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2023 (3) TMI 740 - AT - Service TaxRefund of service tax paid - amount paid under mistake of law - applicability of time limitation and principles of natural justice - HELD THAT - The present case is one where the service providers (i.e. NOMC and Haliburton) as also the service recipient (i.e. the Appellant) have discharged Service Tax on the same transaction and each party has deposited the said tax with the Department. The Department has received the amounts in question twice over and there is no inter-se reimbursement of the said tax between the parties. Though contractually it was the service providers who were to discharge the tax, since they had establishments in India, and then recover the same from the Appellant, the Appellant entertained a view that it was supposed to discharge Service Tax on reverse charge and directly paid the same to the Department. As is evident from the record,NOMC and Haliburton setup establishments in Jodhpur and Bombay respectively, obtained Service Tax registrations and discharged Service Tax. They did this correctly, in terms of the plain language of Explanation 4 to Section 65B(44). The record also indicates that communications were exchanged between the branch offices and the Appellant. Moreover, the labour force to carry out the concerned work was also sourced domestically - Tribunal in the case of M/S. NAGARJUNA OIL CORPORATION LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, PUDUCHERRY 2016 (8) TMI 41 - CESTAT CHENNAI has held that when branch offices of foreign service providers obtained registration and discharged Service Tax in India on the transaction in question, the service recipient located in India (the assessee in that case) was not required to discharge the same,on reverse charge. Both sides have relied on a plethora of judgments on the issue of the applicability of the limitation provided under Section 11B to amounts paid under mistake of law. The tenor of the jurisprudence on the subject indicates that the limitation prescribed under Section 11B is not applicable to a refund claim in a situation where the concerned tax was never payable by the assessee.In other words, had the Department raised a demand of such an amount, the assessee could have successfully challenged the constitutionality of the same - the statutory limitation period prescribed under Section 11B is not applicable to the refund claimed by the Appellant since the amount paid by the Appellant is not a tax. Unjust enrichment - HELD THAT - The appellant in its ledger accounts first discharged the Service Tax and thereafter appended certain notings in front of the said amounts stating on hold . It is also clear that the amounts have not been expensed out as the appellant is awaiting the outcome of the litigation. Hence the amount of Service Tax paid cannot be said to have been passed on to anyone - Moreover, the Ministry of Petroleum vide clarifications dated 1.05.2009 and 25.03.2011 has held that the refineries are only liable to discharge Sales Tax and Pipeline TransportationCharges. There is no mention of Service Tax in the same. Moreover the Crude Offtake Sales Agreements between the Appellant and Indian Oil and Numaligarh Refinery Ltd., at the relevant clauses only provide for VAT to be paid by the Appellant s buyers. In view of the same, Service Tax paid by the Appellant never formed part of the crude oil sold by the Appellant. The judgment of Hon ble Supreme Court in STATE OF RAJASTHAN ORS VERSUS HINDUSTAN COPPER LTD. 1997 (11) TMI 516 - SUPREME COURT is applicable to the present case where it was held that there is no question of any unjust enrichment of the respondent as a result of the refund of the excise duty paid on rectified spirit because the respondent has not passed on the duty to any consumer of the final product, viz., copper, manufactured by the respondent. The present appeal is allowed. The appellant shall be entitled to the refund amount along with interest.
Issues Involved:
1. Contractual Liability for Service Tax 2. Double Payment of Service Tax 3. Refund Claim and Unjust Enrichment 4. Applicability of Limitation Period under Section 11B of the Central Excise Act Summary: 1. Contractual Liability for Service Tax: The Appellant, M/s OIL India Ltd., entered into agreements with National Oilwell Maintenance Company (NOMC) and Haliburton Offshore Services Inc (Haliburton) for the provision of services. Both contracts stipulated that Service Tax would be paid by the contractors and reimbursed by the Appellant. NOMC and Haliburton had establishments in India, obtained Service Tax registrations, and discharged Service Tax on the services rendered. 2. Double Payment of Service Tax: NOMC and Haliburton both discharged Service Tax on the services provided to the Appellant. However, the Appellant also discharged Service Tax on the same transactions under the mistaken belief that it was liable to do so under reverse charge. This resulted in double payment of Service Tax for the same transactions, with both the service providers and the Appellant depositing the tax with the Department. 3. Refund Claim and Unjust Enrichment: The Appellant filed a refund claim for the Service Tax amounting to Rs. 27,88,397/- paid on the transactions. The Department issued a Show Cause Notice proposing to reject the claim on grounds of unjust enrichment, lack of evidence for double payment, and the claim being time-barred. The Appellant argued that it was never liable to discharge Service Tax and that the amount paid under mistake of law was not a 'tax', thus making the bar of unjust enrichment inapplicable. The Tribunal found that the Service Tax paid by the Appellant never formed part of the crude oil's valuation mechanism and thus, there was no unjust enrichment. 4. Applicability of Limitation Period under Section 11B of the Central Excise Act: The Tribunal examined whether the statutory limitation period under Section 11B applied to the refund claim. It was concluded that the limitation period is not applicable to amounts paid under a mistaken notion of law. The Tribunal relied on several judgments, including those of the Karnataka High Court and various High Courts, which held that amounts paid under mistake of law are not subject to the statutory limitation periods. The Tribunal also noted that the refund claim was filed within the limitation period prescribed under Article 113 of the Limitation Act, 1963. Conclusion: The Tribunal allowed the appeal, concluding that the Appellant was not required to discharge Service Tax on reverse charge and did so under a mistake of law. The statutory limitation period under Section 11B was not applicable to the refund claim, and there was no unjust enrichment. The Appellant was entitled to the refund amount along with interest.
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