Refund of tax paid under mistake of law cannot be barred by statutory limitation where the levy was not exigible.

Refund of service tax paid on warehousing services covered by the negative list was held not to be barred by section 11B of the Central Excise Act, 1944 because the payment was treated as one made under mistake of law for a levy not exigible under section 66D of the Finance Act, 1994. On that principle, a payment without authority of law does not acquire the character of duty, and the statutory refund limitation could not defeat restitution. A further objection that supporting evidence was insufficient was rejected because it was raised for the first time at the appellate stage and was not part of the show cause notice or original adjudication. The refund was allowed with consequential relief.

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Issues: (i) whether refund of service tax paid on warehousing services covered by the negative list was barred by limitation under section 11B of the Central Excise Act, 1944; (ii) whether the refund could be denied on the ground of alleged insufficiency of supporting evidence when such objection was not part of the show cause notice or original adjudication.

Issue (i): whether refund of service tax paid on warehousing services covered by the negative list was barred by limitation under section 11B of the Central Excise Act, 1944.

Analysis: The service in question was found to be outside the tax net under section 66D of the Finance Act, 1994. The amount paid was treated as a payment made under mistake of law and not as a valid levy. On that premise, the settled line of authority was applied to hold that a sum paid without authority of law does not acquire the character of duty merely because it was paid and that the limitation prescribed for statutory refund claims under section 11B does not bar restitution of such amounts. The principle that no tax can be retained without authority of law and that the relevant test is whether the Revenue could have lawfully recovered the amount was also applied.

Conclusion: The limitation under section 11B was held not to bar the refund claim, and the assessee was entitled to refund.

Issue (ii): whether the refund could be denied on the ground of alleged insufficiency of supporting evidence when such objection was not part of the show cause notice or original adjudication.

Analysis: The objection regarding inadequate documentary support was examined as having been raised for the first time at the appellate stage. Since the show cause notice and the original order had not proceeded on that basis, the appellate finding was held to have travelled beyond the scope of the proceedings. Such a ground could not validly sustain rejection of the refund claim.

Conclusion: The evidentiary objection was rejected and could not justify denial of refund.

Final Conclusion: The impugned orders were set aside and the refund claim was allowed with consequential relief according to law.

Ratio Decidendi: Amounts paid under a mistake of law for a levy that was never exigible do not acquire the character of duty, and the statutory limitation for refund under section 11B of the Central Excise Act, 1944 does not bar restitution of such payments.

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