2024 (5) TMI 1338 - AT - Service Tax

Refund claim - time-barred - tax paid under protest - liability to pay Service Tax under reverse charge mechanism for the Consultancy Services received from abroad - HELD THAT - The respondent in his written submissions filed before the bench has submitted that the respondent had deposited the service tax, interest and penalty on 05.12.2016, 27.12.2016 and 02.01.2017 respectively. Thereafter, refund claim was filed on 06.10.2017 which is within one year time period from the date of deposit of tax and well within the time period prescribed u/s 11B of the Central Excise Act, 1944. He also observed that they have neither informed the audit Commissionerate nor the jurisdictional division/Range office that the payments were made under protest, and concludes that in the absence of any evidence to prove that payments were made under protest holds the claims were time bar. Therefore, there being no appeal against this finding of the Commissioner (A) by the respondent, the issue with regard to time bar stands settled and cannot be reopened. It is an admitted fact that the respondent had paid the service tax amount based on audit letter dated 16.11.2016 on consulting charges paid in foreign currency to M/s. Aluforms Korea Co. Ltd., Korea under reverse charge mechanism. The respondent vide their letter dated 03.04.2017 had intimated the Assistant Commissioner of Central Excise and Service Tax in terms of the provisions of Section 73(3) of Chapter V of the Finance Act, 1994, we request that the demand show-cause notice may not be issued to us since we have discharged the service tax liability along with the applicable interest and penalty at 15% on the service tax amount . Therefore, there is no question of duty being paid under mistake of law or to be held ultra vires. Thus, the tax being paid under service tax category under the relevant provisions and there is nothing declared unconstitutional or under mistake of law, the amount is necessarily to be considered as tax and refund has to be sanctioned as per the provisions specified u/s 11B of the Central Excise Act, 1944. The Appeal is allowed.

Summary

Issues Involved:
1. Whether the refund claim was time-barred.
2. Whether the payment made by the respondent was a tax or a deposit.

Summary:

Issue 1: Whether the refund claim was time-barred

The respondent paid Service Tax amounting to Rs. 18,98,107/- along with interest and penalty u/s 78 through three challans dated 05.12.2016, 02.01.2017, and 27.12.2016. The original authority rejected the refund claim on the grounds of limitations, asserting that the tax was not paid under protest. The Commissioner (Appeals) held that the absence of a Final Audit Report (FAR) meant the payment should be treated as a 'deposit' and not as 'tax amount,' thus making Section 11(B) of the Central Excise Act, 1944, relating to limitation inapplicable. The Revenue contended that FAR is not mandatory and the payments should be treated as tax payments, making Section 11(B) applicable. The respondent argued that the refund claim was filed within the one-year time limit specified u/s 11(B) and that the amount was paid by mistake, thus not subject to limitation.

Issue 2: Whether the payment made by the respondent was a tax or a deposit

The Commissioner (Appeals) concluded that the amounts paid by the respondent should be treated as a 'deposit' towards tax, as the audit observations were not incorporated in the FAR. The Revenue argued that the audit observation communicated to the respondent was sufficient, and the payments should be treated as tax payments. The respondent maintained that the payment was made under a mistaken notion and should be refunded, citing various case laws supporting that limitation does not apply to amounts paid under a mistaken notion.

Judgment:

The Tribunal noted that the respondent paid the service tax based on audit observations and requested the closure of proceedings u/s 73(3) of the Finance Act, 1994. The Tribunal found that the respondent's claim of payment under protest was incorrect, and the issue of time bar stands settled as there was no appeal against this finding. The Tribunal held that the tax was paid under the service tax category and there was no declaration of unconstitutionality or mistake of law, thus the amount should be considered as tax. Consequently, the refund must be sanctioned as per the provisions specified u/s 11(B) of the Central Excise Act, 1944. The appeal by the Revenue was allowed.

(Order pronounced in Open Court on 21.05.2024.)