the Department cannot retain an amount that was not liable to be recovered, especially when paid under a mistake of law.
- The decision highlighted the importance of refunding excess tax collected without legal authority and upheld the appellant's right to claim a refund in such circumstances.