2024 (11) TMI 1043 - AT - Service Tax

Rejection of refund claim - refund of the amount which was collected during investigation - refund of amount paid without liability whether permissible or not? - scope of assessee's substantive right to refund of the illegally recovered tax - HELD THAT - The new judicial thesis instead rests on the principles of economic and distributive justice enshrined in the Preamble and the Directive Principles of State Policy. It also attaches significance to the unethical consequences which would flow and the fiscal and financial chaos which would follow if no bar of unjust enrichment is applied by the courts before ordering refunds. Article 265 and Section 72 should all be read and understood, says the majority view, in the light of the philosophy and the core values of (the Indian) Constitution and in keeping with equity and good conscience . As discussed decision of Hon ble Supreme Court Mafatlal Industries Ltd 1996 (12) TMI 50 - SUPREME COURT are sufficient to clarify that seeking the refund is not a matter of right and the procedure as discussed in the decision has to be followed. In the present case, apparently none of the said procedure has been followed. Though there had been an earlier order of this Tribunal sanctioning the refund, however, the Tribunal remanded back the matter to the adjudicating authority to dispose of the refund application as per law. In compliance thereof, adjudicating authority has invoked section 11B of Central Excise Act. We do not find any infirmity in the same. We hold that the refund claim of appellant is not maintainable in the light of Mafatlal (supra) decision. Thus the order under challenge is upheld and the appeal is dismissed.

Issues Involved:

1. Whether the refund claim of Rs. 55,32,646/- filed by the appellant is barred by limitation.
2. Whether the services provided by the appellant qualify as export of services, exempting them from service tax liability.
3. Whether the appellant is entitled to a refund of the service tax paid under the mistaken belief of liability.

Issue-wise Detailed Analysis:

1. Limitation on Refund Claim:

The primary issue revolves around whether the refund claim filed by the appellant is barred by limitation as per Section 11B of the Central Excise Act, 1944. The appellant initially filed a refund claim on 18.06.2008 for the service tax amount deposited between 05.05.2006 and 20.04.2007. The claim was rejected on grounds of limitation, as it was not filed within one year from the date of payment. The CESTAT order dated 07.04.2017 allowed the appeal on merits but remanded the matter for reconsideration as per law. Despite this, a fresh show cause notice was issued on 07.11.2017, again proposing rejection on the ground of limitation. The Tribunal observed that the limitation issue was not addressed in the CESTAT order, and upheld the department's stance that the refund claim was time-barred, aligning with the statutory requirement under Section 11B.

2. Export of Services and Exemption from Service Tax:

The appellant argued that the services rendered to EMD, USA, constituted export of services under the Export of Service Rules, 2005, and were thus exempt from service tax. This contention was initially accepted by the Tribunal, which recognized the services as export-oriented and exempt from tax liability. The Tribunal's previous order had established that the appellant was engaged in export of services, which should not attract service tax. The appellant relied on past decisions, including their own case, to substantiate the claim that the services provided were indeed export services, thereby exempting them from service tax liability.

3. Entitlement to Refund of Service Tax Paid:

The appellant sought a refund of the service tax paid under the mistaken belief that it was liable for such tax. The Tribunal noted that the appellant had been previously adjudged to have no service tax liability for the services rendered, as they qualified as export services. However, the issue of refund entitlement was distinct from the issue of tax liability. The Tribunal emphasized that the refund process must adhere to the legal framework, specifically Section 11B of the Central Excise Act, which prescribes a time limit for refund claims. The Tribunal cited the Supreme Court's decision in Mafatlal Industries Ltd. versus Union of India, which clarified that the right to refund is not absolute and must comply with statutory procedures, including limitation periods. Consequently, despite the appellant's eligibility for a refund based on the nature of services, the claim was not maintainable due to non-compliance with procedural requirements.

Conclusion:

The Tribunal upheld the department's rejection of the refund claim on the grounds of limitation, emphasizing adherence to statutory provisions. The appeal was dismissed, reinforcing the principle that procedural compliance is crucial in refund claims, irrespective of the substantive merits of the case.

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