Limitation Period Not Applicable to refund of Service Tax Paid Mistakenly

Ishwar Metal Industries Vs Commissioner, Central Excise and Central Goods & Service Tax (CESTAT Delhi)

Limitation period not applicable to refund claim of service tax paid mistakenly

The CESTAT, Delhi in M/s Ishwar Metal Industries v. Commissioner, Central Excise and CGST, [Service Tax Appeal No. 51834 of 2018-SM dated January 28, 2022] set aside the order rejecting the refund claim of the assessee for the Service tax paid mistakenly, passed by the Revenue Authority, on the grounds of limitation. Directed the Revenue Department to refund the amount to the assessee along with the interest @12% within 45 days.

Facts:

M/s Ishwar Metal Industries (“the Appellant”) filed refund claim along with interest under Section 11B of the Central Excise Act, 1944 (“the Central Excise Act”) of mistakenly paid Service tax amounting to INR 31,50,587/- on May 25, 2011 for the period 2007-08 to 2009-10 provided to Electricity Board/Nigam. The Assistant Commissioner (“the Respondent”) rejected the refund claim stating that the Appellant is required to deposit Service tax on the taxable services, on the ground that the refund claim has been filed after more than one year from the date of deposit of the tax.

Subsequently, the Appellant preferred an appeal before the Ld. Commissioner Appeals (“the Appellate Authority”) against the decision of the Respondent, wherein the appeal was dismissed and the decision of the Respondent was upheld.

Being aggrieved, the Appellant filed this appeal.

The Appellant contended that, as per Circular No. 123/5/2010 -TRU dated May 24, 2010, that clarified the applicability of service tax on laying of cables under or alongside roads and similar activities. The work undertaken by them, are not liable to service tax, hence no service tax was payable and all the services/work was allotted by the government was through open bidding. The price fixed as per work order is not affected due to levy of tax.

Issue:

Whether the Appellant is entitled to get the refund claim of service tax paid by mistake along with interest?

Held:

The CESTAT, Delhi in Service Tax Appeal No. 51834 of 2018-SM dated January 28, 2022 held as under:

• Noted that, Service tax was not leviable on the services provided by the Appellant, which was paid by mistake, thus, it will be treated as deposit, ipso facto, and are entitled for refund.
• Observed that, the limitation under Section 11B of the Central Excise Act will not be applicable as the amount deposited by the Appellant is not tax but revenue.
• Further noted that, work orders issued to the Appellant in competitive open bid and it is clear that the prices are firm in all respect and independent of any variation. Furthermore, the Appellant have not charged any service tax in their invoices. Thus, unjust enrichment is not applicable.
• Set aside the order passed by the Respondent.
• Directed the Respondent to grant refund of the amount in cash, within 45 days, along with the interest @12% p.a. from end of 3 months from the date of refund application filed by the Appellant, till the date of grant of refund.

Relevant Provisions:

Section 11 of the Central Excise Act

“Claim for refund of duty

(1) Any person claiming refund of any duty of excise and interest, if any, paid on such duty may make an application for refund of such duty and interest, if any, paid on such duty to the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise before the expiry of one year from the relevant date in such form and manner as may be prescribed and the application shall be accompanied by such documentary or other evidence (including the documents referred to in section 12A) as the applicant may furnish to establish that the amount of  duty of excise and interest, if any, paid on such duty in relation to which such refund is claimed was collected from, or paid by, him and the incidence of such duty and interest, if any, paid on such duty had not been passed on by him to any other person

Provided that where an application for refund has been made before the commencement of the Central Excises and Customs Laws (Amendment) Act, 1991, such application shall be deemed to have been made under this sub-section as amended by the said Act and the same shall be dealt with in accordance with the provisions of sub-section (2) substituted by that Act;

Provided further that the limitation of one year shall not apply where any duty and interest, if any, paid on such duty has been paid under protest.

(2) If, on receipt of any such application, the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise is satisfied that the whole or any part of the duty of excise and interest, if any, paid on such duty] paid by the applicant is refundable, he may make an order accordingly and the amount so determined shall be credited to the Fund:

Provided that the amount of duty of excise and interest, if any, paid on such duty] as determined by the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise under the foregoing provisions of this sub-section shall, instead of being credited to the Fund, be paid to the applicant, if such amount is relatable to-

(a) rebate of duty of excise on excisable goods exported out of India or on excisable materials used in the manufacture of goods which are exported out of India;

(b) unspent advance deposits lying in balance in the applicant’s account current maintained with the Commissioner of Central Excise;

(c) refund of credit of duty paid on excisable goods used as inputs in accordance with the rules made, or any notification issued, under this Act;

(d) the duty of excise and interest, if any, paid on such duty paid by the manufacturer, if he had not passed on the incidence of such duty and interest, if any, paid on such duty to any other person;

(e) the duty of excise and interest, if any, paid on such duty borne by the buyer, if he had not passed on the incidence of such duty and interest, if any, paid on such duty to any other person;

(f) the duty of excise and interest, if any, paid on such duty] borne by any other such class of applicants as the Central Government may, by notification in the Official Gazette, specify:

Provided further that no notification under clause (f) of the first proviso shall be issued unless in the opinion of the Central Government the incidence of duty and interest, if any, paid on such duty has not been passed on by the persons concerned to any other person.

(3) Notwithstanding anything to the contrary contained in any judgment, decree, order or direction of the Appellate Tribunal or any Court or in any other provision of this Act or the rules made thereunder or any other law for the time being in force, no refund shall be made except as provided in sub-section (2).

(4) Every notification under clause (f) of the first proviso to sub-section (2) shall be laid before each House of Parliament, if it is sitting, as soon as may be after the issue of the notification, and, if it is not sitting, within seven days of its re-assembly, and the Central Government shall seek the approval of Parliament to the notification by a resolution moved within a period of fifteen days beginning with the day on which the notification is so laid before the House of the People and if Parliament makes any modification in the notification or directs that the notification should cease to have effect, the notification shall thereafter have effect only in such modified form or be of no effect, as the case may be, but without prejudice to the validity of anything previously done thereunder.

(5) For the removal of doubts, it is hereby declared that any notification issued under clause (f) of the first proviso to sub-section (2), including any such notification approved or modified under sub-section (4), may be rescinded by the Central Government at any time by notification in the Official Gazette.

Provided further that the limitation of one year shall not apply where any duty and interest, if any, paid on such duty has been paid under protest.”

FULL TEXT OF THE CESTAT DELHI ORDER

The issue involved in this appeal is whether the Commissioner (Appeals) has rightly rejected the refund claim.

2. Heard the parties.

3. Brief facts of the case are that the appellant has provided the following services during the period 2007 – 08 to 2009 – 10:-

(i) Shifting of overhead cables/wires for the reason such as widening/renovation of roads.

(ii) Laying of cables under or alongside road.

(iii) Laying of electrical cables between grids/sub-stations /transformer station, en-route

(iv) Installation of street lights, traffic lights, or other electrical and electronic appliances/devices or providing electric connection to them etc.

4. The appellant is registered with the Service Tax Department. The appellant filed refund claim for Rs. 31,50,587/- on 25.05.2011. It is submitted by the appellants that as per Board’s Circular No. 123/5/2010 -TRU dt.24.05.2010, the work undertaken by them for Electricity Board/Nigam, as aforementioned, are not liable to service tax, hence no service tax was payable. The amount mistakenly paid was thus a deposit and not service tax, which is refundable to them along with interest u/s 11B. The appellant claimed refund of such amount i.e. Rs.31,50,587/-, paid during the period 2007-08 to 2009-10. They submitted that limitation u/s 11B is not applicable in this case, as the amount was paid mistakenly which was not payable. They relied upon the ruling in 3 E Infotech vs. CESTAT Chennai [2018 (18) GSTL 410 (Mad.)] and Venkatraman Guha Prasad vs. Commissioner of CGST, Chennai [2020 (42) GSTL 124 (TRI-Chennai)], where under similar facts and circumstances, it was held that limitation under Section 11B is not applicable.

5. The appellants further submitted that unjust enrichment is also not applicable in the present case. They did not recover the service tax amount from the service recipient. The prices were firm. There is no dispute that all the services/work was allotted by the government was through open bidding. The appellants procured the work order in competition, and as per clause of the contract, the government department did not pay any tax, but it was borne by the appellant. The price fixed as per work order is not affected due to levy of tax. As per the clause of price, it is clearly mentioned that the price is as per open bid. The prices are firm in all respect and independent of any variation. The appellants also did not collect any service tax from the service recipient. Hence, question of unjust enrichment does not arise.

6. The claim of refund was rejected by the Assistant Commissioner observing that the appellant were registered with the Department and was aware that they are required to deposit service tax on the taxable services. The appellant have issued invoices/bill inclusive of service tax in respect of services rendered by them. Out of such payment received they have deposited the service tax portion in the government exchequer. The appellant was aware of the liability and also declared the same in their ST 3 returns filed with the Department. Therefore the amount deposited is tax amount and not just any amount deposited. It was further held that the amount collected by the appellant for the specific service rendered is cum tax amount.

7. Further, admittedly, the claim has been filed after more than one year from the date of deposit of the tax.

8. Being aggrieved the appellant preferred appeal before the ld. Commissioner appeals, who vide impugned order in appeal dismissed the appeal agreeing with the findings of the Assistant Commissioner.

9. Learned Authorised Representative for Revenue relies on the impugned order and prays for rejecting the appeal.

10. Having considered the rival contentions, I find that service tax was not leviable on the services provided by the appellants, which was paid by mistake by the appellants, thus, it will be treated as deposit, ipso facto, and are entitled for refund.

11. This fact is more evident as the services provided by the appellants are – route survey, design, supply of material for construction, erection and commissioning of 33KV D/C Line on Panther Conductor for 2.5 km from 132 KV GSS, Equipment for the work of urban focus programme, equipment for providing HVD/LVD system, etc.

12. Further Limitation u/s 11B will not be applicable as the amount deposited is not tax and, at best, revenue deposit. My view is fortified in view of the judgements passed by Madras High Court in its ruling in 3 E Infotech (supra).

13. As far as applicability of unjust enrichment, in view of the work orders, which were issued to the appellants in competitive open bid, as per contract it is clear that the prices are Firm in all respect and Independent of any variation. It is also not in dispute that the appellants have not charged any service tax in their invoices. I am of the view that unjust enrichment is also not applicable.

14. Accordingly, the appeal is allowed and the impugned order is set aside. The adjudicating authority is directed to grant refund of the said amount in cash, as required under the Transitional Provisions of CGST Act within 45 days from the receipt of this order and is further directed to pay interest @12% p.a. from end of three months from the date of refund application by the appellant, till the date of grant of refund.

15. Thus, the appeal is allowed.

(Pronounced on 28.01.2022).

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