2022 (9) TMI 854 - AT - Service Tax

Refund of Service Tax - tax deposited on mistake of law - denial of refund on the ground that service tax was wrongly deposited by them on warehousing services provided - Negative list of services or not - refund denied on the ground of time limitation - applicability of period of one year as prescribed under Section 11B of the Central Excise Act - HELD THAT - It is not in dispute that assessee is not liable to pay service tax in respect of warehousing services which is categorically specified in the negative list of the services. The Division Bench of the Hon ble Karnataka High Court in KVR. CONSTRUCTIONS VERSUS COMMISSIONER OF CENTRAL EXCISE, BANGALORE 2009 (8) TMI 150 - KARNATAKA HIGH COURT has examined the provisions of Section 11B at length and has also considered the judgement of Hon ble Supreme Court in the case of Mafatlal Industries Ltd. vs. Union of India 1996 (12) TMI 50 - SUPREME COURT , where it was held that that Section 11B provides for making a claim to refund duty. Admittedly, the sums deposited by the petitioner is held to be a deposit and not as a duty, therefore, there was no necessity for the petitioner to have made a claim invoking Section 11B of the Act for refund. Hon ble High Court of Bombay in the case of Parijat Construction Vs. Commissioner of Central Excise, Nashik 2017 (10) TMI 659 - BOMBAY HIGH COURT , had held that the limitation prescribed under 11B of the Central Excise Act, 1944, is not applicable to refund claim for service tax paid under mistake of law. Hon ble Supreme Court in the case of Salonah Tea Company Ltd. Etc. v. Superintendent of Taxes, Nowgong Ors. 1987 (12) TMI 3 - SUPREME COURT had held that if there is no provision for realisation of the money under a statute, then the act of payment is ultra vires and such money, if paid, is not paid under such statute and accordingly, the provisions under such statute would not apply - it is found that even in the present case, the amount so paid by the Appellant was not payable during the relevant period. Since the issue already stands decided, there is no reason to deny the refund claim on the ground of limitation inasmuch as the period of limitation prescribed under Section 11B would not be a bar for the assessee to claim refund of tax paid under mistake - Ld. Commissioner (Appeals) has disputed the claim of refund on the ground that the appellant failed to produce reliable evidence to support the refund claim - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Entitlement to refund claim filed beyond the one-year limitation period under Section 11B of the Central Excise Act.
2. Applicability of limitation period when tax is paid under a mistake of law.
3. Requirement of reliable evidence to support refund claims.

Issue-wise Detailed Analysis:

1. Entitlement to Refund Claim Filed Beyond the One-Year Limitation Period Under Section 11B of the Central Excise Act:
The primary issue was whether the assessee was entitled to a refund for a claim filed beyond the one-year limitation period prescribed under Section 11B of the Central Excise Act. The assessee argued that the service tax was wrongly paid on warehousing services, which were exempt under the negative list specified in Section 66D of the Finance Act, 1994. The Assistant Commissioner and Commissioner (Appeals) rejected the refund claim, citing the one-year limitation period under Section 11B. However, the assessee contended that the limitation period should not apply since the tax was paid under a mistake of law.

2. Applicability of Limitation Period When Tax is Paid Under a Mistake of Law:
The Tribunal considered several precedents to determine if the limitation period under Section 11B applied when the tax was paid by mistake. The Tribunal referenced the Hon'ble Karnataka High Court's decision in K.V.R. Constructions vs. CCE, Bangalore, which held that amounts paid under a mistaken notion do not attract the limitation period under Section 11B, as such amounts are considered deposits, not taxes. This decision was upheld by the Supreme Court. Additionally, the Hon'ble Bombay High Court in Parijat Construction vs. Commissioner of Central Excise, Nashik, and the Hon'ble Madras High Court in 3E Infotech vs. CESTAT, Chennai, supported the view that the limitation period under Section 11B does not apply to refunds of taxes paid under a mistake of law. The Tribunal concluded that the refund claim should not be barred by the one-year limitation period since the tax was paid under a mistake of law.

3. Requirement of Reliable Evidence to Support Refund Claims:
The Commissioner (Appeals) also rejected the refund claim on the grounds that the assessee failed to produce reliable evidence to support their claim. However, the Tribunal found that this issue was not raised in the Show Cause Notice or the Order-in-Original. Therefore, the Tribunal ruled that the Commissioner (Appeals) had exceeded the scope of the original allegations, and this finding could not be legally sustained.

Conclusion:
The Tribunal set aside the impugned orders and allowed the appeal, granting the refund claim with consequential relief as per law. The Tribunal emphasized that the limitation period under Section 11B does not apply to refunds of taxes paid under a mistake of law and that the assessee had filed the refund claim within the limitation period prescribed under the Limitation Act, 1963. The Tribunal also dismissed the relevance of the ITC Ltd. case cited by the Revenue, as it was not part of the original Show Cause Notice or raised before the Commissioner (Appeals).