2022 (7) TMI 306 - HC - Service Tax

High Court grants tax refund to exporter, emphasizes right to claim refund for non-taxable services

M/s. Bellatrix Consultancy Services Versus The Commissioner Of Central Tax Bangalore

The High Court ruled in favor of the appellant in a tax refund case involving Service Tax payments. The Court held that the appellant, providing export ... Refund of amounts paid as Service Tax - rejection on grounds of limitation under Section 11B of the Central Excise Act, 1944 even though the levy under Section 66B of the Finance Act, 1994 does not apply to the activities of the Appellant - according to the Assessing Authority, appellant is not liable to pay service tax, but the application in respect of the taxes paid for the period between April 2016 to December 2016, are barred by time under Section 11B of Central Excise Act - HELD THAT:- In SHIV SHANKER DAL MILLS ETC. ETC VERSUS STATE OF HARYANA & ORS. ETC. [1979 (11) TMI 261 - SUPREME COURT] the Hon'ble Supreme Court of India speaking through Justice Krishna Iyer has held that The petitioners who had, under mistake, paid larger sums which, after the decision of this Court holding the levy illegal, have become refundable, demand a direction to that effect to the Market Committees concerned. There cannot be any dispute about the obligation or the amounts since the Market Committees have accounts of collections and are willing to disgorge the excess sums Indeed, if they file suits within the limitation period, decrees must surely follow. What the period of limitation is and whether Article 226 will apply are moot as is evident from the High Courts judgment, but we are not called upon to pronounce on either point in the view we take. In view of the admitted fact that the services rendered by the assessee satisfy all conditions of Rule 6A of the Service Tax Rules, 1994 and the services provided by it are export services, it is entitled for refund of the tax. In view of authority in the case of Shiv Shanker Dal Mills, the refund cannot be denied on the ground of limitation - appeal allowed - decided in favor of appellant. Issues:1. Tribunal's rejection of refund claims based on limitation under Section 11B of the Central Excise Act, 1944.2. Tribunal's rejection of refund claims contrary to legal precedents.3. Denial of substantive right of claim for refund based on CESTAT decisions.Analysis:1. The appellant sought a refund of Service Tax paid, contending that the levy under Section 66B of the Finance Act, 1994 did not apply to their activities. The Assistant Commissioner allowed a partial refund but rejected the rest as beyond the limitation period. The Commissioner (Appeals) and CESTAT upheld the rejection. The High Court noted that the appellant's services were export services, entitling them to a refund. Citing the case of M/s. Shiv Shanker Dal Mills, the Court emphasized that public bodies must return erroneously recovered funds without limitation. The Court ruled in favor of the assessee, allowing the appeal and directing the Revenue to refund the amount with interest within three months.2. The appellant argued that their services were not taxable, and the rejection of part of the refund claim was unjustified since they were not liable to pay tax at all. The Court agreed, emphasizing that the services provided were export services under Rule 6A of the Service Tax Rules, 1994. The Court referenced the principle from the Shiv Shanker Dal Mills case, stating that refunds cannot be denied based on limitation when funds were erroneously collected. Consequently, the Court held in favor of the assessee, setting aside the rejection of the refund amount and ordering the Revenue to refund the sum with interest.3. The Tribunal's decision to deny the refund claim based on CESTAT decisions was challenged by the appellant. The Court found that the appellant's services met the conditions for export services and were entitled to a refund. Relying on the Shiv Shanker Dal Mills case, the Court reiterated that public bodies must return erroneously collected funds without limitation. As a result, the Court ruled in favor of the assessee, allowing the appeal and instructing the Revenue to refund the amount with interest within three months as per the law.This detailed analysis of the judgment highlights the key issues raised, the arguments presented by the parties, and the Court's reasoning leading to the final decision in favor of the appellant.