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2019 (8) TMI 387 - AT - Service TaxRefund of service tax which was not required to be paid - time limitation - Section 11B of the Central Excise Act, 1944 - Banking and Other Financial Services - illegal levy - service tax was not liable to be paid - HELD THAT - The respondent was not liable for payment of service tax during the period from 01.01.2004 to 18.04.2006 under reverse charge mechanism on foreign remittances made by it in respect of services rendered by foreign entities. However, since the respondent had deposited the service tax along with interest for the services received during the said period, it is no doubt a fact that such amount should be considered for the benefit of refund, subject to fulfillment of the relevant statutory provisions. In the present case, the disputed amount of service tax was paid by the respondent for the period from 01.01.2004 to 18.04.2006 under Rule 2(1)(d)(iv) of Service Tax Rules, 1994. The Hon ble Bombay High Court in the case of Indian National Shipowners Association INDIAN NATIONAL SHIPOWNERS ASSOCIATION VERSUS UNION OF INDIA 2008 (12) TMI 41 - BOMBAY HIGH COURT have held that recipient of service in India is not liable to pay service tax under reverse charge mechanism before 18.04.2006. The refund claim of erroneous payment of service tax will not fall outside the purview of the central excise statute. Since, the disputed amount of service tax was paid by the respondent and collected by the authorities under the Act by placing wrong interpretation of the statutory provisions, such collection or levy will be termed as illegal levy - In such case, the refund claim arises under the provisions of the Central Excise Act, 1944 made applicable to service tax matters inasmuch as such situation in contemplated by and provided in the said Act. Thus, the provisions of Section 11B ibid squarely apply to the case in hand for necessary compliance by the respondent. Since, the refund application was not filed within the stipulated time frame of one year from the relevant date, the original authority had correctly rejected such claim application. Appeal allowed - decided in favor of appellant-Revenue.
Issues Involved:
1. Validity of the stay application filed by the Revenue. 2. Liability of the respondent to pay service tax on foreign remittances prior to 18.04.2006. 3. Applicability of the limitation period under Section 11B of the Central Excise Act, 1944 for refund claims. 4. Treatment of service tax deposits and Cenvat credit in the context of refund claims. Detailed Analysis: 1. Validity of the Stay Application: The Revenue filed a miscellaneous application seeking a stay on the operation of the impugned order dated 16.03.2017 passed by the Commissioner of Service Tax (Appeals), Mumbai. The Tribunal found no justifiable reason to entertain the Revenue's prayer and dismissed the miscellaneous application. 2. Liability to Pay Service Tax on Foreign Remittances Prior to 18.04.2006: The respondent, a non-banking financial corporation, paid service tax on foreign remittances for the period from 01.01.2004 to 17.04.2006 under the reverse charge mechanism. This payment was made following the Service Tax Rules, 1994, and the direction of the department. However, the Hon'ble Bombay High Court in the case of Indian National Shipowners Association held that the recipient of service in India was not liable to pay service tax under reverse charge mechanism before 18.04.2006. This judgment was upheld by the Hon'ble Supreme Court. 3. Applicability of Limitation Period Under Section 11B: The respondent filed a refund application on 09.08.2010, claiming a refund of the service tax paid erroneously. The original authority rejected the refund claim on the ground of limitation, stating that the refund application was not filed within the stipulated one-year period from the relevant date as mandated by Section 11B of the Central Excise Act, 1944. The Commissioner (Appeals) allowed the refund, holding that the amount collected should be treated as deposits and not as service tax, thus not attracting the limitation period under Section 11B. The Tribunal disagreed, citing the Hon'ble Supreme Court's judgments, which emphasized strict adherence to the statutory time frame for refund claims. 4. Treatment of Service Tax Deposits and Cenvat Credit: The Tribunal noted that the respondent had taken Cenvat credit of the service tax paid. It was held that taking credit in the Cenvat account implies authorization for its use as prescribed. The Tribunal found that the refund claim from the credit account was not in the prescribed manner and emphasized that the provisions of Section 11B must be strictly followed. The Tribunal also noted that the respondent did not suffer any injury due to the denial of the refund, as it had already availed the Cenvat credit. Conclusion: The Tribunal set aside the impugned order dated 16.03.2017 passed by the Commissioner (Appeals) and allowed the appeal in favor of the Revenue. The Tribunal held that the refund claim was time-barred under Section 11B and that the amount paid by the respondent could not be treated as a mere deposit. The Tribunal emphasized strict adherence to the statutory provisions for filing and processing refund claims. Order Pronounced: (Order pronounced in the open court on 05/08/2019)
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