Case Law Details
Rattanindia Power Ltd. Vs Commissioner of Customs (CESTAT Delhi)
Section 11B doesn’t apply to refunds pertains to an amount paid under mistake without any liability.
Facts- That appellant is registered under service tax and are engaged in distribution of electricity during the period from July 2012 to June 2017. The appellant had paid service tax on non air conditioned contract carriage under rent a cab service under reverse charge mechanism. However, later it was realised that the service provided by them was exempted vide notification no. 25/12-ST dated 20.6.2012 vide entry no. 23 (b). Consequent thereto that the appellant filed a refund claim of Rs.7,71,592/-dated 28.9.2018. However, vide show cause notice no. 2659726598 dated 21.2.2020. The said refund claim was proposed to be rejected as being barred by limitation in terms of section 11B of Central Excise Act 1994. The said proposal was initially confirmed vide order in original no. 14/2019 dated 25.9.2020. The appeal thereof has been rejected upholding the said OIO vide order in appeal no. 12/2021-22 dated 24.9.2021. Being aggrieved the appellant is before this Tribunal.
Conclusion- In the present case also, due to the exemption of notification no. 25/2012 dated 20.06.2012 the services on which the appellant had paid service tax i.e. non air conditioned contract carriage under rent a cab service was the exempted service. Hence at the time of the payment the payment had no colour of liability as already discussed above section 11B of Excise Act is not applicable. Hence, the bar of limitation under section 11B also cannot be made applicable upon the said amount.
Held that the issue has repeatedly been clarified about non applicability of section 11B upon such refunds which pertains to an amount paid under mistake without any liability.
FULL TEXT OF THE CESTAT DELHI ORDER
The present appeal has been filed to assail the order in appeal no. 112 dated 24.9.2021 vide which the refund claim of the appellant has been rejected as being barred by time in terms of section 11B of Central Excise Act. The facts relevant for the purpose, in brief are as follows:
That appellant is registered under service tax and are engaged in distribution of electricity during the period from July 2012 to June 2017. The appellant had paid service tax on non air conditioned contract carriage under rent a cab service under reverse charge mechanism. However, later it was realised that the service provided by them was exempted vide notification no. 25/12-ST dated 20.6.2012 vide entry no. 23 (b). Consequent thereto that the appellant filed a refund claim of Rs.7,71,592/-dated 28.9.2018. However, vide show cause notice no. 2659726598 dated 21.2.2020. The said refund claim was proposed to be rejected as being barred by limitation in terms of section 11B of Central Excise Act 1994. The said proposal was initially confirmed vide order in original no. 14/2019 dated 25.9.2020. The appeal thereof has been rejected upholding the said OIO vide order in appeal no. 12/2021-22 dated 24.9.2021. Being aggrieved the appellant is before this Tribunal.
2. I have heard Ms. Shagun Arora and Mr. Kunal Agarwal, learned Counsel for the appellant and Mr. Mahesh Bharadwaj, Authorised Representative for the respondent.
3. It is submitted on behalf of the appellant that the adjudicating authorities below have not denied that the appellant was not liable to pay any service tax on rent a cab service under reverse charge mechanism, the services being exempted. Despite the said acknowledgement, the refund claim has been rejected on the grounds of limitation as prescribed under section 11B of the Central Excise Act. It is submitted that the applicability of the provisions of the said section are limited to the cases wherein refund is claimed in respect of an amount paid as tax / duty. When a person is not liable to pay tax or duty, the claim of refund of any amount paid by him does not attract provisions of section 11B of the Central Excise Act. It is reiterated that appellant herein was not liable to pay any service tax on the services being exempted. Hence, the amount paid by the appellant cannot be called as service tax to which section 11B may be applied. The rejection on limitation ground is alleged to be absolutely erroneous. The reliance has been placed upon the following decisions:
i. National Institute of Public Finance and Policy vs. Commissioner of Service Tax 2019 (20) GSTL 330 (Del)
ii. Hitachi Metals (I) Pvt. Ltd. vs. Commissioner of Central Excise and Service Tax, Gurgaon-2019 (25) GSTL 573 (Tri-Chan.)
iii. Venkatraman Guhaprasad vs. CGST & CE Chennai 2020-VIL-233-CESTAT-CHE-ST
iv. ASL Builder Private Ltd. Vs. Commissioner of Central Tax 2020 (1) TMI 431-CESTAT Kolkata
4. The order is accordingly prayed to be set aside and appeal is prayed to be allowed.
5. While rebutting the submissions the learned DR has laid emphasis upon the findings in para 15 of the order under challenge. It is submitted that the Commissioner (A) has meticulously considered the entire case laws as relied upon by the appellants and has distinguished the present case there from. Impressing upon no infirmity in the said order the appeal in hand is prayed to be dismissed.
6. After hearing the rival contentions and perusing the entire record of the present appeal, it is observed and held as follows:
The adjudicating authority has clearly acknowledged that the services as were received by the appellant were exempted from the payment of service tax during the relevant period. Hence, the service tax paid by them is an erroneous payment due to which the appellant is actually entitled for the refund. Despite these findings the authority has rejected the refund holding it to be barred by period of limitation in terms of section 11B of the Central Excise Act 1944. The only moot controversy to be adjudicated herein therefore is:
Whether the statutory time prescribed under section 11B shall be applicable to the amount erroneously deposited by the appellant despite having no liability to deposit the same.
7. For the purpose it is necessary to look into the provisions of section 11B reads as follows:
“Section 11B: Any person claiming refund of any duty of excise may make an application for refund of such duty to the Assistant Collector of Central Excise before the expiry of six months from the relevant date in such form 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 in relation to which such refund is claimed was collected from, or paid by, him and the incidence of 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 subsection (2) as substituted by that Act]: Provided further that] the limitation of six months shall not apply where any duty has been paid under protest.
(2) if, on receipt of any such application, the Assistant Col- lector of Central Excise is satisfied that the whole or any part of the duty of excise 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 as determined by the Assistant Collector 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 manufac- ture of goods which are exported out of India;
(b) unspent advance deposits lying in balance in the applicant’ s account current maintained with the Collector of Central Excise;
(c) refund of credit of duty paid on excisable goods used as inputs in accordance with the rules made, or any notifica- tion issued, under this Act;
(d) the duty of excise paid by the manufacturer, if he had not passed on the incidence of such duty to any other person;
(e) the duty of excise borne by the buyer, if he had not passed on the incidence of such duty to any other person;
(f) the duty of excise 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 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 there under 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 subsection (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 reassembly, 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 there under.
(5) For the removal of doubts, it is hereby declared that any notification issued under clause (f) of the first proviso to subsection (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.”] 3 Explanation.- For the purposes of this section,-
(A) ” refund” includes 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) ” relevant date” means,-
(a) in the case of goods exported out of India where a refund of excise duty paid is available in respect of the goods themselves or, as the case may be, the excisable materials used in the manufacture of such goods,-
(i) if the goods are exported by sea or air, the date on which the ship or the aircraft in which such goods are loaded, leaves India, or
(ii) if the goods are exported by land, the date on which such goods pass the frontier, or
(iii) if the goals arc exported by post, the date of despatch of goods by the Post Office concerned to a place outside India;
(b) in the case of goods returned for being remade, refined, reconditioned, or subjected to any other similar process, in any factory, the date of entry into the factory for the purposes aforesaid;
(c) in the case of goods to which banderols are required to be affixed if removed for home consumption but not so required when exported outside India, if returned to a factory after having been removed from such factory for export out of India, the date of entry into the factory;
(d) in a, case where a manufacturer is required to pay a sum, for a certain period, on the basis of the rate fixed by the Central Government by notification in the Official Gazette in full discharge of his liability for the duty leviable on his production of certain goods, if after the manufacturer has made the payment on the basis of such rate for any period but before the expiry of that period such rate is reduced, the date of such reduction;
(e) in the case of a person, other than the manufacturer, the date of purchase of the goods by such person;”
(f) in any other case, the date of payment of duty.
7. From the bare reading of the above section, it is clear that the provision refers to the claim of refund of duty of excise only, it does not refer to any other amount collected without authority of law. In the case on hand, admittedly, the amount sought for as refund was the amount paid under mistaken notion which even according to the Department / Adjudicating Authority was not the liability of the appellant due to the prevalent exemption during the relevant period for the impugned services received by the appellant (payment was made under reverse charge mechanism).
8. In the given circumstances, I find that there is lack of authority to collect such service tax by the appellant. It would not give the Department an authority to retain the amount paid which otherwise was not payable by the appellant. Nothing may act as an embark on the right of the appellant to demand refund of payment made by them under the mistaken notion. The issue has been dealt by Hon’ble Supreme Court in the case of Mafatlal Industries vs. CCE reported as 1997 (89) ELT 247 SC. It has been held that one has to see whether the amount claimed is unconstitutional and outside the provisions of section 11B of the Act. In paragraph 113 of the said judgment My Lords have classified various refund claims into three groups or categories as follows:
i. The levy is unconstitutional-outside the provisions of the (1) Act or not contemplated by the Act.
ii. The levy is based on misconstruction or wrong or erroneous (II) Interpretation of the relevant provisions of the Act, Rules or Notifications: or by failure to follow the vital or fundamental provisions of the Act or by acting in violation of the fundamental principles of judicial procedure.
iii. Mistake of law – the levy or imposition was (III) unconstitutional or illegal or not exigible in law (without jurisdiction) and, so found in a proceeding initiated not by the particular assessee, but in a proceeding initiated by some other assessee either by the High Court or the Supreme Court, and as soon as the assessee came to know of the judgment (within the period of limitation), he initiated action for refund of the tax paid by him, due to mistake of law.
After referring several judgments and provisions of Section 11A & 11B of Central Excise Act, at paragraph 137 of the said judgment, their Lordships have concluded as under:
“137. Applying the law laid down in the decisions aforesaid, it is not possible to conclude that any and every claim for refund of illegal/unauthorized levy of tax can be made only in accordance with the provisions of the Act (Rule 11, Section 11B etc. as the case may be), and an action by way of suit or writ petition under Article 226 will not be maintainable under any circumstances. An action by way of suit or a petition under Article 226 of the Constitution is maintainable to assail the levy or order which is illegal, void or unauthorized or without jurisdiction and/or claim refund, in cases covered by propositions No. (1), (3), (4) and (5) in Dulalbhai’s case, as explained hereinabove, as one passed outside the Act and ultra vires. Such action will be governed by the general law and the procedure and period of limitation provided by the specific statute will have no application (Collector of Central Excise, Chandigarh) M/s. Doaba Cooperative Sugar Mills Ltd., Jalandhar 1988 (37) ELT 487 (SC). 1988 Supp. SCC 683; Escorts Ltd. v. Union of India [1994] Supp (3) SCC 86 Rule 11 before and after amendment or Section 11B cannot affect Section 72 of the Contract Act or the provisions of Limitation Act in such situations. My answer to the claims for refund broadly falling under the three groups of categories enumerated in paragraph 6 of this judgment is as follows:
Where the levy is unconstitutional – outside the category (I) provisions of the Act or not contemplated by the Act-
In such cases, the jurisdiction of the civil courts is not barred. The aggrieved party can invoke Section 72 of the Contract Act, file a suit or a petition under Article 226 of the Constitution and pray for appropriate relief inclusive of refund within the period of limitation provided by the appropriate law. – Dulabhai’s Case (Supra)-para 32 – clause (3) and (4).”
9. The said decision has been followed in the case of Natraj Venkat Associates vs. CCE reported as 2010 (17) STR 3 Madras. In this case also, the question arose was what is the relevant date of commencement of period of limitation for the purpose of section 11B and it was held that it could be the date of payment. The decision further clarified that the amounts paid under mistaken notion since cannot be considered as duty of excise, therefore, bar of limitation under section 11B cannot be applied and the limitation on this provision would not come in way of any person claiming refund of the amount which was not his liability. Similar decision has been given by the Division Bench of this Tribunal in the case of Motorola India Ltd. vs. CCE reported as 2006 (206) ELT 90 Kar. The Principal Bench of this Tribunal also in the case of Oriental Insurance Company Ltd. Vs. CCE reported as 2020 (1) TMI 324 while laying emphasis upon the decision of the Delhi High Court in the case of M/s. National Institute of Public Finance and Policy (Supra). has held that if service tax was not leviable but it was paid by mistake the amount has to be refunded to the assessee. It was held that the distinguishing feature for attracting the provision under section 11B is that the levy should have the colour of validity when it was paid and only consequent upon interpretation of law or adjudication the levy is liable to be ordered as refund when payment was effected if it has no colour of legality section 11B does not at all gets attracted.
10. In the present case also, due to the exemption of notification no. 25/2012 dated 20.06.2012 the services on which the appellant had paid service tax i.e. non air conditioned contract carriage under rent a cab service was the exempted service. Hence at the time of the payment the payment had no colour of liability as already discussed above section 11B of Excise Act is not applicable. Hence, the bar of limitation under section 11B also cannot be made applicable upon the said amount.
11. I further observe that the issue has repeatedly been clarified about non applicability of section 11B upon such refunds which pertains to an amount paid under mistake without any liability. The adjudicating authorities are observed to have miserably failed to follow the law as got settled by the Hon’ble Apex Court, by various High Courts and by various Benches of this Tribunal as in the case of M/s. Chhattisgarh Civil Supplies Corporation Ltd. vs. Commissioner of Central Excise & Service Tax reported as 2020 (2) TMI 1202-CESTAT New Delhi, in the case of Kerala Ex-serviceman Welfare Association vs. Comm of Service Tax & Central Excise reported as 2022 (3) TMI 985-CESTAT BANGALORE and in the case of Dexterous Products Pvt. Ltd. vs. Comm of C.Ex & S.T. Indore reported as 2019 (28) GSTL 51 (Tri-Del).
12. Hon’ble High Court of Bangalore in the case titled as XL Health Corporation India Pvt. Ltd. vs. UOI & Others reported as Writ Petition No. 37514/2017 decided on 22.10.2018 has held as follows:
“The adjudicating authorities throwing to the winds the principles of judicial discipline by not following the binding order passed by Higher forum reflects total callous negligent and disrespectful behaviour. The court held that same cannot be tolerated. If this kind of lack of Judicial discipline which if goes unpunished will lead to more litigation and chaos and such public servants are actually threat to the society.”
13. Keeping in view thereof, and the entire above discussion the findings of Commissioner (A) in the order under challenge are held absolutely in violation of above mentioned decisions rather are held to be in complete disrespect to the judicial precedent already been made by the superior judicial authorities. The Board is required to notify the appropriate warnings to the Departmental Adjudicating Authorities requiring them to observe the proper judicial protocol.
14. With these observations the order under challenge is held not sustainable and same is hereby set aside. Resultantly the appeal stands allowed.
(Order dictated and pronounced in the open court)
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