HIGH COURT OF GUJARAT
C C Patel & Associates (P.) Ltd.
Union of India & 2
AKIL KURESHI AND HARSHA DEVANI, JJ.
SPECIAL CIVIL APPLICATION NO. 1861 OF 2005
JULY 5, 2012
Akil Kureshi, J.
The petitioner has challenged the order dated 22nd July, 2004 passed by the Customs, Excise and Service Tax Tribunal (hereinafter to be referred to as “the Tribunal”) by which the petitioner’s appeal, challenging the orders passed by the Revenue Authorities, came to be dismissed.
2. Brief facts may be noted at the outset:
2.1 The petitioner is a Company, providing engineering services and engages in engineering consultancy. Under the provisions of section 68 of the Finance Act, 1994, the petitioner was required to pay service tax on such services provided by it. Sub-section (2) of section 68 provides that the service tax collected during any calender month, shall be paid to the credit of the Central Government by the 15th of month immediately following the said calender month. Sub-section (3) of section 68 provides that if any person, responsible for collecting the service tax, fails to collect such tax, he shall notwithstanding such failure, be liable to pay such tax to the credit of the Central Government within 75 days from the end of the month in which the service was rendered.
2.2 Thus, under sub-section (2) of section 68, the petitioner was required to pay service tax by the 15th of the month immediately following the month when such tax was collected. However, even if, there was failure to collect such tax, the petitioner under sub-section (3) of section 68 was duty bound to deposit such amount on the service so provided with the Central Government within 75 days from the end of the month during which such service was provided.
2.3 It is the case of the petitioner that for six quarters starting from July 1997 and ending with March 1999, the petitioner paid such tax on mere billing, without actual collection, but within 15 days of the month following the end of the month during which such service was provided. In other words, the petitioner paid the service tax without collection from the service recipient, but within the time provided for depositing the tax on actual receipt.
2.4 The adjudicating officer assessed the returns filed by the petitioner for the above mentioned period. He passed separate orders for each quarter, covering the entire period under consideration. He though noted that the service tax was already paid, since the same was paid earlier than mandated by sub-section (3) of section 68, held that for the later period, such tax was short paid. To put it differently, the Assessing Officer though acknowledged that the petitioner had already paid the tax, without giving any adjustment for the same, on the technical ground that for the later period there was no reflection of actual payment of tax, raised tax demand on such basis. By way of example, if we peruse the assessment order for the quarter ending with September, 1997, the Assessing Officer noted that the service tax payable was Rs. 79,568/-, against which the assessee had paid service tax of Rs.1,40,083/-. He held that service tax was short paid by Rs. 30,000/-, but was excess paid by Rs. 90,650/-. He accordingly held that the petitioner has paid excess service tax of Rs. 60,515/-. Such is the position emerging in other assessment orders, of course, with difference in actual figures.
3. Interestingly, the department raised demand from the petitioner for service tax, which according to the department, was not paid during the quarter when the same ought to have been paid. Covering entire period, a total demand of Rs. 1,19,465/- was raised with interest. It is not in dispute that the petitioner paid up such amount with interest.
4. When the petitioner claimed refund of the amount excess paid and so found in the assessment orders, the Competent Authority issued a show-cause notice dated 15th December, 1999, calling upon the petitioner to state why such refund claims be not rejected as time barred and also on the ground of unjust enrichment. Separate notices were issued for each separate quarters.
5. After hearing the petitioner, the Adjudicating Officer passed his Order-in-Original on 9th March, 2000 and rejected the refund claims only on the ground of limitation. He was of the opinion that such refund claims were barred by limitation under section 11B of the Central Excise Act, 1994 (hereinafter to be referred to as “the Act”). He did not go into the question of unjust enrichment. Here again the Assessment Commissioner has passed three separate orders, rejecting different refund claims of the petitioner, however, on a material aspects, they are identical in nature.
6. The petitioner preferred appeals against such orders of the Assessment Commissioner, rejecting his refund claims. The Appellate Commissioner upheld the view of the Assessment Commissioner on the question of limitation. He also therefore, did not touch the aspect of unjust enrichment.
7. The petitioner carried the issue in appeal before the Tribunal. The Tribunal, by the impugned order, rejected the appeal. Hence the present petition.
8. The learned counsel for the petitioner raised following contentions:
8.1 That the claims made by the petitioner were not barred by any limitation. He contended that the petitioner’s right to claim refund arose only when the Assessing Officer finalized the assessment in terms of Rule 7 of the Service Tax Rules, 1994 (hereinafter to be referred to as “the Rules”).
8.2 In this connection, he relied on the decision of the Apex Court in the case of Serai Kella Glass Works (P.) Ltd. v. Collector of Central Excise 1997 (91) ELT 497 (SC) and also on the decision of the Division Bench of this Court in the case of Paper Cones & Bobbins Factory v. Union of India 2005 (185) ELT 122.
8.3 The learned counsel for the petitioner further contended that the Authorities ought to have adjusted the tax already paid by the petitioner towards the liability which was computed in the following quarters. He submitted that non-granting of adjustment was wholly illegal.
8.4 In this connection, the learned counsel for the petitioner relied on the decision of the Apex Court in the case of Collector of Central Excise v. Divya Enterprises Ltd. 2003 (153) ELT 497 and also on the decision of the Tribunal in the case of Vinir Engg. (P.) Ltd. v. CCE 2004 (168) ELT 34 (Trib. – Bang.).
8.5 The learned counsel for the petitioner lastly submitted that this was a clear case of duty paid under mistake. Such excess payment cannot be categorized as duty and therefore, limitation prescribed under section 11B of the Act would not apply.
9. Mr. P.S. Champaneri, learned counsel for the Department opposed the petition contending that the refund claims filed by the petitioner were clearly beyond the period of limitation prescribed under section 11B of the Act. In the present case, the duty was not either provisional or under protest and therefore, in view of the definition of term “relevant date” provided under explanation 2 of section 11B, would mean the date on which such duty was paid. Admittedly, since refund claims were not filed within one year from the payment of such duty, the same were rightly treated as time barred by the Authorities. He further submitted that the question of unjust enrichment is yet to be examined.
10. Having heard the learned counsel for the parties, what emerges from the record is that under sub-section (2) of section 68, the petitioner had to deposit with the Government, service tax collected from the recipient of the service by the 15th of the month following the end of the month when such service was provided. However, under sub-section (3) of section 68, if such service tax was not collected by the petitioner, he still had to deposit a matching amount with the Government within 75 days from the end of the month when such service was provided. The petitioner admittedly deposited the duty with the Government, without actual collection thereof, but within 15 days of the end of the month when such service was provided. In other words, the petitioner deposited the duty on billing basis without actual collection, but within the time limit provided for depositing the duty on actual collection.
11. The petitioner submitted his returns disclosing such particulars of duty paid. The Assessing Officer framed assessment for each quarter and found that on one hand the petitioner had paid excess duty and on the other hand, he had short paid the duty of matching amount in the following quarter. On that basis, he raised a demand to the extent he held that the petitioner had short paid the duty. Such total demand amounted to Rs. 1,19,465/-. He further insisted that the petitioner paid such amount with interest. The petitioner did so. But simultaneously asked for refund of the amount which he had already paid towards such service tax.
12. We fail to see how the department can withhold such refund. We say so for several reasons. Firstly, we notice that under sub- section (3) of section 68, the time available to a service provider such as the petitioner for depositing with the Government service tax though not collected from the service recipient was 75 days from the end of the month when such service was provided. This is in contrast to the duty to be deposited by a service provider upon actual collection by the 15th of the month following the end of the month when such duty is collected. Sub-section (3) of section 68 thus provided for an outer limit of 75 days, but never provided that the same cannot be paid by the 15th of the month following the end of the month when such service was provided. Thus, if the petitioner deposited such duty with the Government during a particular quarter on the basis of billing without actual collection, he had discharged his liability under sub-section (3) of section 68. Thereafter, on an artificial basis, the Assessing Officer could not have held that he ought to have deposited same amount once all over again in the following quarter. This is fundamentally flawed logic on the part of the Assessing Officer.
13. Further, to accept such formula adopted by the Assessing Officer would amount to collecting the tax from the petitioner twice. The petitioner having already paid up the service tax even before collection in a particular quarter, cannot be asked to pay such tax all over again in the following quarter on the same service on the ground that such tax had to be deposited in the later quarter but was deposited earlier. Any such action would be without authority of law. Further, before raising demand of Rs. 1,19,465/- under the head of duty short paid, the Assessing Officer should have granted adjustment of the duty already paid by the petitioner towards the same liability.
14. Under the circumstances, we are of the opinion that the department cannot withhold such amount which the petitioner rightfully claimed. Under the circumstances, question of applying limitation under section 11B of the Act would not arise since we hold that retention of such service tax would be without any authority of law.
15. A question of unjust enrichment is wholly irrelevant. It is not refund of a duty which is found upon completion of assessment excess paid that the petitioner is asking for. It is a duty which the petitioner has already paid separately and second time under insistence of the department which he is asking for being refunded. Under the circumstances, the question of unjust enrichment cannot be applied.
16. In the result, the impugned order is set aside. Resultantly, orders passed by the Assessing Commissioner and confirmed by the Commissioner of Appeals also stand nullified. The respondents are directed to refund a total amount of Rs. 1,01,905/- with statutory interest which shall be done within a period of four weeks from the date of receipt of the copy of this order. The petition is allowed. Rule is made absolute accordingly.