Refund of tax paid without liability cannot be denied by mechanical limitation objections or an inapplicable circular.

Service tax paid on an activity outside the levy was refundable where the claimant showed that the burden had not been passed on to customers. The authorities could not defeat the claim by mechanical reliance on limitation or by invoking a later departmental circular that had been withdrawn and was inapplicable. The Court found the refund decision had not been examined objectively and directed refund of the unpaid amount with interest.

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Issues: Whether the petitioner was entitled to refund of service tax paid on activities not covered by the levy, and whether the claim could be defeated by limitation and procedural objections.

Analysis: The petitioner, a Government of India undertaking, had paid service tax under a mistaken impression though the underlying activity was outside the purview of the levy at the relevant time. The refund claim was partly rejected on limitation and the balance was not returned despite the appellate order. The Court held that the authorities acted mechanically and failed to examine the refund claim objectively, particularly when the petitioner asserted that the tax burden had not been passed on to the customer. It also noted that the departmental reliance on a later circular could not assist the revenue, especially when that circular had itself been withdrawn.

Conclusion: The petitioner was entitled to refund of the unpaid amount with interest, and the objection based on limitation did not defeat the claim in the circumstances.

Ratio Decidendi: Tax paid without liability is refundable where the claimant establishes that the burden was not passed on and the authorities cannot refuse refund by mechanical reliance on limitation or an inapplicable departmental circular.

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