Advance service tax payment not adjusted against liability was not treated as duty for refund limitation purposes.

An amount deposited through GAR challan and promptly intimated as advance service tax under Rule 6(1A) of the Service Tax Rules, 1994 did not retain the character of duty where it was never adjusted against any later tax liability and was not shown as adjusted in the ST-3 returns. The mandatory disclosure and adjustment mechanism under Section 70 of the Finance Act, 1994 was not satisfied, so the payment could not be treated as duty paid for refund purposes. On that basis, the refund claim was not barred by the limitation under Section 11B of the Central Excise Act, 1944 and was allowable.

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Issues: Whether the amount deposited through GAR challan, treated by the assessee as an advance payment under Rule 6(1A) of the Service Tax Rules, 1994 and never adjusted against any later tax liability, retained the character of tax or duty so as to attract the limitation under Section 11B of the Central Excise Act, 1944.

Analysis: The payment was promptly intimated to the department as advance payment and, on the record, was not reflected as adjusted service tax in subsequent ST-3 returns. The mandatory mechanism under Rule 6(1A) required timely intimation and disclosure of adjustment in the return under Section 70 of the Finance Act, 1994. Since the amount was never adjusted against any tax liability, it did not acquire the character of duty paid. In such circumstances, the refund claim could not be rejected on the footing that the statutory limitation applicable to duty refunds governed the claim.

Conclusion: The limitation under Section 11B of the Central Excise Act, 1944 did not bar the refund, and the claim was allowable.

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