By TIOL News Service

MUMBAI, OCT 17, 2017: THE  appellants are registered as provider of Commercial or Industrial Construction Services.

On the ground that they have provided service to Mumbai Education Trust (MET), a non-profit making organization engaged in education, the appellants filed refund claims of service tax paid. They relied on para 13.2 of CBEC Circular No.  80/10/2004-ST  dated 17/9/2004 clarifying that construction services provided for use of organizations or institutions being established solely for educational, religious, charitable, health, sanitation or philanthropic purposes and not for the purpose of profit, are exempted.

The Asstt. Commissioner rejected the refund claim of Rs. 11,31,144/- and Rs. 9,73,292/- respectively as being time barred and an amount of Rs. 81,567/- [for August 2007] was also held not admissible on the ground that Board Circular No.  80/10/2004-ST  was withdrawn vide Circular No.  96/7/2007-ST  dated 23.08.2007.

The Commissioner (Appeals) partly allowed the refund claims of Rs. 81,567/- and Rs. 73,330/- and for remaining amounts 10,49,568/- and Rs. 8,99,962/- the Orders-in-Original were upheld.

In appeal, the CESTAT held thus -

+ For the purpose of claiming refund of such amount of service tax which was paid by the appellant, under the Central Excise Act, Section 11B is the only provision which deals with refund of any amount refundable to any person.

+ In our view, since the amount claimed for refund by the appellant can be refunded only under Section 11B, the limitation provided in the said Section shall also apply for sanction of refund. There is no other provision for refund of Service Tax/Excise duty except Section 11B of the Act, therefore, limitation is applicable.

To the submission by the appellant that since the service is not a taxable service, the payment made is without authority of law and hence Section 11B is not applicable, the Bench observed -

++ We are of the view that in every case of refund the amount became refundable only where it is not payable as per law and accordingly every such amount shall be treated as payment without authority of law.

++ If this view is accepted then Section 11B will stand redundant, as in every refund matter Section 11B shall not apply for the reason that any amount which is refundable is neither the service tax nor excise duty and all such amount shall be deemed to be paid without authority of law.

++ Therefore in my considered view, at the time of payment the assessee pays the amount under a particular head such as service tax, excise duty etc. and when subsequently it is found that this amount is not payable, the same amount stand refundable to the assessee and such refund is treated as refund of service tax/duty only..

++ Therefore in our view, any amount which is to be refunded shall be refunded in accordance with Section 11B which includes the condition of time limitation.

++ Since refund of any amount is governed by Section 11B and there being no other provision, this Tribunal being a creature under the Central Excise/Custom Act cannot go beyond the statute and, therefore, cannot relax the time limitation provided under the statute.

In fine, the impugned orders rejecting refund claims on the ground of time barwere upheld and the appeals were dismissed. We reported this decision as - 2016-TIOL-1391-CESTAT-MUM .

The appellants filed appeals before the Bombay High Court and relied upon a judgment in Hindustan Coca Products Vs. Union of India 1994 (74) ELT 525 (Bom.) and another judgment of Division Bench of this Court (Nagpur Bench) in the case of The Commissioner Central Excise, Nagpur Vs. M/s. SGR Infratech Ltd. Central Excise Appeal No. 26 of 2014 dated 28th October 2015 [CESTAT order - 2014-TIOL-1702-CESTAT-MUM] in support of their contention that the limitation prescribed u/s 11B of the said Act is not applicable, where admittedly the tax could not have been demanded and / or service tax was paid under a mistake of law.

The High Court observed -

"5. We are of the view that the issue as to whether limitation prescribed under Section 11 B of the said Act applies to a refund claimed in respect of service tax paid under a mistake of law is no longer res integra. The two decisions of the Division Bench of this Court in Hindustan Cocoa (supra) and Commissioner of Central Excise, Nagpur V/s. M/s. SGR Infratech Ltd. (Supra) are squarely applicable to the facts of the present case.

6. Both decisions have held the limitation prescribed under Section 11 B of the said Act to be not applicable to refund claims for service tax paid under a mistake of law. The decision of the Supreme Court in the case of Collector of C.E., Chandigarh Vs. Doaba Co-Operative Sugar Mills (2002-TIOL-426-SC-CX ) relied upon by the Appellate Tribunal has in applying Section 11 B, limitation made an exception in case of refund claims where the payment of duty was under a mistake of law. We are of the view that the impugned order is erroneous in that it applies the limitation prescribed under Section 11 B of the Act to the present case where admittedly Appellant had paid a service tax on Commercial or Industrial Construction Service even though such service is not leviable to service tax. We are of the view that the decisions relied upon by the Appellate Tribunal do not support the case of the Respondent in rejecting the refund claim on the ground that it was barred by limitation. We are, therefore, of the view that the impugned order is unsustainable."

The appeals were allowed.

(See 2017-TIOL-2170-HC-MUM-ST)