ST - Donations not liable to Service Tax - Time bar u/s 11B of CEA, 1944 will apply only if demand has been paid as duty under law - since no demand made and tax was not payable in law, refund not time barred: CESTAT
By TIOL News Service
MUMBAI, JAN 13, 2015: THE appellant is a Charitable Trust. It has two halls which are given on hire for various functions. They also received donations from caterers and decorators for permitting them to use their halls. They were asked to pay Service Tax by the Superintendent on the donations received by them. As regards hire charges for the halls, they were paying Service Tax under the category of Mandap keeper.
After a few rounds of litigation up to the High Court, it was held that donations received by appellant from caterers are not leviable to Service Tax. We reported the CESTAT and the Bombay High Court order as - 2004-TIOL-1081-CESTAT-MUM & 2006-TIOL-152-HC-MUM-ST respectively.
Pursuant to the High Court order, the appellant filed two refund claims out of which refund claim of Rs.47,029/- was sanctionedand the other of Rs.71,759/- was rejected on the ground of time bar.
The appellant is before the CESTAT against the order of Commissioner(A) upholding the rejection.
It is submitted that on the refund which was sanctioned, no interest has been paid till date. As regards the refund which was held time barred, the appellant drew attention to a letter written by them on 07.06.2001 to the Assistant Commissioner, Mumbai-IV (Service Tax) asking for a copy of the assessment order in respect of the Service Tax paid by them for the period 01.07.1997 to 31.03.2001. The decision of Karnataka High Court in the case of Commissioner of Central Excise (Appeals), Bangalore vs. KVR Construction - 2010-TIOL-89-HC-KAR-ST is relied in support of their claim that time bar under Section 11B will not apply where Service Tax is not payable under law.
The A.R. while agreeing that interest is payable under law on the refund already sanctioned, argued that in the case of M/s Mafatlal Industries - 2002-TIOL-54-SC-CX the Supreme Court held that refund of duty will be governed by the provisions of Section 11B of the CEA, 1944.
The Bench observed -
“6. …As regards the refund of Rs.47,029/- already sanctioned under Section 11B it is quite clear that interest has to be paid under Section 11BB of the Central Excise Act as made applicable to Service Tax. I order accordingly.
6.1 In the case of refund which was rejected, I note that the appellant requested for an assessment order in respect of the tax which they were persuaded to pay. This request was made within three months of the date of payment of Service Tax. Had they received the assessment order/adjudication order under the Finance Act confirming the tax payment, they would have applied for refund under Section 11B as made applicable to Finance Act, 1994. Notwithstanding this aspect, it has been held in various judgements pursuant to the Hon'ble Apex Court judgement in the case of M/s Mafatlal Industries and as held in the judgement of KVR Construction (supra) that the time bar under 11B will apply only if the demand has been made or paid as duty under the law. In the present case no such demand was made under law by a demand or order. Rather the tax which was collected was not payable in law and appellants were persuaded to pay the amount. Therefore, the appellant is entitled to refund along with appropriate interest payable under law.”
The appeal was allowed.
In passing: Fourteen years of litigation may fetch handsome interest as ‘donation' from the department…
(See 2015-TIOL-98-CESTAT-MUM)
