2017 (9) TMI 458 - AT - Service Tax

Appellants' Service Tax payments deemed not mistaken; Larger Bench to clarify time limit on refunds.

The Tribunal determined that the appellants' Service Tax payments were not made due to a mistake of law or fact. The conflicting Tribunal decisions ... Refund of amount collected without authority of law - service tax which was exempt by N/N. 13/2003-ST dt. 20.06.2003 as amended - denial of refund on the ground that refund was filed beyond the statutory time limit of one year prescribed under Section 11B of the CEA, 1944 - Held that: - as a result of this clarification dt. 26.05.2011, the benefit of this exemption notification No. 13/2003 became available to the appellant and the amount collected by the Revenue was therefore without any authority. It is settled position in law that beneficial circular has to be applied retrospectively while oppressive circular has to be applied prospectively. Time limitation - Held that: - there are conflicting decisions of the Division Benches of this Tribunal on whether the statutory time limit under Section 11B of the Central Excise Act, 1944 is applicable to claim for refund of tax which was collected without authority of law - In view of the divergent views of this Tribunal on the same issue, the matter requires reference to the Hon’ble President for constitution of a Larger Bench - matter to the Hon’ble President for constitution of a Larger Bench of this Tribunal to decide the issue Whether in respect of the claim for refund of illegal levy of Service Tax or of Service Tax collected without authority of law, the statutory time limit prescribed in terms of Section 11B of Central Excise Act 1944 will be applicable or not? - matter referred to Larger Bench. Issues Involved:1. Whether the Service Tax paid by the appellants was due to a mistake of law.2. Whether the statutory time limit under Section 11B of the Central Excise Act, 1944 is applicable to claims for refund of tax collected without authority of law.Detailed Analysis:1. Mistake of Law:The appellants filed for a refund of Service Tax paid as recipients of services from Foreign Commission Agents under Business Auxiliary Services, asserting that the tax was paid inadvertently since it was exempt under Notification No. 13/2003-ST. The notification exempts Business Auxiliary Services provided by a Commission Agent related to the sale or purchase of agricultural produce from Service Tax under Section 66 of the Finance Act, 1994. The appellants, engaged in the export of rice, claimed the tax paid was exempt. However, both lower authorities rejected the refund claims as they were filed beyond the statutory time limit of one year under Section 11B of the Central Excise Act, 1944.The appellants argued that the Service Tax was paid inadvertently and relied on CBEC Circular No. 143/12/2011-ST, which clarified that Business Auxiliary Services by commission agents abroad to promote rice export are exempt under Notification No. 13/2003-ST. However, the clarification existed only from 26.05.2011, after the tax payments were made. The amendment to Notification No. 13/2003 on 09.07.2004 included rice in the definition of agricultural produce, but a further amendment on 07.06.2005 deleted the clause defining commission agents. Therefore, at the time of payment, the appellants were not covered by the exemption, indicating no mistake of law or fact.2. Statutory Time Limit for Refund Claims:The core issue is whether the statutory time limit under Section 11B of the Central Excise Act, 1944 applies to claims for refunds of taxes collected without authority of law. The Tribunal's decisions are conflicting on this matter.The appellants relied on the Monnet International Ltd. case, where the Tribunal held that amounts deposited without authority of law cannot be considered Service Tax, and thus, Section 11B is not applicable. The Tribunal concluded that the refund claim within three years was valid, and the Department should not exploit the assessee's ignorance.Conversely, the Revenue cited the XL Telecom Ltd. case, where the Tribunal, following the Supreme Court's decision in Mafatlal Industries Ltd., held that even for illegal levies, the statutory time limit under Section 11B is non-extendable. The Supreme Court affirmed that refund applications must adhere to the prescribed time limits, even for illegal levies, and any direction to extend this period is unsustainable.Given the conflicting views, the Tribunal referred the matter to the Hon’ble President for constituting a Larger Bench to resolve whether the statutory time limit under Section 11B applies to refunds of illegal Service Tax collections.Conclusion:The Tribunal found that the payments made by the appellants were not due to a mistake of law or fact at the time of payment. The conflicting Tribunal decisions on the applicability of Section 11B's time limit to refunds of illegal levies necessitated a reference to a Larger Bench for a definitive ruling. The Registry was directed to take steps for this referral.