2012 (11) TMI 653 - AT - Service Tax

Refund claim of service tax paid by mistake of law - denial if claim on bar of limitation - Held that - As the provision of law which excluded renting of immovable property to hotels from the levy was in existence at the time of payment of service tax in question and continued to be in force till the date of refund claim and thereafter, the applicability of the provisions (including time-bar) of Section 11B of the Central Excise Act to the refund claim cannot be ruled out on the plank of payment of tax by mistake of law - against assessee.

Summary

Issues:
1. Whether the claim of refund of service tax paid on renting of immovable property is hit by limitation.
2. Whether refund of tax paid by mistake of law can be claimed without the bar of limitation.

Issue 1:
The appellant claimed a refund of service tax paid on renting an immovable property for boarding and lodging, contending that the tax was not liable to be paid under the Finance Act 1994. The original authority rejected the claim, and the appellate authority held the refund claim was time-barred. The appellant argued that as the tax was paid by mistake of law, Section 11B of the Central Excise Act should not apply to the refund claim. The appellant cited various decisions in support of their argument. The learned Superintendent (AR) argued that all refund claims under the Finance Act 1994 must adhere to the requirements of Section 11B of the Central Excise Act. The Superintendent distinguished the cases relied on by the appellant and contended that the limitation period prescribed under Section 11B should apply to the refund claim.

Issue 2:
The Tribunal analyzed the provisions of the Finance Act 1994 regarding taxable services related to renting immovable property. It was noted that the property for which service tax was paid was expressly excluded from the definition of taxable service. The appellant paid the tax by mistake of law and later sought a refund. The appellant claimed that refund of tax paid by mistake of law should not be subject to limitation. However, the Tribunal held that the refund claim must adhere to the limitation prescribed under Section 11B of the Central Excise Act. The Tribunal emphasized the importance of Section 11B and cited the Mafatlal Industries case, where the Supreme Court recognized the significance of this provision in refund claims. The Tribunal dismissed the appeal, stating that the principle of time-bar under Section 11B applies to refund claims, even if the tax was paid by mistake of law.