Mistake-of-law payments on exempt construction services are refundable as revenue deposits, with compensatory interest and no separate recipient certificate.

Service tax paid on exempt construction services under a mistake of law is treated as a revenue deposit rather than legally leviable tax. Refund of such deposits is therefore outside the framework of Sections 11B and 11BB of the Central Excise Act, 1944, and carries compensatory interest at 12% per annum. Where the service recipient deducted tax from the contractor's running bills and deposited it under the reverse charge mechanism, that admitted payment establishes the relevant incidence; separate certificates from the service recipient are unnecessary. The stated analysis supports full refund of amounts paid directly and through reverse charge.

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Issues: (i) Whether refund of service tax deposited by the service recipient under the reverse charge mechanism could be denied for want of separate certificates from the service recipient; (ii) Whether service tax paid on exempt construction services under a mistake of law was refundable with interest at 12% per annum.

Issue (i): Whether refund of service tax deposited by the service recipient under the reverse charge mechanism could be denied for want of separate certificates from the service recipient.

Analysis: The show-cause notice recorded that the Rajasthan Housing Board deducted service tax from the appellants' running bills and deposited it with the Government under the reverse charge mechanism. This admission established that the incidence of the amount had been borne by the appellants and that the service recipient had made the payment. Separate certificates from the service recipient were therefore unnecessary.

Conclusion: The appellants are entitled to refund in full of the amount deposited by the service recipient under the reverse charge mechanism, in favour of the assessee.

Issue (ii): Whether service tax paid on exempt construction services under a mistake of law was refundable with interest at 12% per annum.

Analysis: The construction activity was exempt, and the amounts paid as service tax were not legally leviable. Such payment made under a mistake of law was a revenue deposit rather than duty or service tax. Consequently, Sections 11B and 11BB of the Central Excise Act, 1944 did not govern either the refund claim or interest. The ruling concerning reassessment-based crystallisation of refund was distinguishable because no reassessment was required in these matters.

Conclusion: The appellants are entitled to refund of the amounts paid by them and by the service recipient, with interest at 12% per annum, in favour of the assessee.

Final Conclusion: Amounts paid on exempt services under a mistake of law must be returned as deposits, including amounts recovered from the contractor's bills and paid through the reverse charge mechanism, with compensatory interest at 12% per annum.

Ratio Decidendi: A payment not legally leviable as service tax, having been made under a mistake of law, is a revenue deposit outside Sections 11B and 11BB of the Central Excise Act, 1944, and its refund carries interest at 12% per annum.

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