Limitation period U/s. 11B of Excise Act not applies if Service tax was not payable under law

C K P Mandal Vs. Commissioner of Service Tax [2015-TIOL-98-CESTAT-MUM]

C K P Mandal (the Appellant) is a Charitable Trust. It has two halls which are given on hire for various functions. On hire charges, the Appellant was paying Service tax under the category of Mandap keeper. The Appellant also received donations from caterers and decorators for permitting them to use the halls. The Department asked the Appellant to pay Service tax on the amount of donations received.

However, after a few rounds of litigation up to the Hon’ble High Court, it was held that donations received by Appellant from caterers are not leviable to Service tax. Pursuant to the High Court order, the Appellant filed two refund claims out of which refund claim of Rs. 47,029/- was sanctioned and the other of Rs. 71,759/- was rejected on the ground of time barred.

On appeal being filed to the Commissioner (Appeals), rejection of the refund claim was upheld. Being aggrieved, the Appellant filed an appeal before the Hon’ble CESTAT, Mumbai submitting the following:

• In respect of the sanctioned refund, no interest has been paid till date;
• As regards the refund which was held time barred, the Appellant requested for a copy of the Assessment Order in respect of the tax which they were persuaded to pay;
• The Hon’ble High Court of Karnataka in the case of Commissioner of Central Excise (Appeals), Bangalore vs. KVR Construction [2010-TIOL-89-HC-KAR-ST] has held that the limitation period under Section 11B of the Central Excise Act, 1944 (“the Excise Act”) will not apply where Service tax is not payable under law.

As regards the refund of Rs. 47,029/- already sanctioned under Section 11B of the Excise Act, the Hon’ble CESTAT, Mumbai ordered interest to be paid under Section 11BB thereof. Further, as regards the refund rejected on the ground of being time barred, the Hon’ble Tribunal held as under:

• The Appellant requested for a copy of the Assessment Order in respect of the tax which they were persuaded to pay. Had they received the Assessment Order, they would have applied for refund within the limitation period under Section 11B of the Excise Act, as made applicable to Service tax vide Section 83 of the Finance Act, 1994;
• It has been held in various judgements that the time bar under Section 11B of the Excise Act 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. Rather the tax which was collected was not payable in law and the Appellant was persuaded to pay the amount.

Therefore, the Appellant was held to be entitled to refund along with appropriate interest payable under law.

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