Service provider wins refund battle as unjust enrichment rule doesn't apply to wrongly paid amounts under mistake of law

CESTAT Chandigarh dismissed Revenue's appeal regarding refund claim with interest under Section 11BB of Central Excise Act, 1944. The appellant proved no service tax was charged to SEZ units through invoices, establishing they bore the refund amount burden. Commissioner (Appeals) correctly held that Rule 6(3) CCR Rules refers to "amount" not "duty/tax," making unjust enrichment doctrine inapplicable. Denial of wrongly paid amount refund violates Article 265 of Constitution. Erroneous payment under mistake of law doesn't attract unjust enrichment provisions under Section 11B Central Excise Act.

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Issues Involved:
1. Refund of Rs. 2,52,31,030/- along with interest on delayed payment.
2. Applicability of Rule 6(3) and Rule 6(6A) of the CCR Rules, 2004.
3. Unjust enrichment under Section 11B of the Central Excise Act, 1944.
4. Limitation period for refund claims.

Issue-wise Detailed Analysis:

1. Refund of Rs. 2,52,31,030/- along with interest on delayed payment:
The appeal by the Revenue contests the refund granted by the Commissioner (Appeals) of Rs. 2,52,31,030/- along with interest under Section 11BB of the Central Excise Act, 1944. The respondent had paid this amount under Rule 6(3)(i) of the CCR Rules for services provided to SEZ units during the disputed period (October 2011 to March 2012). The respondent later filed for a refund, claiming the payment was made erroneously.

2. Applicability of Rule 6(3) and Rule 6(6A) of the CCR Rules, 2004:
The respondent argued that Rule 6(3) of the CCR Rules was not applicable to services provided to SEZ units without payment of service tax, as per Rule 6(6A). The Commissioner (Appeals) agreed, noting that Rule 6(3) refers to an 'amount' and not 'duty' or 'tax', and the amount payable under Rule 6(3) is not available as input tax credit to the recipient.

3. Unjust enrichment under Section 11B of the Central Excise Act, 1944:
The adjudicating authority rejected the refund on grounds of unjust enrichment, asserting that the respondent must have passed on the cost to their clients. However, the Commissioner (Appeals) and the Tribunal found that the doctrine of unjust enrichment is not applicable in cases of refund of Cenvat credit. The respondent provided evidence, including invoices and a Chartered Accountant's affidavit, showing no service tax was charged to SEZ units.

4. Limitation period for refund claims:
The Tribunal referred to various High Court decisions, including M/s 3e Infotech and Abdul Samad, which held that claims for refunds due to payments made by mistake cannot be barred by the limitation period under Section 11B. The Tribunal emphasized that retaining excess service tax paid by mistake would violate Article 265 of the Constitution of India.

Conclusion:
The Tribunal upheld the Commissioner (Appeals) order, stating that the erroneous payment of duty/tax under a mistake of law does not attract the provisions of unjust enrichment under Section 11B of the Central Excise Act. The appeal by the Revenue was dismissed, affirming the refund to the respondent.

Order Pronounced:
(Order pronounced in the open court on 13.09.2024)

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