2025 (6) TMI 1010 - AT - Service Tax

Appeal allowed for refund of excess service tax deposits as advance deposits remain depositor's property under Section 11B

CESTAT Allahabad allowed the appeal regarding refund of excess service tax deposits made in January and May 2017, with refund claim filed on 28.12.2018. ... Refund of amount deposited in excess - time limitation in terms of Section 11B of the Central Excise Act, 1944 as made applicable on service tax matters by Section 83 of the Finance Act, 1994 - refund claim for the amount deposited in the month of January, 2017 and in May, 2017 was filed on 28.12.2018 - HELD THAT:- The unspent advanced deposit lying in balance of the applicant’s account current are not treated as duty for the purpose of Section 11B. Thus the claim of refund of such unspent deposit in account current cannot be hit by the limitation as provided by this Section. In case of Fluid Control Pvt. Ltd. [2018 (3) TMI 1857 - CESTAT MUMBAI] wherein it has been held that 'The limitation prescribed under Section 11B applies to the refund of duty amount. Inasmuch as the lower authorities themselves observed that the amount in question is “duty waiting to be debited”, this clearly shows that the same is not duty, in which case, the provision of Section 11B would not apply. Otherwise also I find that the PLA deposits are mere deposit for the purposes of their utilisation in the future and if the same is not in a position to be utilised, the depositor has to be held as owner of the said amount which is required to be refunded to them, in the absence of any limitation prescribed under the Act for such refund.' Thus, once it is admitted that the amount paid under challan no.00041 was an advance payment, the refund claim could not have been hit by the limitation period. Conclusion - The refund claim for the amount deposited twice as service tax for January 2017 is not barred by limitation because the amount under Challan was an unspent advance deposit. The impugned order is devoid of merits and is set aside - appeal allowed. 1. ISSUES PRESENTED and CONSIDERED- Whether the refund claim filed by the appellant for the amount deposited twice as service tax for the month of January 2017 is barred by limitation under Section 11B of the Central Excise Act, 1944 as made applicable to service tax matters by Section 83 of the Finance Act, 1994.- Whether the amount deposited under Challan No. 00041 dated 09.01.2017 constitutes a payment of service tax or an advance deposit (unspent balance) and the legal consequences thereof on limitation for refund claims.- The applicability and interpretation of Section 11B(2) regarding refund of unspent advance deposits lying in the applicant's current account.- The relevance and applicability of judicial precedents, including the Supreme Court decisions in Mafatlal Industries Ltd. and Porcelain Electrical MFG Company, on limitation and refund claims under service tax law.- Whether the limitation period under Section 11B applies to refund claims for unutilized advance deposits (PLA balances) and the legal treatment of such deposits.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Whether the refund claim is barred by limitation under Section 11BLegal framework and precedents: Section 11B of the Central Excise Act, 1944 prescribes a one-year limitation period for filing refund claims of excise duty, which has been made applicable to service tax matters by Section 83 of the Finance Act, 1994. The Supreme Court in Mafatlal Industries Ltd. (1997) held that refund claims must be filed within the statutory period and disapproved claims based on discovery of mistake of law beyond limitation. Similarly, Porcelain Electrical MFG Company (1990) held that refund claims before departmental authorities are governed by the statutory limitation and not by general limitation laws.Court's interpretation and reasoning: The impugned order rejected the refund claim as time barred because the refund was claimed on 28.12.2018 for a deposit made on 09.01.2017, exceeding the one-year period prescribed under Section 11B. The Tribunal noted that the appellant did not dispute the factual timeline but questioned whether limitation applied at all.Application of law to facts: The Tribunal agreed that if the amount deposited is treated as service tax paid, the refund claim is barred by limitation. However, the critical question is whether the deposit under Challan No. 00041 was a payment of service tax or an advance deposit.Treatment of competing arguments: The revenue relied on the limitation provisions and binding Supreme Court precedents to reject the refund claim. The appellant argued that the deposit was an advance payment (PLA balance) and thus not subject to limitation under Section 11B.Conclusion: The Tribunal found that the limitation under Section 11B applies only to refund of duty paid and not to unspent advance deposits lying in the appellant's account.Issue 2: Nature of deposit under Challan No. 00041 - payment of tax or advance depositKey evidence and findings: The appellant had two challans for January 2017: No. 00041 dated 09.01.2017 for Rs. 1,83,677 and No. 00065 dated 24.05.2017 for Rs. 1,83,820. The ST-3 returns for October 2016 to March 2017 did not reflect the amount from Challan No. 00041 as tax paid or adjusted against any liability. This indicated that the amount was never utilized against tax liability and remained as an unspent advance deposit.Court's interpretation and reasoning: The Tribunal held that since Challan No. 00041 amount did not appear in the returns as tax paid or adjusted, it was an advance deposit akin to a balance in an account current, not a payment of tax. As such, it did not acquire the status of duty and hence was not governed by the limitation under Section 11B.Application of law to facts: Section 11B(2) explicitly provides for refund of unspent advance deposits lying in the applicant's current account without limitation or examination of unjust enrichment. The Tribunal relied on this provision and held that the refund claim for the amount under Challan No. 00041 cannot be rejected on limitation grounds.Treatment of competing arguments: The revenue treated the amount as tax paid and relied on limitation to deny refund. The appellant contended it was an unspent advance deposit and thus exempt from limitation. The Tribunal sided with the appellant's interpretation supported by statutory provisions and precedent.Conclusion: The amount under Challan No. 00041 was an unspent advance deposit and refund of such amount is not subject to limitation under Section 11B.Issue 3: Applicability of judicial precedents on limitation and refund of advance depositsRelevant precedents: The Tribunal examined the Supreme Court decisions in Mafatlal Industries Ltd. and Porcelain Electrical MFG Company, which emphasize strict adherence to limitation for refund of duty paid. However, these decisions do not apply to refund of unspent advance deposits or PLA balances.Other Tribunal decisions cited include Fluid Control Pvt. Ltd. (2018), Jay Shree Tea & Industries Ltd. (2005), Josts Engineering Co. Ltd. (2018), and Pramukh Poly Products (2023), all holding that refund claims for unspent PLA balances are not governed by limitation under Section 11B as such amounts are not duty but deposits awaiting utilization.Court's interpretation and reasoning: The Tribunal distinguished the present case from those involving refund of duty paid under mistake of law or excess duty paid. It emphasized that unspent advance deposits are not duty and hence limitation under Section 11B does not apply. The Tribunal rejected the reliance on cases allowing refund beyond limitation treating deposits as mere deposits, noting that the legislature's intent is to restrict limitation for duty paid, not for advance deposits.Application of law to facts: The Tribunal applied the principle that PLA balances are refundable without limitation and that the appellant's claim falls within this category.Treatment of competing arguments: The revenue's reliance on Mafatlal and similar cases was rejected as not applicable to advance deposits. The appellant's reliance on Tribunal decisions supporting refund of PLA balances without limitation was accepted.Conclusion: The Tribunal held that the limitation period under Section 11B does not apply to refund claims of unspent advance deposits and PLA balances, and such claims are to be allowed.Issue 4: Interpretation of Service Tax Rules regarding advance payment and adjustmentRelevant provisions: Rule 6(1A) and Rule 4A of the Service Tax Rules, 1994, allow payment of service tax in advance and adjustment of such advance payments against future liabilities. The assessee is required to intimate such advance payments and their adjustments in returns.Court's interpretation and reasoning: The Tribunal noted that the appellant's deposit under Challan No. 00041 was an advance payment, not adjusted in the return for the relevant period, and thus remained an unspent balance. This aligns with the provisions allowing advance payment and adjustment.Application of law to facts: Since the amount was not adjusted against any tax liability, it retained the character of an advance deposit, supporting the appellant's refund claim free from limitation.Conclusion: The Service Tax Rules support the characterization of the deposit as an advance payment and the consequent refund claim without limitation.3. SIGNIFICANT HOLDINGS'Section 11B ibid, is the enabling provision under which statutory refund claims can be filed before the statutory functionaries under the statute. There is no other provision of law that can be invoked for granting of any refund claim which has been deposited either by mistake or for any other reason. The excess deposit or double deposit of the Service Tax for the month of January 2017 was actually made by them and that the refund for such excess deposit is rightfully available to the appellant for a period of one year as per the provision of law, counting the period from the date of deposit as the relevant date. From such provision of law, it is evident that one has to be vigilant in claiming the refund of any duty that might have been deposited in excess or paid by mistake in any given situation, and if the depositor is not careful in pursuing the benefit that is available to them, it would be automatically forfeited as being beyond the limitation period as prescribed.''Section 11B(2) recognizes that such unspent deposits laying in balance are to be refunded to the claimant without even examining the issue of unjust-enrichment.''The limitation prescribed under Section 11B applies to the refund of duty amount. Inasmuch as the lower authorities themselves observed that the amount in question is 'duty waiting to be debited', this clearly shows that the same is not duty, in which case, the provision of Section 11B would not apply. Otherwise also I find that the PLA deposits are mere deposit for the purposes of their utilisation in the future and if the same is not in a position to be utilised, the depositor has to be held as owner of the said amount which is required to be refunded to them, in the absence of any limitation prescribed under the Act for such refund.''It is clear that for withdrawing an amount from such account-current only requires permission from the Commissioner concerned. Neither the law of limitation nor the theory of unjust enrichment is applicable on such deposit. It is the money belonging to the appellant and has a right to withdraw it.''The amount lying balance in PLA in any case cannot take a colour of excise duty. Therefore, for refund of any unspent PLA balance Section 11B is not applicable for the simple reason that the Section 11b provides refund in respect of duty.'Core principles established:Refund claims for service tax paid in excess or by mistake must be filed within one year under Section 11B.Unspent advance deposits or PLA balances are not treated as duty and hence refund claims for such amounts are not subject to limitation under Section 11B.Section 11B(2) mandates refund of unspent advance deposits without consideration of unjust enrichment or limitation.Advance payments made but not adjusted against tax liability retain their character as deposits and can be refunded without limitation.Judicial precedents on refund of duty paid under mistake of law or excess duty do not apply to refund of unspent advance deposits.Final determinations on each issue:The refund claim for the amount deposited twice as service tax for January 2017 is not barred by limitation because the amount under Challan No. 00041 was an unspent advance deposit.The amount under Challan No. 00041 was not utilized against tax liability and thus not duty paid, but an advance deposit eligible for refund without limitation.The limitation period under Section 11B applies only to refund of duty paid, not to unspent advance deposits or PLA balances.The appellant's refund claim is valid and the impugned orders rejecting the refund on limitation grounds are set aside.