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2025 (3) TMI 1322 - AT - Service TaxRefund of service tax paid on mobilization advance - applicability of limitation period prescribed u/s 11B of the Central Excise Act 1944 - HELD THAT - In disputes over refund of duties of central excise it has been consistently held that any claim of refund would have to pass through the sieve of section 11B of Central Excise Act 1944 as even with leviability arising upon manufacture the tax liability would be discharged only upon clearance of goods which not only offers corporeal ascertainment of taxable event but also as a consequence of assessment whether by self or in terms of section 11A of Central Excise Act 1944. Per contra the taxability under section 66 of Finance Act 1994 would arise only upon taxable service being rendered; service is not discernable except with satisfaction of recipient manifested by transfer of consideration and creating liability only then. Consequently any tax collected upon rendering of service would necessarily have to comply with the law of limitation set out in section 11B of Central Excise Act 1944 and not in dispute any more than clearance of the goods under Central Excise Act 1944 would be. Inasmuch as taxable service did not exist tax may not be acknowledged as leviable or having been collected as tax and in much the same way as topping up of the erstwhile personal ledger account (PLA) to enable debits upon clearance of the goods under Central Excise Act 1944. In much the same way as such payments were advance deposit and not liable to be scrutinized within the template of section 11B of Central Excise Act 1944 the remittance of amount towards an intended service which never happened would not have to go through the restrictions imposed under section 11B of Central Excise Act 1944 for effecting the sanction. Conclusion - The refund claim is not barred by the limitation period under section 11B of the Central Excise Act 1944 as the payment was made under a mistaken belief and classified as a deposit. The sanction granted by the original authority is restored - appeal allowed.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment are:
2. ISSUE-WISE DETAILED ANALYSIS Issue: Applicability of Section 11B Limitation - Relevant legal framework and precedents: Section 11B of the Central Excise Act, 1944 prescribes a limitation period of one year for claiming a refund of duty/tax. The appellant relied on precedents such as Thermax Instrumentation Ltd v. Commissioner of Central Excise and SMS Infrastructure Ltd v. Commissioner of Central Excise & Customs, which held that tax liability does not arise on 'mobilization advance'. - Court's interpretation and reasoning: The Tribunal considered that the payment of service tax on 'mobilization advance' was made under a mistaken notion of law. It was argued that such payments should be treated as deposits, not taxes, and thus not subject to section 11B limitations. - Key evidence and findings: The 'mobilization advance' was returned to the principal after the contract was canceled, and no service was rendered. The Tribunal found that the taxability of the advance was not justified. - Application of law to facts: The Tribunal applied the principle that if no service is rendered, no service tax is payable, aligning with decisions in Commissioner of Central Excise & Service Tax, Bhavnagar v. Madhvi Procon Pvt Ltd and Oil India Ltd v. Commissioner of Central Excise & Service Tax. - Treatment of competing arguments: The Tribunal addressed the respondent's argument that the limitation under section 11B applied, citing the Point of Taxation Rules, 2011. However, it concluded that the payment was not a tax due to the absence of service. - Conclusions: The Tribunal concluded that the limitation period under section 11B does not apply to refunds of amounts paid as tax under a mistaken belief, as these are considered deposits. Issue: Classification of Payment as 'Deposit' or 'Tax' - Relevant legal framework and precedents: The Tribunal referenced rulings such as Credible Engineering Construction Projects Ltd v. Commissioner of Customs & Central Excise, where payments made under a mistaken notion were considered deposits. - Court's interpretation and reasoning: The Tribunal emphasized that the 'mobilization advance' was not linked to any service rendered, thus it should be classified as a deposit. - Key evidence and findings: The Tribunal noted that the advance was adjusted against the final payment and was not linked to the execution of any service. - Application of law to facts: The Tribunal applied the principle that a refund claim for amounts paid under a mistaken notion of law should not be restricted by section 11B. - Treatment of competing arguments: The Tribunal refuted the respondent's reliance on the Point of Taxation Rules, 2011, arguing that these rules do not override the fundamental requirement of a service being rendered. - Conclusions: The Tribunal found that the payment was a deposit, not a tax, and thus not subject to the limitations of section 11B. 3. SIGNIFICANT HOLDINGS - The Tribunal held that the refund claim was not barred by the limitation period under section 11B of the Central Excise Act, 1944, as the payment was made under a mistaken belief and classified as a deposit. - The Tribunal established the principle that amounts paid as tax under a mistaken notion, where no service is rendered, should be treated as deposits and are refundable without the constraints of section 11B. - The Tribunal restored the original authority's sanction of the refund, setting aside the appellate authority's decision.
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