Ocean freight service tax refund allowed despite revenue's time-bar objection following Supreme Court decision

CESTAT Ahmedabad allowed the appeal for refund of service tax paid on ocean freight. The appellant filed refund application on 23.11.2020 following Gujarat HC decision in SAL Steel Ltd. Revenue rejected claim as time-barred under Section 11B(5)(B)(ec) of Central Excise Act, 1944. However, SC dismissed revenue's appeal in Kiri Dyes Chemicals Ltd. on 01.09.2023, holding service tax levy unsustainable. Appellant could file refund within one year from SC decision i.e., by 31.08.2024. Since application was filed much before this deadline, and Section 142(3) of CGST Act, 2017 only requires compliance with Section 11B(2), the refund claim was valid. Impugned order set aside, appeal allowed.

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Issues:
1. Refund claim filed beyond the specified period.
2. Applicability of Section 142(3) of the CGST Act, 2017 for refund claims.
3. Interpretation of the time limit for filing refund claims under Section 11B of the Central Excise Act, 1944.

Analysis:
The appeal was filed against the rejection of a refund claim of Rs.1,85,79,431/- by the first appellate authority. The Appellant, a steamer agent, was made liable to pay service tax under reverse charge mechanism for the period 22.01.2017 to 22.04.2017. The levy of service tax on ocean freight charges was challenged before the Hon'ble Gujarat High Court, which held the levy as ultra vires. The Appellant filed a refund application based on this decision, but it was rejected on the grounds of being time-barred under Section 11B of the Central Excise Act, 1944.

The Appellant argued that the time limit should be considered from 01.09.2023, as the Hon'ble Supreme Court dismissed a civil appeal by the revenue department on that date, holding the levy of service tax as not maintainable. The Appellant filed the refund claim on 23.11.2020, well within the extended time limit. The Tribunal found merit in this argument and noted that the provisions of Section 142(3) of the CGST Act, 2017 allow for refund claims filed before or after the introduction of GST laws. The Tribunal referred to a decision by the Hon'ble Bombay High Court, emphasizing that any amount eventually accruing should be paid in cash, as per Section 142(3) of the CGST Act, 2017.

The Tribunal held that the rejection of the refund claim based on the time limit specified in Section 11B of the Central Excise Act, 1944 was not sustainable. It further emphasized that only the provisions of sub-section (2) of Section 11B of the Central Excise Act, 1944 should be considered for processing refunds, as per Section 142(3) of the CGST Act, 2017. The Tribunal allowed the appeal, stating that the Appellant is entitled to a refund of the service tax paid on ocean freight charges during the disputed period, in line with the provisions of Section 142(3) of the CGST Act, 2017.

In conclusion, the Tribunal set aside the impugned order and allowed the appeal, granting the Appellant the refund of the service tax paid on ocean freight charges during the disputed period. The decision was pronounced in the open court on 10.09.2024.

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