2019 (3) TMI 1233 - HC - Service Tax

Refund claim - time limitation - section 11B of CEA - It is the case of the Revenue that the claim of refund made by the petitioner has to be considered only under Section 11B of the Act - Held that - The refund claimed not being made within the time prescribed under Section 11B of the Act, the petitioner is not entitled to the relief sought for. The settled principle of law is mere payment of tax made by the respondent under the mistaken notion would neither validate the nature of payment nor the nature of transaction. The controversy in the present case involves around the applicability of Section 11B of the Act to the facts of the present case - In the KVR Construction, 2012 (7) TMI 22 - KARNATAKA HIGH COURT , the Division Bench of this Court has categorically observed that when once there was no compulsion or duty cast to pay the service tax, the amount paid by petitioner under mistaken notion, would not be a duty or service tax payable in law. Once it is not payable in law there was no authority for the department to retain such amount which would otherwise be outside the purview of Section 11B of the Act. Respondent No.2 is directed to process and sanction the refund of tax of ₹ 2,19,196/- in an expedite manner, in any event, within an outer limit of eight weeks from the date of receipt of certified copy of this order - petition allowed.

Summary

Issues:
Challenge to order seeking refund of tax with interest, applicability of Section 11B of the Central Excise Act, 1994, legality of tax collection without authority of law, entitlement to refund after a lapse of time, interpretation of Division Bench judgment on refund claims made under mistaken notion.

Analysis:
The petitioner, a practicing Chartered Accountant, challenged an order seeking a refund of tax with interest, passed by the Assistant Commissioner of Central Excise and Service Tax. The petitioner had rendered ledger maintenance services to MESCOM from July 2003 to March 2005 without collecting or paying service tax as it was not categorized as a taxable service under the Finance Act, 1994. The Appellate Authority ruled in favor of the petitioner, stating no liability for service tax on MESCOM ledger maintenance services. However, the refund claim of ?2,19,196/- was rejected by respondent No.2, leading to the writ petition.

The petitioner argued that the rejection of the refund claim by respondent No.2 based on Section 11B of the Central Excise Act, 1994 was incorrect. The petitioner contended that the taxes collected without legal authority violated Article 265 of the Constitution of India. Reference was made to a Division Bench judgment in the case of Commissioner of Central Excise (Appeals), Bangalore vs. KVR Construction, emphasizing the illegality of collecting taxes without proper legal basis.

On the other hand, the respondents justified the rejection of the refund claim, citing the lapse of 10 years since the Appellate Authority's order. They argued that Section 11B of the Act applied to the case and supported respondent No.2's decision to deny the claim. The respondents sought the dismissal of the writ petition based on these grounds.

The court analyzed the arguments and the legal provisions in detail. It noted that the issue of the taxable nature of the ledger maintenance service had been settled by the Appellate Authority's decision and the Revenue's withdrawal of appeal. The court referred to the Division Bench judgment in KVR Construction, emphasizing that payments made under a mistaken notion do not constitute valid tax liabilities. The court held that if a service is not taxable under the law, Section 11B does not apply, and the department cannot retain the tax amount unjustly.

Consequently, the court quashed the order of respondent No.2 and directed the refund of ?2,19,196/- to the petitioner. The court instructed respondent No.2 to process the refund expeditiously within eight weeks. The court disposed of the writ petition accordingly, emphasizing that interest claimed by the petitioner on the tax amount paid under a mistaken notion would not be granted due to the delay in taking effective steps after the Appellate Authority's order.