ST - Service tax paid, later appellant realized that no tax is payable in view of exemption notification - whether refund claim is governed by section 11B of CEA, 1944 - Yes, says CESTAT LB, by 2:1 Majority
By TIOL News Service
CHANDIGARH, MAY 04, 2018: THE appellants are engaged in the business of export of rice.
The appellants filed two refund claims of service tax paid on reverse charge basis in respect of services received from foreign commission agents taxable under business auxiliary service. The appellants paid the service tax and later realized that in view of exemption under Notification No. 13/2003-ST dated 20/06/2003 (as amended) no tax is payable. The said notification exempted business auxiliary service provided by commission agents in relation to sale or purchase of agricultural produce.
Realizing that the services received by them are exempt, the appellants filed claims for refund of tax already paid.
The claims were rejected by the Original Authority on the ground that these were barred by limitation, which order was upheld by Commissioner (Appeals).
In appeal, the Single Member Bench noted that on the subject issue divergent views exist in the case of XL Telecom Ltd. - 2006-TIOL-1982-CESTAT-BANG & Monnet International Ltd. 2017-TIOL-1023-CESTAT-DEL and, therefore, found it prudent to refer the following question for a decision by the Larger Bench -
| Whether in respect of the claim for refund of illegal levy of Service Tax or of Service Tax collected without authority of law, the statutory time limit prescribed in terms of Section 11B of Central Excise Act, 1944 will be applicable or not? |
We reported this order as [2018-TIOL-09-CESTAT-CHD].
In the case of Monnet International Ltd. - 2017-TIOL-1023-CESTAT-DEL it was held thus -
| ST - 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 -Section 11B of the Central Excise Act, 1944 is not applicable - the claim has been made within the period of three years, hence not hit by limitation - Department should not take advantage of the ignorance of the assessee-Appellants - Jurisdictional Commissioner directed to return the deposited amounts - appeals allowed: CESTAT |
And in the case of XL Telecom Ltd. - 2006-TIOL-1982-CESTAT-BANG it was held -
| Central Excise - Limitation of time in refund of duties not required to be paid - Claim allowed by first appellate authority holding excess payment as only amount and time limit not applicable - Limitation under statute applicable even for refund of even illegal levy and time-limit not extendable by any authority or Court - SC Decision in Anam Manufacturing Co followed. |
The Larger Bench comprising the President, Member (T) & Member (J) heard the matter recently.
The Member (Technical), writing for the Bench examined the decision in Monnet International Ltd. and while distinguishing the same observed -
++ The said decision relied on certain case laws regarding applicability of limitation of three years and non-applicability of Section 11B in certain situations.
++ Further, in the said case there was no tax liability at all as the services were not subjected to tax.
++ In the present case, the services were liable to tax and by way of an exemption notification services in respect of certain commodities were exempted.
++ One more important aspect to be considered is that the amount paid by the appellant has been deposited under a proper service tax head of account by a payment challan. The said amount has been appropriated by the Government as service tax. Later, the appellant realized that the services were exempt by a notification. The amount already paid was in the form of a tax through the Jurisdictional Authorities and the same has been accounted and appropriated by the Government as a tax.
++ Section 11B of the Central Excise Act, 1944 made applicable to service tax refund clearly stipulates that any person claiming refund of any duty of excise to make an application for refund of such duty to the Assistant Commissioner of Central Excise before the expiry of one year from the relevant date…
++ Wehave specifically asked the learned Counsel for the appellant under what provision of law he is seeking the return of the money earlier paid. He admitted that the claim has been preferred in terms of the provisions of Section 11B. If that being the case, it cannot be said that except for limitation other provisions of Section 11B will be made applicable to the appellant.
++ Admittedly, the amount is paid as a tax, the refund has been claimed from the Jurisdictional Tax Authorities and necessarily such tax authorities are bound by the law governing the collection as well as refund of any tax. There is no legal mandate to direct the tax authority to act beyond the statutory powers binding on them. The Hon'ble Supreme Court in Mafatlal Industries Ltd. (2002-TIOL-54-SC-CX-CB) categorically held that no claim for refund of any duty shall be entertained except in accordance with the provisions of the statute.
++ We note in the present case there is no such situation of the provision of any tax levy insofar as the present dispute is concerned is held to be unconstitutional. As already held that the appellant is liable to pay service tax on reverse charge basis but for the exemption which was not availed by them.
Concluding that the decision of the Tribunal in Monnet International Ltd. (supra) has no application to decide the dispute in the present referred case, the Bench noted the decision of the Tribunal in XL Telecom Ltd. (supra) and held that the claim for refund of service tax is governed by the provision of Section 11B for period of limitation and the statutory time limit cannot be extended by any authority.
The above view has been endorsed by the CESTAT President.
However, the Member (Judicial) had a differing view and proceeded to record a separate order in which it was inter alia observed that the Bombay High Court in the case of Parijat Construction vs. CCE, Nashik - [2017-TIOL-2170-HC-MUM-ST] had examined the issue in hand and had held that limitation prescribed u/s 11B of the CEA, 1944 is not applicable to refund claim in respect of service tax paid under a mistake of law.
After extracting paragraphs 5 to 7 from the said order, the Member (Judicial) further observed -
“ 4. …, similar view was entertained by Hon'ble High Court of Bombay in the case of CCE, Nagpur vs. SGR Infratech Limited in Central Excise Appeal No. 26/2014 dated 28.10.2015. As the Hon'ble High Court of Bombay has entertained the refund claim in Central Excise Appeals but not exercising Writ jurisdiction power granted to the Hon'ble High Court under Constitution of India and allowed the refund claim holding that time limit prescribed under Section 11B of the Act is not applicable and the decision of Hon'ble Bombay High Court in Central Excise Appeals is binding on this Tribunal. Therefore, in my considered view, for entertaining the refund claim of amount paid by mistake, the time limit prescribed under Section 11B of the Act is not applicable.”
Incidentally, the CESTAT in SGR Infratech Limited - 2014-TIOL-1702-CESTAT-MUMhad inter alia held that Service tax paid by the appellant is not payable at the relevant time as there was no levy of service tax on the activity of the appellant, therefore, provisions of s.11B of CEA, 1944 are not applicable.
LB Majority order:
Time limit prescribed under Section 11B of the Central Excise Act, 1944 will govern claim for refund of service tax.
(See 2018-TIOL-1432-CESTAT-CHD-LB)
