2024 (10) TMI 1060 - AT - Service Tax

Refund of service tax - interest on delayed sanction of the refund - time limitation - relevant date - Section 11B of the Central Excise Act, 1944, made applicable to service tax matter under Section 83 of the Finance Act, 1994 - Recovery of erroneously sanctioned refund - HELD THAT - On reading of both Section 11B of the Act of 1944 and Section 103 of the Act of 1994, it transpires that the time line has been prescribed therein for consideration of the refund application filed by the assessee. Where the statute has prescribed a particular time limit, then the authorities functioning under such statute cannot alter such time line, in order to adopt some other time frame for consideration of the refund application. Various aspects for claim of refund under the indirect tax statutes have been elaborately discussed by the Constitutional Bench of the Hon ble Supreme Court in the case of Mafatlal Industries Ltd. and Others Vs. Union of India and Others 1996 (12) TMI 50 - SUPREME COURT . The Hon ble Apex Court have categorized the claim of refund broadly into three heads i.e., (i) unconstitutional levy; (ii) illegal levy; and (iii) tax paid under mistake of law. Since, the appellants had filed the refund claim in the form and manner prescribed under Section 11B of the Act of 1944, the provisions contained therein alone have the application and accordingly, the department had acted upon, based on such statutory provision in disposal of such refund applications. Thus, since the appellants had not filed the refund applications within the stipulated time frame of one year , rejection of the claim amounting to Rs.6,13,77,646/- by the learned Commissioner (Appeals) is in consonance with such statutory provisions. In view of the fact that the refund application filed by the assessee-appellants in the year 2017 was now being considered for refund, which is much beyond the statutory time frame of three months, the assessee-appellants should be entitled for claim of interest for the period, to be computed from expiry of three months from the date of filing of refund applications, till sanction of the refund amount. Since, the exercise for quantification of interest is required to be done at the original stage, the matter should go back to the original authority, for the limited purpose of such quantification only. Appeal allowed by way of remand.

Issues Involved:

1. Refund of service tax claimed by the assessee-appellants.
2. Limitation period for filing refund claims.
3. Entitlement to interest on delayed refund.
4. Recovery of erroneously sanctioned refund.

Detailed Analysis:

1. Refund of Service Tax:

The assessee-appellants, engaged in developing and operating ports, filed refund claims for service tax paid during the period when the exemption was withdrawn but later restored retrospectively. The Tribunal found that the refund claims were filed under Section 11B of the Central Excise Act, 1944, applicable to service tax matters. The statutory provision mandates filing the refund application within one year from the relevant date, defined as the date of payment of duty. The Tribunal upheld the rejection of the refund claim of Rs.6,13,77,646/- for being time-barred, as the claims were filed beyond the prescribed time limit. The Tribunal emphasized that statutory provisions must be strictly adhered to, and the filing of refund applications must be complete with all requisite documents.

2. Limitation Period for Filing Refund Claims:

The Tribunal addressed the issue of limitation, noting that the refund applications were filed beyond the six-month period stipulated in Section 103 of the Finance Act, 1994, following the retrospective exemption. The Tribunal highlighted that the statutory provision uses the term 'shall,' indicating a mandatory requirement. The Tribunal rejected the argument that time consumed in obtaining clarifications should be excluded from the limitation period, citing the Supreme Court's stance that statutory timelines must be strictly followed.

3. Entitlement to Interest on Delayed Refund:

The Tribunal considered the entitlement to interest on the delayed refund of Rs.5,90,99,124/-, which was sanctioned but not paid with interest. The Tribunal referred to Section 11BB of the Central Excise Act, 1944, which mandates interest payment if the refund is delayed beyond three months from the date of application. The Tribunal ruled that the assessee-appellants were entitled to interest from the expiry of three months from the date of filing the refund application until the refund was sanctioned. The matter was remanded to the original authority for quantification of the interest amount.

4. Recovery of Erroneously Sanctioned Refund:

The Tribunal set aside the order for recovery of the refunded amount of Rs.5,90,99,124/- along with interest, which was issued following the Tribunal's earlier order that was later quashed by the Bombay High Court. The Tribunal upheld the Commissioner (Appeals)'s decision to sanction the refund, finding no merit in the Revenue's appeal against it.

Conclusion:

The Tribunal dismissed the appeal filed by the assessee-appellants regarding the time-barred refund claim and upheld the sanction of Rs.5,90,99,124/- refund, dismissing the Revenue's appeal. The Tribunal allowed the appeal for interest on the delayed refund by remanding the matter for quantification. The order for recovery of the refunded amount was set aside, favoring the assessee-appellants. The Tribunal emphasized strict adherence to statutory timelines and provisions in refund matters.

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