2016 (6) TMI 415 - HC - Service Tax

Period of limitation - Refund claim - Erection, Commissioning and Installation Services - Amount deposited by mistake for the period prior to 16.06.2005 as the services provided by the petitioner was added in the Finance Act, 1994, for the payment of Service tax with effect from 16.06.2005 - Held that - the show cause notice was given by the respondents on 20.11.2009 for the payment of service tax for the year 2004-05 and for the year 2005-06. This amount was never recovered by this petitioner from the persons to whom the services were provided by this petitioner in the relevant years. As there was no tax liability at all because, the tax liability starts from 16.06.2005 and therefore, the amount deposited by this petitioner which is, ought to be refunded by the respondents. Section 11B of the Central Excise Act to be read with Section 83 of the Finance Act, 1994 are not applicable to the facts of the present case because, the amount paid by the petitioner is never under the Central Excise Tax nor under the service tax when there is no liability to make the payment of the amount and under the mistake of facts or under mistake of law or under both if any amount is deposited by the assessee, the same cannot be retained by the Union of India under the one or other pretext when a service provider is not liable to make payment of the service tax and if any payment is made, it cannot be covered under Section 11B ibid to be read with Section 83 ibid. - Petition allowed and disposed of

Summary

Issues:
Claim for refund of service tax paid under mistake of fact and law.

Analysis:
The petitioner filed a writ petition seeking the refund of ?2,52,762 deposited as service tax despite no liability to pay. The petitioner provided erection, commissioning, and installation services, which became taxable under the Finance Act from 16.06.2005. However, a show cause notice for service tax payment for 2004-05 and 2005-06 was issued erroneously. The respondents argued that the refund claim is time-barred under Section 11B of the Central Excise Act, 1944, and Section 83 of the Finance Act, 1994, as the tax was not paid under protest. The court noted that there was no tax liability before 16.06.2005 for the services provided by the petitioner.

The court observed that the show cause notice for tax payment was based on incorrect grounds as the service tax liability started only from 16.06.2005. The Assistant Commissioner stated that the petitioner was aware that no service tax was applicable before the said date, but the tax was paid without protest. Therefore, the limitation period did not apply in this case. The court held that the tax liability did not exist before 16.06.2005, and the amount deposited under mistake of fact and law should be refunded.

The court ruled that Section 11B of the Central Excise Act and Section 83 of the Finance Act were not applicable since the petitioner's payment was not under any tax liability. The order dated 28.02.2013 was quashed, and the amount of ?2,52,762 was directed to be refunded to the petitioner or adjusted against any future liabilities for service tax. The writ petition was allowed, and the case was disposed of in favor of the petitioner.