Court allows refund for mistaken service tax payment, citing violation of Constitution.

The High Court ruled that the limitation under Section 11B does not apply to refund claims for service tax paid under a mistake of law. The appellant, who inadvertently paid service tax twice for the same period, was entitled to a refund as the duty had already been discharged. The court highlighted that retaining excess tax paid would violate the Constitution. The Tribunal allowed the appeal, granting the appellant a refund for the inadvertent payment made without any liability.

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Issues involved:
The issue involves the eligibility of a refund claim for inadvertent payment of service tax beyond the prescribed period under Section 11B of the Central Excise Act, 1944.

Details of the Judgment:

1. Issue 1 - Eligibility for Refund Claim:
- The appellant provided taxable service and inadvertently paid service tax twice for the same period.
- The department rejected the refund claim as it was made after the prescribed one-year period from the date of deposit.
- The appellant contended that the refund claim was for the amount paid inadvertently, not for duty.
- The High Court held that the limitation under Section 11B does not apply to refund claims for service tax paid under a mistake of law.
- The appellant's case, although not a mistake of law, was paid by mistake, and the department admitted the double payment.

2. Issue 2 - Legal Precedents:
- The High Court of Madras also ruled that when service tax is paid by mistake, a claim for refund cannot be barred by limitation.
- The court emphasized that allowing the revenue to retain the excess service tax paid would go against the Constitution's mandate.
- The Tribunal in a separate case held that retaining any amount paid without liability or in excess violates the Constitution.

3. Conclusion:
- The Tribunal concluded that the appellant is entitled to a refund of the service tax paid inadvertently.
- The duty had already been discharged, and the payment was made without any liability.
- The Tribunal set aside the impugned order and allowed the appeal with consequential relief, if any, in accordance with the law.

This judgment clarifies that the limitation under Section 11B does not apply to refund claims for service tax paid under a mistake of law. The appellant, in this case, was entitled to a refund for the inadvertent payment made without any liability, as the duty had already been discharged. The court emphasized the importance of not allowing the revenue to retain excess tax paid, as it would go against the constitutional mandate.

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