2024 (4) TMI 1041 - HC - Service Tax

Refund of Service Tax - tax paid as a mistake of law - applicability of time limitation as per Section 11B of the Act 1944 - HELD THAT - This question came up for consideration before the Delhi High Court in HIND AGRO INDUSTRIES LIMITED VERSUS COMMISSIONER OF CUSTOMS 2007 (8) TMI 215 - DELHI HIGH COURT . After considering the judgment of the Hon ble Supreme Court in case of Mafatlal Industries Ltd. 2002 (11) TMI 707 - CEGAT MUMBAI the Delhi High Court held that the judgment of Mafatlal Industries Ltd. nowhere talks of a situation where the refund of a tax paid under the relevant Act albeit erroneously was required to be made under the Excise Act or the Customs Act and under no other enactment. It was clearly held that judgment of Mafatlal Industries Ltd. (supra 1) is of no assistance in a case where tax is erroneously paid as a mistake of law. The Tribunal has also taken note of the judgment of Karnataka High Court in COMMISSIONER OF CENTRAL EXCISE (APPEALS) BANGALORE VERSUS KVR CONSTRUCTION 2012 (7) TMI 22 - KARNATAKA HIGH COURT . The Karnataka High Court also considered the judgment of Delhi High Court in case of Hind Agro Industries Limited 2007 (8) TMI 215 - DELHI HIGH COURT and the judgment of Mafatlal Industries Ltd. and in no certain terms made it clear that where the tax is admittedly paid as a mistake of law the limitation will not come in the way for refund. Thus no substantial question of law subsists and needs to be answered because curtains are already drawn on this issue by various High Courts. Thus admission is declined. The Central Excise Appeal is dismissed.

Summary

Issues involved:
The appeal under Section 35G of the Central Excise Act, 1944 challenges the order allowing the respondent's claim for refund of service tax paid under a Works Contract, contending it was a mistake of law. The main issue revolves around the applicability of Section 11B of the Act, 1944 regarding limitation for refund in cases where tax is paid voluntarily but not actually payable as service tax.

Summary:

Issue 1: Claim for refund of service tax paid under Works Contract:
The respondent worked under a Works Contract from 30.09.2012 to 30.06.2014 and paid service tax. A claim for refund of Rs. 1,60,81,347/- was filed on 10.02.2017, stating that the tax was paid as a mistake of law. The claim was initially dismissed by the Assistant Commissioner of Customs, Central Excise & Service Tax, Hyderabad, leading to subsequent appeals.

Issue 2: Applicability of Section 11B of the Act, 1944 for refund in case of mistaken tax payment:
The Tribunal considered the question of limitation under Section 11B of the Act, 1944 for refund of tax paid as a mistake of law. The Third Member opined that the limitation does not apply in such cases, leading to the decision that Section 11B cannot be invoked when tax is paid as a mistake of law.

Judgment:
The appellant raised a substantial question of law regarding the applicability of Section 11B in cases of voluntary tax payment. Referring to relevant judgments, including Mafatlal Industries Ltd. v Union of India, it was argued that the Tribunal erred in its decision. However, the Court found that the issue has been settled by previous decisions of various High Courts, including the Delhi High Court and Karnataka High Court, which held that limitation does not apply when tax is paid as a mistake of law. Therefore, the appeal was dismissed, and no substantial question of law remained to be answered.