2018 (7) TMI 1114 - AT - Central Excise

Refund claim - GTA Service - reverse charge mechanism - denial on the ground of unjust enrichment and time limitation - Section 11B of the Central Excise Act, 1944 - Held that - The Service Tax paid, was paid under the category of Reverse Charge Mechanism , The appellant himself was the service recipient. Therefore, the question of passing on incidence on other person, does not arise at all since the appellant was service recipient. Time Limitation - Held that - Karnataka High Court in the case of K.V.R. Constructions Versus Commissioner of Central Excise, Bangalore 2009 (8) TMI 150 - KARNATAKA HIGH COURT wherein it was held that if an amount paid by assessee to Revenue considering Service Tax, it is to be treated as deposit at the hands of Government and over such amount limitation under Section 11B of the Central Excise Act, 1944, does not apply. Refund allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
Claim for refund under Service Tax; Time limitation under Section 11B of the Central Excise Act, 1944; Bar of unjust enrichment.

Analysis:
The appellant filed a claim for refund of excess Service Tax paid under the "Reverse Charge Mechanism" for Goods Transport Agency Service, amounting to ?6,57,070. The appellant contended that they mistakenly paid Service Tax on 100% of the consideration, whereas Notification No. 26/2012-ST dated 20/06/2012 stipulated that Service Tax was applicable only on 25% of the consideration. The Original Authority rejected the refund claim as time-barred under Section 11B of the Central Excise Act, 1944, applied to Service Tax through the Finance Act, 1994. The Commissioner (Appeals) upheld the rejection, citing unjust enrichment, as the appellant failed to prove that the excess payment incidence was not passed on to another person.

The appellant argued that the excess amount sought as a refund was paid under a mistake of law and did not represent actual Service Tax liability, as per the notification. They contended that being the service recipient under the "Reverse Charge Mechanism," the question of passing on the incidence to another person did not arise. Citing judgments from the Bombay High Court and Karnataka High Court, the appellant asserted that payments made by mistake of law do not fall under Section 11B limitations and that such amounts should be treated as deposits with the government.

After hearing both parties, the Tribunal found merit in the appellant's contentions. The Tribunal held that the Order-in-Appeal was not sustainable, allowing the appeal and granting the refund of ?6,57,070 along with interest from 26/08/2015. The Tribunal agreed with the appellant's argument that the excess payment was made under a mistake of law and that the bar of unjust enrichment did not apply since the appellant was the service recipient.