Case Law Details

Case Name : Oil India Limited Vs Commissioner of Central Tax (CESTAT Hyderabad)
Appeal Number : Service Tax Appeal No. 31055 of 2018
Date of Judgement/Order : 06/05/2019
Related Assessment Year :
Courts : All CESTAT (815) CESTAT Hyderabad (14)

Oil India Limited Vs Commissioner of Central Tax (CESTAT Hyderabad)

Refund jurisdiction of the Officers of Central Excise and Service Tax emanates from Section 12E and Section 11B of Central Excise Act, 1944 and Section 83 of the Finance Act, 1994. The powers of the first appellate authority to decide appeals or such decisions emanates from Section 35 of the Central Excise Act, 1944. Clearly, the Officers have no jurisdiction to decide matters which fall beyond the scope of the law itself. In such cases, the appropriate legal remedy as held by Hon’ble Apex Court is Civil Suit under Section 72 of the Contract Act and the Officers have no jurisdiction to decide on such Civil Suits. In the present case, I find that the contractor has already paid the service tax and the appellant was not liable to pay service tax under reverse charge mechanism but has wrongly paid so. Under these circumstances, I find that payment of the amount as representing service tax is beyond the scope of Finance Act 1994 and therefore no provisions of the Acts including Section 11B and the period of limitation therein or the jurisdiction of the Officers to sanction refund claim applies to the present case.

FULL TEXT OF THE CESTAT JUDGMENT

This appeal is filed against Order-in-Appeal No. VIZ-EXCUS-002-APP- 043-18-19, dated 11.05.2018. After hearing both sides and perusal of records, it emerges that the appellant is engaged in the business of exploration of mineral oil and natural gas. During the relevant period, they availed services of M/s B.J. Services in relation to drilling of exploratory wells. M/s BJ Services discharged appropriate service tax to the department. However, on the same services, the appellant also paid service tax under reverse charge mechanism to the extent of Rs.20,43,584/- under various challans dated 07.08.2014, 16.08.2014 and 30.09.2014. Realising that they have paid service tax wrongly, the appellant informed the Department on 27.07.2015 and thereafter filed a refund claim under section 11B as made applicable to service tax by Section 83 of the Finance Act, 1994 on 12.07.2016. A show cause notice was issued to the appellant asking why the refund was filed after one year from the date of payment of service tax should not be rejected. After due process of law, the lower authority rejected the refund claim as being time barred. This rejection was upheld by the first appellate authority vide the impugned order. Hence, this appeal.

2. Ld. Counsel for the appellant submits that the assessee paid service tax under mistake of law and therefore the limitation under section 11B should not apply as has been held by various High Courts and this Bench in the case of GMR Vemagiri Power Generation Limited [2018(11)TMI 231-CESTAT-HYD], Karvy Investor Services Limited [2016(43)S.T.R. 610 (Tri.-Hyd.)] National Institute of Public Finance and Policy [2019(20)G.S.T.L. 330 (Del.)] and 3E Infotech [2018(18)G.S.T.L. 410 (Mad.)]. Ld. Counsel would argue that what is not due to the Government, cannot be retained by them and the refund application cannot be rejected on the ground of limitation when the amount was paid under mistake of law which is squarely their case. They were not liable to pay service tax but under mistake they have paid the same and therefore the department cannot reject refund on the ground of limitation under Section 11B. He would argue that what was paid was not service tax at all although it was wrongly paid as service tax. It was just an amount deposited in the exchequer because no service tax was not leviable on them. In view of the above and the case laws relied upon, she would urge that the service tax paid by them may be refunded ignoring the fact that the refund claim under Section 11B was filed after a period of one year which is beyond the limitation under that section.

3. Ld. DR would submit that the limitation clause under section 11B would squarely apply in every case where the refund claim is filed after due date. He relies on the case laws of Anam Electrical Manufacturing Company [1997(90)E.L.T. 260 (S.C.)] in which it was held that refund application has to be filed within the time limit and the statutory time limit cannot be extended. He also relies on the case law of CMS Info Systems Limited vs. Union of India [2017 (349) E.L.T. 236 (Bom.)] in which their Lordships held that any claim of refund must be filed as per the refund application and within the limitation therein. Ld. DR admits that in some cases the Hon’ble High Courts as well as this Bench have held that where levy itself is beyond the scope of the Act, the amounts so collected do not get limited by the refund restrictions under the Act. However, he submits that in these cases what was never argued was the jurisdiction of the officials in sanctioning refund of an amount which is not collected under the Act itself. He submits that the officers exercise their powers under the Acts and have no jurisdiction whatsoever to exercise powers beyond the law. He draws the attention of the Bench to Section 12E of Central Excise Act, 1944 which gives the Officers the powers to perform functions under the Act. Section 12E read with section 11B of Central Excise Act, 1944 gives the Asst. Commissioner or Dy. Commissioner the power to sanction refunds. Both these sections have also been made applicable to service tax by virtue of Section 83 of the Finance Act, 1994. Therefore, if what was paid was not service tax, the Officer had no jurisdiction to entertain any refund claim. His powers to sanction refund wholly flow from Section 11B and 12E of Central Excise Act, 1944 as made applicable to Service Tax by Section 83 of the Finance Act, 1994. Similarly the powers of the Commissioner (Appeal) to hear and decide the appeals is also subject to the provisions of Central Excise Act and Finance Act, 1994. Therefore, as far as any amount which was paid beyond the Finance Act, 1994 itself is concerned, Officers have no jurisdiction whatsoever and therefore any refund claim under Section 11B has to be rejected. He would further argue that this issue of jurisdiction was not discussed or argued in any of the case laws relied upon by the Ld. Counsel for the appellant. However, this issue was discussed at length and decided by a nine Member Constitutional Bench of Hon’ble Supreme Court in the case of Mafatlal Industries Limited vs. Union of India [1997(89)E.L.T. 247 (S.C.)] of which paras 104 and 105 reads as follows:

“104.In view of these propositions, which have been reiterated by this Court on several occasions and thus constitute sound law, it is clear that actions by way of suits or petitions under Article 226 of the Constitution cannot be completely eliminated. The claims for refund can arise under three broad classes and the issue of ouster of jurisdiction of civil courts can be understood by focussing on the parameters of these classes which are as follows :

Class I :“Unconstitutional levy” — where claims for refund are founded on the ground that the provision of the Excise Act under which the tax was levied is unconstitutional.

Cases falling within this class are clearly outside the ambit of the Excise Act. In such cases assessees can either file a suit under Section 72 of the Contract Act, 1872 (hereinafter called “Contract Act”) or invoke the writ jurisdiction of the High Court under Article 226 of the Constitution.

Class II :“Illegal levy” — where claims for refund are founded on the ground that there is mis-interpretation/mis-application/erroneous interpretation of the Excise Act and the Rules framed thereunder.

Oridinarily, all such claims must be preferred under the provisions of the Excise Act and the Rules framed thereunder by strictly adhering to the stipulated procedure. However, in cases where the authorities under the Excise Act arrogate to themselves jurisdiction even in cases where there is clear want of jurisdiction, the situation poses some difficulty. Reddy, J. has held that in all cases, except where unconstitutionality is alleged, the remedy is to be pursued within the framework of the Excise Act. This is a dangerous proposition for it will not cater to situations where the authorities under the Excise Act assume authority in cases where there is an inherent lack of jurisdiction. This is because, if one were to follow Reddy, J.’s reasoning, the authorities under the Act will have the final say over situations in which they totally lack inherent jurisdiction. In such a situation, there is nothing to prevent the authorities from exercising jurisdiction in cases which are ultra vires the Excise Act but intra vires the Constitution. To that extent, I would hold that in cases where the authorities under the Excise Act initiate action though lacking in inherent jurisdiction, the remedy by way of a suit under Section 72 of the Contract Act or a writ under Article 226 of the Constitution, will lie. Such a conclusion will not frustrate the exclusion of jurisdiction of civil courts by the Excise Act because the areas where an authority acting under a statute is said to lack inherent jurisdiction have been clearly demarcated by several decisions of this Court.

Class III :“Mistake of Law” — where claims for refund are initiated on the basis of a decision rendered in favour of another assessee holding the levy to be : (1) unconstitutional; or (2) without inherent jurisdiction.

Ordinarily, no assessee can be allowed to reopen proceedings that have been finally concluded against him on the basis of a favourable decision in the case of another assessee. This is because an order which has become final in the case of an assessee will continue to stand until it is specifically recalled or set aside in his own case.

105. In cases where the levy of a tax has been held to be (1) unconstitutional; or (2) void for want of inherent jurisdiction (as explained in Class II), it is open for the assessees to take advantage of the declaration of the law so made and claim refunds on the ground that they paid the tax under a mistake of law. This is because such claims are outside the ambit of the Excise Act. In such cases, the limitation period applicable will be that specified in Section 17(1)(c) of the Limitation Act.”

4. Ld. DR would submit that as has been made clear by Hon’ble Apex Court in this case, in every case where a levy was not under the Customs Act, Central Excise Act or Service Tax Act, no provisions of these Acts apply. Therefore, the officers have no jurisdiction to sanction refunds under these Acts. In such a case the proper mechanism for the appellant is to file a Civil Suit under Section 72 of the Contract Act and the limitation as applicable under the Limitation Act would apply in such cases. An alternative mechanism provided for by Hon’ble Apex Court is that the jurisdiction under Article 226 before Supreme Court. Therefore, if the Bench is of the opinion that what is paid is not service tax, then the refund cannot be sanctioned under Section11B. The appellant is free to pursue the alternative remedies provided for under the law as elaborated by Hon’ble Apex Court in the case of Mafatlal Industries Limited (supra).

5. I have considered the arguments on both sides and perused the records. The facts are not disputed. Of the three elements related to refund claim, (i) merit, (ii) limitation and (iii) unjust enrichment, the only dispute is regarding limitation of time. Clearly the refund application was filed beyond a period of one year. Ld. Counsel for the appellant correctly points out that in the case of GMR Vemagiri Power Generation Limited (supra), this Bench has held that in case of levy beyond the scope of law, the limitation should not apply relying upon various judgments of Hon’ble High Courts. Either in that case or in the cases before Hon’ble High Courts, the question of jurisdiction of the Officers in deciding on the refund applications was not discussed. Ld. DR is correct in pointing out that the appropriate legal remedy in this case was held to be a Civil Suit under section 72 of the Contract Act by Hon’ble Apex Court in the case of Mafatlal Industries Limited (supra). I find the refund jurisdiction of the Officers of Central Excise and Service Tax emanates from Section 12E and Section 11B of Central Excise Act, 1944 and Section 83 of the Finance Act, 1994. The powers of the first appellate authority to decide appeals or such decisions emanates from Section 35 of the Central Excise Act, 1944. Clearly, the Officers have no jurisdiction to decide matters which fall beyond the scope of the law itself. In such cases, the appropriate legal remedy as held by Hon’ble Apex Court is Civil Suit under Section 72 of the Contract Act and the Officers have no jurisdiction to decide on such Civil Suits. In the present case, I find that the contractor has already paid the service tax and the appellant was not liable to pay service tax under reverse charge mechanism but has wrongly paid so. Under these circumstances, I find that payment of the amount as representing service tax is beyond the scope of Finance Act 1994 and therefore no provisions of the Acts including Section 11B and the period of limitation therein or the jurisdiction of the Officers to sanction refund claim applies to the present case.

6. In view of the above, the impugned order is upheld and the appeal is rejected as a refund claim under Section 11B of Central Excise Act,1944 read with Section 83 of the Finance Act, 1994 is not maintainable for any amount paid beyond the scope of the Finance Act, 1994 itself. The appellant is free to pursue other remedies as has been held by Hon’ble Supreme Court in the case of Mafatlal Industries Limited (supra) to recover the amount wrongly paid by them beyond the scope of Finance Act, 1994.

( Order pronounced in open court on 06.05.2019)

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