2022 (5) TMI 651 - AT - Service Tax

Refund claim - time limitation - Whether the statutory time prescribed under section 11B shall be applicable to the amount erroneously deposited by the appellant despite having no liability to deposit the same? - reverse charge mechanism - HELD THAT - From the bare reading of the section 11B, it is clear that the provision refers to the claim of refund of duty of excise only, it does not refer to any other amount collected without authority of law - In the case on hand, admittedly, the amount sought for as refund was the amount paid under mistaken notion which even according to the Department / Adjudicating Authority was not the liability of the appellant due to the prevalent exemption during the relevant period for the impugned services received by the appellant (payment was made under reverse charge mechanism). There is lack of authority to collect such service tax by the appellant. It would not give the Department an authority to retain the amount paid which otherwise was not payable by the appellant. Nothing may act as an embark on the right of the appellant to demand refund of payment made by them under the mistaken notion - The issue has been dealt by Hon ble Supreme Court in the case of MAFATLAL INDUSTRIES LTD. VERSUS UNION OF INDIA 1996 (12) TMI 50 - SUPREME COURT . It has been held that one has to see whether the amount claimed is unconstitutional and outside the provisions of section 11B of the Act. In the present case also, due to the exemption of N/N. 25/2012 dated 20.06.2012 the services on which the appellant had paid service tax i.e. non air conditioned contract carriage under rent a cab service was the exempted service. Hence at the time of the payment the payment had no colour of liability as already discussed above section 11B of Excise Act is not applicable. Hence, the bar of limitation under section 11B also cannot be made applicable upon the said amount. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Whether the refund claim was barred by limitation under Section 11B of the Central Excise Act.
2. Applicability of Section 11B to amounts paid under a mistaken notion of liability.

Issue-wise Detailed Analysis:

1. Whether the refund claim was barred by limitation under Section 11B of the Central Excise Act:
The appellant, engaged in the distribution of electricity, paid service tax on non-air-conditioned contract carriage under the rent-a-cab service under the reverse charge mechanism from July 2012 to June 2017. However, the service was exempted under Notification No. 25/12-ST dated 20.6.2012. Consequently, the appellant filed a refund claim on 28.9.2018, which was rejected as time-barred under Section 11B of the Central Excise Act. The adjudicating authority acknowledged the exemption but rejected the refund claim due to the statutory time limit prescribed under Section 11B. The appellant argued that Section 11B applies only to amounts paid as tax or duty, not to amounts paid without liability.

2. Applicability of Section 11B to amounts paid under a mistaken notion of liability:
The Tribunal examined the provisions of Section 11B, which pertain to the refund of duty of excise and do not cover amounts collected without authority of law. The appellant's payment was under a mistaken notion, and even the Department acknowledged no liability due to the exemption. The Tribunal referenced several precedents, including the Supreme Court's decision in Mafatlal Industries vs. CCE, which categorized refund claims and clarified that amounts paid without liability are not subject to the limitations of Section 11B. The Tribunal also cited cases like Natraj Venkat Associates vs. CCE and Motorola India Ltd. vs. CCE, which supported the non-applicability of Section 11B to such refunds.

The Tribunal concluded that the service tax paid by the appellant was not a liability and thus not subject to Section 11B's limitations. The adjudicating authorities failed to follow established judicial precedents, leading to the erroneous rejection of the refund claim. The Tribunal emphasized the need for judicial discipline and adherence to higher court rulings.

Conclusion:
The Tribunal set aside the order under challenge, holding it unsustainable and allowed the appeal, directing the refund of the amount paid by the appellant under a mistaken notion. The Tribunal also called for appropriate warnings to Departmental Adjudicating Authorities to observe judicial protocol.