By TIOL News Service

NEW DELHI, MAR 28, 2017: THE Appellants are registered under BAS and during the period under consideration (01.06.2005 to 31.01.2007), were providing liaisoning services to M/s Dongfang Electric Corporation, China ("DEC"). It is alleged that under pressure/ignorance, the Appellants deposited the amount of Rs.93,13,142/- in the first case and Rs.25,31,125/- in the second case in installments towards Service Tax.

After coming to know that the "Liaisoning Services" provided were not subject to Service Tax, a refund claim was filed on 02.01.2008.

The refund claim was rejected as time-barred by the lower authorities.

The appellants are before the CESTAT.

It is submitted that during the impugned period, the "Liaisoning Service" provided was not subject to any Service Tax and, therefore, what was paid is not towards a tax but it is merely a deposit which was wrongly made and, therefore, Section 11B is not applicable; there has been no unjust enrichment as amount was deposited from own pocket.Reliance is placed on the decisions in Mera Baba Realty Associate (P) Ltd. 2016-TIOL-2139-HC-DEL-ST , Kalpataru Power Transmission Ltd. -2016-TIOL-47-CESTAT-AHM , KVR Constructions - 2010-TIOL-980-HC-KAR-ST , Hind Agro Industries Ltd. -2007-TIOL-811-HC-DEL-CUS .

The AR justified the rejection of the refund claim by relying on the decisions in Miles India Ltd. -2002-TIOL-501-SC-CUS and Boaba Co-operative Sugar Mills -2002-TIOL-426-SC-CX .

The Bench observed -

+ It appears that during the period under consideration, the assessee-Appellants had provided the "Liaisoning Services", which were not subject to Service Tax as per the Finance Act, 1994. The assessee-Appellants by mistake or in good faith or pressure from the Department had deposited the amounts towards Service Tax on different dates as per the details mentioned in the impugned orders.

+ Soon after knowing the factual position, the assessee-Appellants have filed the refund claim along with the certificate issued by the Chartered Accountant in prescribed Form. The necessary details like registration certificate, ST-3 for concerned periods, copy of the challan, copy of Cenvat Credit register, copy of CA certificate were also enclosed.

+ The claim of refund was rejected by the lower authorities in a mechanical way by following the statutory provisions prescribed under Section 11B of the Central Excise Act, 1944.

+ As per the certificate issued by the Chartered Accountant, no Service Tax was charged in the invoice raised on DEC, China. Apart from the amount raised in the invoice, the assessee-Appellants has not received any amount from DEC, China, as Service Tax. A certificate was also issued by Dongfang Electronic Corporation on 31.08.2010 where it is clearly mentioned that no Service Tax was paid to the assessee-Appellants.

+ From these documents, it is crystal clear that DEC, China has not paid any Service Tax. The Service Tax was paid by the assessee-Appellants from their own pocket under the misconception of law or by mistake or in good faith. When it is so, then no case of unjust enrichment is made out.

Placing reliance on the decision in Hind Agro Industries Ltd. -2007-TIOL-811-HC-DEL-CUS wherein it is observed that the period of limitation under the Act would not apply as explained by the apex Court in Salonah Tea Company Limited -2002-TIOL-504-SC-CT , the Bench further observed -

11. Thus, in the instant case also, the assessee-Appellants were not subjected to Service Tax. Therefore, mere payment made by the assessee-Appellants will neither validate the nature of payment nor the nature of transaction. In other words, mere payment of amount would not make it a Service Tax payable by them. Hence, the amount deposited by the assessee-Appellants by mistake/good faith cannot be termed as "Tax".

The CESTAT also adverted to the case laws cited by the appellant and after noting the decision in Shankar Ramchandra Auctioneers - 2010-TIOL-632-CESTAT-MUM held-

++ In the present case, the assessee-Appellants were rendering "liaisoning service". The said services were not liable to Service Tax at the relevant time. Hence, the Department would not be in a position to collect service tax on the said activities since the same is not leviable. Consequently, …, the Government will have no authority to retain the said amount and will have to be refunded.

++ It may also be mentioned that in the case of Hind Agro Industries Limited (supra), we find that the Hon'ble Delhi High Court has circumscribed the above view by prescribing the period of three years, after discovery of the mistake, for claiming such refund.

++ We are of the view that in the instant case, the amount deposited by the assessee-Appellants without any authority of law cannot be considered as Service Tax. As per Article 265 of the Constitution, no tax can be collected without any authority of law. At the relevant time, there was no authority of law to collect Service Tax on the activity carried out by the assessee-Appellants . Hence, Section 11B of the Central Excise Act, 1944 is not applicable. The amount was deposited in the year 2006-07 and the refund was filed on 02 nd January, 2008. Hence, the claim has been made within the period of three years prescribed by Hon'ble Delhi High Court. Therefore, we are of the view that the assessee-Appellants are entitled to get the refund and the same is not hit by the limitation prescribed under Section 11B of the Central Excise Act, 1944 read with Section 83 of the Finance Act, 1994.

++ It may be mentioned that the Department should not take advantage of the ignorance of the assessee-Appellants as per the ratio laid down in the case of Parekh Brothers vs CIT, 150 ITR 105 Kerala ; and CIT vs Maha Laxmi Sugar Mills, 160 ITR 920 SC.

Concluding that the instant proceeding is not a case of refund of tax but return of deposit for which limitation (Section 11B of the Act) is not applicable, the impugned orders were set aside and the jurisdictional Commissioner was directed to return the deposited amount, as per law.

The appeals were allowed.

(See 2017-TIOL-1023-CESTAT-DEL)