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2021 (10) TMI 1173 - AT - Service TaxRefund of service tax paid on Ocean Freight - constitutional validity of such levy - period April 2017 to June 2017 - HELD THAT - It is a clear case where the service tax has been held to be unconstitutional hence, the tax which is paid would amount to the one paid under mistake of law. In a similar situation, the jurisdictional Hon ble High Court of Karnataka in one of its decisions in the case of COMMISSIONER OF CENTRAL EXCISE (APPEALS), BANGALORE VERSUS KVR CONSTRUCTION 2012 (7) TMI 22 - KARNATAKA HIGH COURT where it was held that once it is not payable in law there was no authority for the department to retain such amount. By any stretch of imagination, it will not amount to duty of excise to attract Section 11B. Therefore, it is outside the purview of Section 11B of the Act. There are no justification in the reasons adopted for rejection of the refund claim by the lower authorities and hence, the impugned order is not sustainable in the eye of law - appeal allowed - decided in favor of appellant.
Issues: Challenge to rejection of refund claim under Section 11B of the Central Excise Act based on the constitutional validity of service tax on ocean freight payments.
Analysis: 1. The appellant challenged the Order-in-Appeal rejecting their refund claim of service tax paid on ocean freight, citing the decision of the Hon'ble High Court of Gujarat declaring the levy of service tax on ocean freight as unconstitutional. The appellant argued that the tax paid was under a mistake of law. The Tribunal noted a similar decision by the Hon'ble High Court of Karnataka in a different case, emphasizing that payments made under a mistaken notion do not constitute duty or service tax payable in law, thus not falling under Section 11B of the Act. The Supreme Court dismissed the SLP against this order, reinforcing the principle that amounts paid under a mistake of law are refundable. 2. Referring to another case, the Tribunal highlighted the judgment of the Hon'ble jurisdictional High Court, which held that the refund provisions under Section 27 of the Customs Act do not apply when duty is paid without the authority of law. The Court emphasized that the limitation for refunds is governed by the Limitation Act, not the one year specified under the Customs Act. In this specific case, excess duty was paid due to erroneous calculation, and the Court ruled that the department was liable to refund the excess amount, rejecting the Tribunal's reliance solely on Section 27 of the Customs Act for dismissing the claim. The judgment emphasized the entitlement of the appellant to a refund of duty paid in excess. 3. Considering the legal precedents and settled legal position, the Tribunal concluded that the reasons for rejecting the refund claim by the lower authorities were unjustified. The impugned order was deemed unsustainable in the eyes of the law, leading to its setting aside and allowing the appeal with any consequential benefits as per law. The decision emphasized the right to a refund when payments are made under a mistake of law and reiterated the obligation of the department to refund excess amounts paid, irrespective of the limitation under the relevant statutes. In conclusion, the judgment by the Appellate Tribunal CESTAT Bangalore highlighted the importance of constitutional validity in tax matters, emphasizing the refund entitlement when payments are made under a mistake of law. The detailed analysis of legal precedents and statutory provisions provided a robust foundation for allowing the appeal and granting the appellant the rightful refund of excess tax payments.
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