2024 (5) TMI 993 - AT - Service Tax

Revenue's appeal dismissed as refund allowed for service tax on ocean freight under reverse charge mechanism citing SC precedent

CESTAT Allahabad dismissed Revenue's appeal regarding refund claim for service tax paid on ocean freight under reverse charge mechanism for crude oil ... Delay in filling Refund Claim - limitation of 01 year u/s 11B - Imports crude oil - Unjust Enrichment - Liability for payment of service tax on reverse charge mechanism on the ocean freight - HELD THAT:- The issue in the present appeal is no more res integra and the Tribunal in the case of M/s RGI Meditech Pvt. Ltd. V/s Commissioner of Central Excise & Service Tax [2024 (1) TMI 578 - CESTAT ALLAHABAD] The Hon’ble Supreme Court in the case of Mafatlal Industries Ltd. V/s UOI [1996 (12) TMI 50 - SUPREME COURT] has laid the law by holding that the very collection/retention of tax without the authority of law entitles the person from whom it is collected to claim its refund. Thus, I do not find any infirmity in the impugned Order-In-Appeal and accordingly, the same is upheld. The appeal filed by the Revenue being devoid of any merits is dismissed. Issues Involved:1. Early Hearing Application2. Refund Claim Rejection3. Applicability of Section 11B of the Central Excise Act, 19444. Unjust Enrichment5. Jurisdictional Authority of Gujarat High Court6. Pending Appeal before the Supreme CourtDetailed Analysis:1. Early Hearing Application:The respondent filed a miscellaneous application for an early hearing of the appeal. The Tribunal considered the submissions and accepted the prayer for an early hearing. Consequently, the appeal was taken up for hearing on the same day.2. Refund Claim Rejection:The respondent, engaged in the manufacture of edible oil, filed a refund claim of Rs. 21,20,859/- on 06.09.2021, which was deposited after an audit for the period April 2017 to June 2017. The Department contended that the respondent was liable for service tax on ocean freight under the reverse charge mechanism. The Adjudicating Authority rejected the refund claim, citing a delay of 20 months from the due date (30th December, 2019), thus hitting the one-year limitation under Section 11B of the Central Excise Act, 1944.3. Applicability of Section 11B of the Central Excise Act, 1944:The Commissioner (Appeals) Noida allowed the appeal, directing the Adjudicating Authority to grant the refund. The Commissioner observed that the refund claim was rejected on two counts:- Liability to pay service tax on ocean freight as per notifications.- The refund claim was filed after one year from the date of deposit, thus time-barred under Section 11B.The Commissioner referred to the Gujarat High Court's judgment in Sal Steels Ltd. v. Union of India, which declared the levy of service tax on ocean freight as 'ultra vires' and struck down the relevant notifications. Consequently, the appellant was not liable to pay service tax on ocean freight. The Commissioner noted that the provisions of time bar under Section 11B do not apply when the levy of service tax is declared 'ultra vires.'4. Unjust Enrichment:The Commissioner found that the issue of unjust enrichment was not relevant in this case since the refund was denied solely on the grounds of time bar and applicability of service tax on ocean freight. There was no allegation that the incidence of tax was passed on to any other person.5. Jurisdictional Authority of Gujarat High Court:The Revenue contended that the Gujarat High Court is not the jurisdictional High Court and that its decision in Sal Steels Ltd. has been challenged before the Supreme Court. However, the Tribunal found that the issue is no longer res integra, as the Gujarat High Court's judgment remains operative without a stay from the Supreme Court.6. Pending Appeal before the Supreme Court:The Tribunal noted that the same argument regarding the pendency of the appeal against Sal Steels Ltd. was raised before a coordinate bench in Commissioner of Service Tax, Ahmedabad v. Kiri Dyes and Chemical Ltd. The coordinate bench dismissed the Revenue's appeal, upholding the order deleting the demand for service tax on ocean freight. The Supreme Court dismissed the Civil Appeal against this order, reinforcing the Tribunal's stance.Conclusion:The Tribunal upheld the Commissioner (Appeals) Noida's order, directing the Adjudicating Authority to grant the refund within 30 days. The Tribunal found no infirmity in the impugned Order-In-Appeal and dismissed the Revenue's appeal, deeming it devoid of any merits.