2024 (6) TMI 772 - HC - Service Tax

Refund of service tax paid - applicability of time limitation on the refund claims - subscription of chit fund - HELD THAT - In the present case the petitioner did not pay any service tax under the mistake of law but he paid the tax on demand made to him by the tax authorities. The tax authorities considered the amendment of 2015 brought in the Finance Act 1994 as clarificatory. However the Supreme court and this court held that it was not a clarificatory amendment but it was substantive amendment and therefore in absence of any retrospective operation under the Act the provision brought in by the amendment as in 2015 have prospective effect. Therefore the tax paid prior to the amendment in the Finance Act 1994 was liable to be refunded on moving appropriate applications as per the law however the limitation was extended by one year from the date of judgment. There are no substance in the submission of the learned counsel for the petitioner as the petitioner did not pay the service tax under the mistake of law. The petitioner admittedly did not file the application within the extended time of limitation as prescribed by this court - there are no error in the impugned order in original in Ext. P6 which requires this court to interfere with in the present writ petition - petition dismissed.

Summary

Issues involved:
The legality of service tax imposition on chit fund subscriptions, eligibility for refund of tax paid, application of limitation period for refund claims.

Judgment details:
1. The petitioner, a company conducting Chitty business, challenged the imposition of service tax on chit fund subscriptions by the Central Government. A Division Bench of the court held the imposition of service tax as illegal, stating that the amendment in 2015 was not retrospective. The court ruled that transactions related to chit funds were not subject to service tax before the amendment and ordered refunds to be made to the assesses.

2. Refunds for tax paid should be claimed based on the Supreme Court judgment in CIT v. Vatika Township Pvt. Ltd. Authorities must assess if the tax was collected from mutual subscribers and if refunds are feasible. If refunds cannot be made to the actual payee, the State retains the amounts.

3. The Division Bench directed individual refund applications to be considered based on evidence provided by the assessees. Any limitation for filing refund applications should be calculated from the date of the judgment.

4. Section 11B of the Central Excise Act 1944 sets a one-year time limit for refund applications. The petitioner's application for refund was filed after the expiration of this period, making it not maintainable as per the law.

5. A show cause notice was issued to the petitioner for arrears of service tax due to the rejected refund application. The petitioner's claim for refund was rejected in the impugned order due to non-compliance with Section 11B of the Central Excise Act.

6. The petitioner argued that refunds for tax paid under a mistake of law are not subject to the limitation period. Citing judgments from Delhi High Court and Gujarat High Court, the petitioner contended that the limitation does not apply in such cases.

7. The petitioner did not pay service tax under a mistake of law but based on demand from tax authorities. The court confirmed that the amendment in the Finance Act in 2015 was substantive, not clarificatory, and had prospective effect. Refunds for tax paid before the amendment were eligible, with an extended limitation period of one year from the judgment date.

8. The petitioner failed to file the refund application within the extended limitation period. The court found no error in the impugned order rejecting the refund claim and dismissed the writ petition for lacking merit.