2017 (10) TMI 659 - HC - Central Excise

Service tax refund allowed for payment made under mistake of law on non-leviable construction service

The Bombay HC allowed an appeal regarding refund of service tax paid under mistake of law. The appellant had paid service tax on Commercial or Industrial ... Refund of service tax paid under mistake of law - limitation for refund claims under Section 11 B of the Central Excise Act - applicability of Section 11B to service tax refunds - mistake of law exception to statutory limitationRefund of service tax paid under mistake of law - limitation for refund claims under Section 11 B of the Central Excise Act - mistake of law exception to statutory limitation - Whether the one year limitation under Section 11B applies to a refund claim for service tax paid under a mistake of law - HELD THAT: - The Court held that the question is no longer res integra and applied the Division Bench decisions of this Court in Hindustan Cocoa Products and Commissioner of Central Excise, Nagpur v. SGR Infratech Ltd., which treat refunds of service tax paid under a mistake of law as outside the limitation prescribed by Section 11B. The Supreme Court decision relied upon by the Tribunal (Collector of C.E., Chandigarh v. Doaba Co operative Sugar Mills) does not preclude the exception where duty or tax was paid under a mistake of law. Applying those precedents to the admitted facts - that the appellants paid service tax on commercial or industrial construction services which were not leviable - the limitation in Section 11B was held inapplicable and the Tribunal's application of Section 11B to bar the refund was erroneous. For these reasons the impugned order was quashed insofar as it rejected the refund claim on the ground of limitation. [Paras 5, 6, 7]Appeals allowed; impugned order quashed insofar as it rejected the refund on limitation grounds; refund of the claimed amount directed.Final Conclusion: The High Court allowed the appeals, held that Section 11B limitation does not bar refund of service tax paid under a mistake of law, quashed the Tribunal's order to that extent and directed the respondent to refund the specified amount within three months. Issues:Challenge to order of Customs, Excise and Service Tax Appellate Tribunal regarding refund claim for service tax paid under a mistake of law.Analysis:The Appellant challenged a common order by the Customs, Excise and Service Tax Appellate Tribunal upholding Orders-in-Appeal passed by the Commissioner of Central Excise and Customs. The Appellant, engaged in providing 'Commercial or Industrial Construction' service, secured a contract for construction work and paid service tax under the belief that it was applicable. A refund claim was filed, but it was rejected as time-barred under Section 11 B of the Central Excise Act, 1944. The Commissioner (Appeals) partly allowed the appeal, and the Appellate Tribunal dismissed it, citing limitation under Section 11 B.The Appellant argued that Section 11 B does not apply to refund claims for service tax paid under a mistake of law. They relied on judgments by the High Court and the Supreme Court to support this contention. The Respondent, however, supported the impugned order, stating that the limitation under Section 11 B applies to all refund claims. The High Court noted that previous decisions by the Division Bench supported the Appellant's position that the limitation under Section 11 B does not apply to refund claims for service tax paid under a mistake of law. The Court found the impugned order erroneous in applying the limitation to the present case and allowed the Appeals, directing the Respondent to refund the amount to the Appellant.In conclusion, the High Court held that the limitation under Section 11 B does not apply to refund claims for service tax paid under a mistake of law. The impugned order was set aside, and the refund claim of the Appellant was fully allowed. The Respondent was directed to refund the specified amount within three months, with no order as to costs.