Tribunal grants refund in Service Tax appeal, citing mistake of law.

The Tribunal allowed the appeal in a case concerning a claim for refund of excess Service Tax paid under the "Reverse Charge Mechanism." The appellant successfully argued that the payment was made under a mistake of law and was not subject to the time limitation under Section 11B of the Central Excise Act, 1944. The Tribunal granted the refund of Rs. 6,57,070 along with interest, holding that the bar of unjust enrichment did not apply as the appellant, being the service recipient, did not pass on the excess payment incidence to another person.

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Issues:
Claim for refund under Service Tax; Time limitation under Section 11B of the Central Excise Act, 1944; Bar of unjust enrichment.

Analysis:
The appellant filed a claim for refund of excess Service Tax paid under the "Reverse Charge Mechanism" for Goods Transport Agency Service, amounting to Rs. 6,57,070. The appellant contended that they mistakenly paid Service Tax on 100% of the consideration, whereas Notification No. 26/2012-ST dated 20/06/2012 stipulated that Service Tax was applicable only on 25% of the consideration. The Original Authority rejected the refund claim as time-barred under Section 11B of the Central Excise Act, 1944, applied to Service Tax through the Finance Act, 1994. The Commissioner (Appeals) upheld the rejection, citing unjust enrichment, as the appellant failed to prove that the excess payment incidence was not passed on to another person.

The appellant argued that the excess amount sought as a refund was paid under a mistake of law and did not represent actual Service Tax liability, as per the notification. They contended that being the service recipient under the "Reverse Charge Mechanism," the question of passing on the incidence to another person did not arise. Citing judgments from the Bombay High Court and Karnataka High Court, the appellant asserted that payments made by mistake of law do not fall under Section 11B limitations and that such amounts should be treated as deposits with the government.

After hearing both parties, the Tribunal found merit in the appellant's contentions. The Tribunal held that the Order-in-Appeal was not sustainable, allowing the appeal and granting the refund of Rs. 6,57,070 along with interest from 26/08/2015. The Tribunal agreed with the appellant's argument that the excess payment was made under a mistake of law and that the bar of unjust enrichment did not apply since the appellant was the service recipient.

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