Refund of tax paid by mistake is not barred by Section 11B, but interest may be denied for delay in pursuing the claim.

Service tax paid on ledger maintenance services under a mistaken belief was treated as refundable where no tax was legally due, and such payment could not be retained by the department merely because it had been collected. Applying the stated principle on amounts paid under mistake of fact, the refund was held to fall outside Section 11B of the Central Excise Act, 1944, so limitation under that provision did not defeat the claim. The refund rejection on limitation was therefore set aside. Interest on the refunded amount was declined because the application was not pursued with due promptness after the appellate order.

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Issues: Whether service tax paid on ledger maintenance services under a mistaken notion could be refunded without being defeated by the limitation under Section 11B of the Central Excise Act, 1944, and whether interest on the refund was payable.

Analysis: The service rendered for MESCOM had already been held not taxable in the petitioner's case, and the Revenue's further challenge had been withdrawn. Following the principle applied in earlier binding authority, an amount paid under mistake of fact, where no tax was legally due, does not become duty or service tax merely because it was paid to the department. In such a situation, the department has no authority to retain the amount, and the refund claim is outside the purview of Section 11B of the Central Excise Act, 1944. However, as the refund application was not pursued with due promptness after the appellate order, interest on the refunded amount was declined.

Conclusion: The refund claim was held maintainable and the rejection based on limitation was set aside. The petitioner was entitled to refund of the tax amount, but not to interest.

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