2022 (2) TMI 1478 - AT - Service Tax

Applicability of time limitation under Section 11B of the Central Excise Act to refund claims for amounts paid under a mistaken notion - eligibility for exemption under Notification No. 25/2012-ST - interest on the refund claim from the date of deposit till the refund date - difference of opinion. HELD THAT - The limitation contemplated under section 11B of the Excise Act would not be attracted in a case where any amount, even though it is not payable as service tax, is paid under a mistaken notion. The papers may be placed before the Division Bench for deciding the appeal.

Summary

Issues Involved:

1. Applicability of limitation under Section 11B of the Central Excise Act to refund claims for amounts paid under a mistaken notion.
2. Whether the tax paid by the appellant was eligible for exemption under Notification No. 25/2012-ST.
3. Entitlement to interest on the refund claim from the date of deposit till the refund date.

Issue-wise Detailed Analysis:

1. Applicability of Limitation under Section 11B of the Central Excise Act:

The primary issue was whether the limitation prescribed under Section 11B of the Central Excise Act applies to refund claims made for amounts paid under a mistaken belief. The appellant argued that the limitation should not apply because the amount paid had no "colour of tax" and was not a duty or tax under the Act. The appellant relied on the Karnataka High Court's decision in KVR Construction, which was affirmed by the Supreme Court, to support that limitation under Section 11B does not apply to amounts paid by mistake. This position was supported by various High Court decisions, including the Delhi High Court in Hind Agro Industries and the Telangana High Court in Vasudha Bommireddy, which held that payments made under a mistaken belief are not subject to the limitation period prescribed under Section 11B. The Tribunal concluded that the limitation under Section 11B is not applicable when the amount is paid under a mistaken notion, as it is not required to be paid towards any duty or tax.

2. Eligibility for Exemption under Notification No. 25/2012-ST:

Both members of the Tribunal agreed that the appellant was entitled to a refund on merits because the tax was paid on services that were eligible for exemption under Notification No. 25/2012-ST. The appellant provided 'commercial or industrial construction' services, which were exempt from service tax per the notification. The appellant had paid the tax under a mistaken notion that it was required, and thus sought a refund for the amount paid.

3. Entitlement to Interest on the Refund Claim:

The appellant claimed interest on the refund amount from the date of deposit until the refund was made, at a rate of 12% per annum. This claim was based on the argument that since the tax was paid by mistake and was not due, the appellant should be compensated for the time the funds were held by the authorities. The Tribunal's decision did not directly address this issue in the provided text, but the appellant's argument for interest was based on precedents where courts have granted such interest in similar situations.

Conclusion:

The Tribunal concluded that the limitation under Section 11B of the Central Excise Act does not apply to amounts paid under a mistaken notion, as these payments do not constitute a duty or tax. The appellant was entitled to a refund of the amount paid, as the services were exempt under the relevant notification. The decision reflects the view that when a jurisdictional High Court has expressed a view on an issue, that view should be followed, reinforcing the principle of jurisdictional precedence in legal interpretations.