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Period of limitation not apply in case of refund of Service tax paid inadvertently

Shravan Banarasilal Jejani (the Appellant) is the owner of the residential flats sold to them by the builder who paid Service tax on the residential flats. However, in terms of the Circular No. 108/2/2009-ST dated January 29, 2009 (the Circular), there was no Service tax liability on sale of the residential flats on the Appellant.

CA Bimal Jain

Period of limitation under Section 11B of the Excise Act will not apply in case of refund of Service tax paid inadvertently where no such Service tax liability exist

Shravan Banarasilal Jejani (the Appellant) is the owner of the residential flats sold to them by the builder who paid Service tax on the residential flats. However, in terms of the Circular No. 108/2/2009-ST dated January 29, 2009 (the Circular), there was no Service tax liability on sale of the residential flats on the Appellant. Accordingly, refund claim was filed by the Appellant in respect of Service tax so deposited.

The Adjudicating Authority sanctioned the refund claim but on appeal by the Revenue, the claim for refund was rejected on the ground of being time barred in terms of provisions of Section 11B of the Excise Act. Being aggrieved, the Appellant preferred an appeal before the Hon’ble CESTAT, Mumbai contending that as they were not required to pay the Service tax therefore, the provisions of Section 11B of the Excise Act are not applicable.

The Hon’ble CESTAT, Mumbai relying upon the decision in case of CCE Vs. KVR Construction [(2012) 36 STT 33/22 taxmann.com 408] held that period of limitation under Section 11B of the Excise Act will not apply in case of refund of Service tax paid inadvertently, where no such Service tax liability exist.

It was further held that in terms of the Circular, the Department is not legally allowed to ask for the Service tax and if they do so, the same is unconstitutional. Accordingly, the Appellant is rightly entitled for refund of the amount of Service tax paid erroneously.

(Bimal Jain, FCA, FCS, LLB, B.Com (Hons), Mobile: +91 9810604563, Email: bimaljain@hotmail.com)

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