Refund limitation and unjust enrichment: review order set aside, and refund allowed where service tax was not legally payable under exemption.

A review order rejecting refund on unjust enrichment was held unsustainable where the adjudicating authority had already verified the Chartered Accountant's certificate and related material showing the tax had not been recovered from buyers and was reflected as receivable. The later review could not reopen those recorded findings after appellate disposal, and the rejection was set aside. The refund claim was also held not barred by limitation under Section 11B because the service tax had not been legally payable under the applicable exemption notification; in that setting, the amount was treated as tax not lawfully due rather than an ordinary tax refund. The refund claims were allowed with consequential relief.

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Issues: (i) Whether the review order rejecting refund on the ground of unjust enrichment was sustainable; (ii) whether the refund claim was barred by limitation under Section 11B where the service tax itself was not payable under the exemption notification.

Issue (i): Whether the review order rejecting refund on the ground of unjust enrichment was sustainable.

Analysis: The refund had already been examined by the adjudicating authority, which recorded verification of the Chartered Accountant's certificate and other materials showing that the amount had not been recovered from buyers and was reflected as receivable. The later review order, passed after the appellate disposal, was held impermissible. Reliance was placed on the principle that the revisional or superior authority cannot reopen the matter in the manner adopted here once the appellate order had already dealt with it. The review authority also failed to consider the factual findings already recorded on unjust enrichment.

Conclusion: The review order was not sustainable and the rejection of refund on the ground of unjust enrichment was set aside in favour of the assessee.

Issue (ii): Whether the refund claim was barred by limitation under Section 11B where the service tax itself was not payable under the exemption notification.

Analysis: The claim arose from excess service tax paid on goods transport agency services when, under the applicable notification, no tax liability existed on the relevant portion. In such a situation, the claim was treated as one for return of an amount not lawfully payable as tax. On that basis, the limitation provision governing refund claims under Section 11B was held inapplicable.

Conclusion: The refund claim was not barred by limitation and the assessee was entitled to the amount claimed.

Final Conclusion: The orders below were set aside and the refund claims were allowed with consequential relief, leaving the assessee successful on both substantive grounds.

Ratio Decidendi: Where an amount collected as service tax was not legally payable under the applicable exemption regime, refund cannot be denied by applying the statutory refund limitation in the same manner as a normal tax refund, and a review order contrary to prior appellate disposal and recorded factual findings on unjust enrichment is unsustainable.

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