2009 (8) TMI 150 - HC - Service Tax

Section 11-B not applicable where sums are deposits, refund allowed and prior denial as time-barred overturned

HC held the sums deposited were deposits and not duty, so Section 11-B did not govern refund. The Asst. Commissioner erred by treating Section 11-B as ... Refund of the amounts paid as service tax - whether Section 11-B of the Act is attracted to effect refund? - HELD THAT:- Admittedly, the sums deposited by the petitioner is held to be a deposit and not as a duty, therefore, there was no necessity for the petitioner to have made a claim invoking Section 11B of the Act for refund. The Asst. Commissioner of Central Excise by a misconception of law assumed that Section 11-B of the Act applied, so as to decline the petitioner's claim for refund of the amount in deposit, on the premise that the claim was beyond the period of limitation. The order impugned insofar as it relates to the denial of the claim for refund is unsustainable and is quashed. Writ petition is ordered accordingly. Issues:1. Whether the petitioner is entitled to a refund of the amounts paid as service tax under the Finance Act, 1994.2. Whether Section 11-B of the Act is applicable to the refund claim.3. Whether the denial of the refund claim by the Asst. Commissioner of Central Excise is justified.Analysis:1. The petitioner, engaged in construction activities, paid amounts through T.R.-6 challans despite not being liable to pay service tax under the Finance Act, 1994. The Asst. Commissioner of Central Excise acknowledged that the construction services were non-taxable as per a Board Circular, and the amounts paid were akin to a deposit with the Government. The Asst. Commissioner wrongly rejected the refund claim based on an erroneous interpretation of Section 83 of the Finance Act, 1994, which led to the petition for refund.2. The Asst. Commissioner's decision to reject the refund claim was based on the misconception that Section 11B of the Act applied to the refund process. However, since the amounts were treated as a deposit and not a duty, there was no requirement for the petitioner to invoke Section 11B for the refund. The Asst. Commissioner's misapplication of the law in this regard rendered the denial of the refund claim unsustainable.3. The High Court found that the Asst. Commissioner's denial of the refund claim was unjustified due to the incorrect application of Section 11B. The Court quashed the order that refused the refund and directed the 2nd respondent to refund the total amount of Rs. 1,23,96,948 to the petitioner promptly, within two weeks from the judgment date. The judgment clarified that the petitioner was not liable to pay service tax and was entitled to the refund of the deposited amounts, emphasizing the importance of correct legal interpretation in such matters.