2025 (8) TMI 3 - AT - Service Tax

Amendment to Notification 6/2014-ST is Prospective; Refund Claims Limited by Section 11B Time Bar

M/s. Tamil Nadu Water Supply and Drainage Board Versus Commissioner of GST & Central Excise, Chennai

The CESTAT Chennai held that the amendment to Notification No.25/2012-ST by Notification No.6/2014-ST is prospective, not retrospective, and the unamended ... Refund claim - applicability of Entry No. 25 of Notification No.25/2012-ST dated 20.06.2012 to service provider - rejection on the grounds that the appellant is not the service provider who had paid service tax to the Government and the eligible person to claim the refund would be the service providers - applicability of limitation u/s 11B of the Central Excise Act, 1944 as made applicable to Finance Act by virtue of Section 83 of the Finance Act, 1994. HELD THAT:- There is no express or clear intent emanating from the Notification No.6/2014-ST dated 11.07.2014, amended the Notification No.25/2012-ST dated 20.06.2012 so as to substitute the item (a) of entry Sl.No.25, that it is retrospective in its operation. Moreover, since it has been stated by CBEC to be with an intent to expand the tax base, it fortifies our view that the said substitution of item (a) in Sl.No.25 is only prospective in nature. Further, it is noted that the refund claim was in respect of Service Tax paid during the period from July 2012 to September 2013 and has been filed on 13.06.2014, even prior to the issue of the Notification No.6/2014-ST dated 11.07.2014, which amended the Notification No.25/2012-ST dated 20.06.2012. Therefore, it is the unamended entry at Sl.No.25(a) of the notification No.25/2012-ST ibid that would have to be applied while evaluating the appellant’s claim of refund. Reliance placed on the Judgement of the Honourable Apex Court in Commissioner of Cus. (Import), Mumbai v. Dilip Kumar & Company, [2018 (7) TMI 1826 - SUPREME COURT (LB)], wherein the Honourable Supreme Court has held that when an assessee claims tax exemption under a notification, the burden to prove its entitlement to the benefit of such exemption notification is on the assessee who is claiming such exemption. The exemption as provided in the unamended clause 25(a) of the Notification No.25/2012-ST ibid provided exemption to Services provided to Government, a local authority or a governmental authority by way of carrying out any activity in relation to any function ordinarily entrusted to a municipality in relation to water supply, public health, sanitation conservancy, solid waste management or slum improvement and upgradation. Hence, given the fact that the appellant’s status as a governmental authority is not in dispute, and in light of the facts as stated in the show cause notice itself as to the nature of the activities of the services provided by the service providers to the appellant, as well as in view of the expansive nature of the exemption as it existed when the service providers rendered the service to the appellant as provided in the unamended exemption clause 25(a) of the notification ibid; which brought within its ambit “any activity in relation to water supply”; the appellant’s case comes within the parameters of the unamended exemption clause 25(a) of the exemption notification No.25/2012-ST ibid. On examining the N/N. 6/2014-ST dated 11.07.2014, by which the N/N. 25/2012-ST ibid came to be amended to substitute the clause 25(a), we find that it does not convey any clear legislative intent to give the amendment brought about by the said notification, a retrospective effect. By the said substitution of clause 25(a), it does not confer any benefit and in contradistinction it widens the tax base by taking away the benefit of exemption from services that were hitherto excluded. The restriction of the exemption to the specified services post the substitution, thus imposes fresh burden on services that had till then remained excluded, thereby attracting the presumption of prospectivity. Given that the clause 25(a) as it existed was clear and unambiguous, the substitution cannot be considered to be clarificatory or declaratory either and therefore, its operation can only be construed to be prospective in nature. Applicability of the time limit prescribed under Section 11B, as made applicable to the Finance Act, 1994 by virtue of Section 83 of the Finance Act ibid - HELD THAT:- The appellant’s refund claim although found to be sustainable on merits, but nevertheless, are found to attract the limitation prescribed under Section 11B of the Central Excise Act, ibid. Therefore, it is only the amount of tax paid within the period of limitation prescribed under Section 11B of the Central Excise Act, which the appellant can legally claim a stake to, subject however to satisfying the refund sanctioning authority that the appellant is not being unjustly enriched. In matters involving refund of tax that has already been paid to the Government Exchequer, the evidence adduced should be a certification by an independent professional, so that it carries the credibility of impartiality. However, given that the refund claim of the appellant for the period within limitation merits consideration and has to be quantified, for which purpose, the matter remitted to the adjudicating authority, the appellant is permitted to produce before the adjudicating authority, a certificate by an independent chartered accountant to the effect that the appellant’s records and relevant documents have been verified and it has been found that the appellant is not being unjustly enriched. The appellant is entitled to refund of the amount due which is not barred by the period of limitation specified under Section 11B, it is held that the impugned Order in Appeal is untenable and cannot sustain - matter remanded back to the jurisdictional adjudicating authority to quantify and refund the amount due which is not barred by the period of limitation specified under Section 11B, duly putting the appellant to notice as to the amount so quantified and subject to the appellant producing a chartered accountant’s certificate to substantiate that the appellant is not being unjustly enriched. Appeal disposed off by way of remand. ISSUES: Whether the refund claim premised on the benefit of exemption under Sl.No.25(a) of Notification No.25/2012-ST to the service providers is tenable.Whether the refund claim, if tenable on merits, is barred by limitation under Section 11B of the Central Excise Act, 1944 as applied to service tax by Section 83 of the Finance Act, 1994.Whether Section 17(1)(c) of the Limitation Act applies to refund claims based on mistake of law in service tax matters.Whether the doctrine of unjust enrichment applies to the refund claim and the evidentiary standard required to establish non-enrichment.Whether the amendment by Notification No.6/2014-ST dated 11.07.2014 substituting clause 25(a) of Notification No.25/2012-ST has retrospective effect.The legal effect of the Supreme Court's ruling in Mafatlal Industries Ltd. v. Union of India on refund claims arising from mis-interpretation or misapplication of tax provisions.Whether refund claims based on a decision in another assessee's case can be entertained after finality of assessment orders.The applicability of equitable considerations, including passing on of tax burden and the defense of expenditure of collected tax, in refund claims under Section 72 of the Contract Act. RULINGS / HOLDINGS: The appellant's refund claim is tenably premised on the availability of exemption under the unamended clause 25(a) of Notification No.25/2012-ST, as the amendment by Notification No.6/2014-ST is prospective and not retrospective.The refund claim, although sustainable on merits, is subject to the limitation period prescribed under Section 11B of the Central Excise Act, 1944, as made applicable to service tax by Section 83 of the Finance Act, 1994; hence, claims beyond the limitation period are barred.Section 17(1)(c) of the Limitation Act is not applicable to refund claims arising under the Central Excise Act or Finance Act, 1994 for service tax, as held by the Supreme Court in Mafatlal Industries Ltd. v. Union of India.The doctrine of unjust enrichment applies; the claimant must establish that it has not passed on the burden of tax to another and is not unjustly enriched to be entitled to refund.The amendment substituting clause 25(a) of Notification No.25/2012-ST by Notification No.6/2014-ST does not have retrospective operation and cannot be applied to deny exemption for services rendered prior to its coming into effect.The Supreme Court in Mafatlal Industries Ltd. held that refund claims for taxes collected by misinterpretation or misapplication of law must be made strictly under the provisions of the relevant enactment (Section 11B) and within the prescribed limitation period; claims based on mistake of law discovered via another's case are not maintainable.Refund claims cannot be entertained after finality of assessment orders merely on the basis of a later judicial decision in another case; the finality of proceedings in the assessee's own case must be respected.Equitable considerations under Section 72 of the Contract Act apply only in cases where a provision of the Act is declared unconstitutional and the claimant has borne the burden of tax; passing on the burden to others negates refund entitlement, and expenditure of collected tax is a valid defense. RATIONALE: The Court applied the statutory framework of the Finance Act, 1994 and the Central Excise Act, 1944, particularly Section 11B (refund provisions) as made applicable to service tax by Section 83 of the Finance Act, 1994, emphasizing the exclusivity and finality of refund claims under these enactments.The Court relied on the principle of strict interpretation of exemption notifications as mandated by the Supreme Court in Commissioner of Customs v. Dilip Kumar & Co., holding that exemption notifications must be construed narrowly in favor of revenue unless clearly applicable.In interpreting the amendment Notification No.6/2014-ST, the Court applied the general presumption against retrospectivity of legislation, supported by the Supreme Court's constitutional jurisprudence on retrospectivity and declaratory statutes, concluding the amendment was prospective to widen the tax base.The Court extensively analyzed the Supreme Court's nine-judge Constitution Bench decision in Mafatlal Industries Ltd. v. Union of India, which clarified the legal regime governing refund claims for indirect taxes, overruling prior inconsistent decisions and emphasizing that refund claims must be filed within statutory limitation and under the specific provisions of the Act.The Court underscored the doctrine of unjust enrichment and the burden on the claimant to prove non-passing on of tax burden, referencing statutory presumptions under Section 64A of the Sale of Goods Act and equitable principles under Section 72 of the Contract Act.The Court rejected the appellant's reliance on Section 17 of the Limitation Act and Section 72 of the Contract Act for refund claims based on mistake of law, holding that these do not apply to claims governed by the Central Excise Act and Finance Act refund provisions.The Court emphasized the importance of finality of assessments and the inadmissibility of reopening concluded proceedings based on judicial decisions in other cases, to prevent fiscal chaos and uphold the rule of law under Article 265 of the Constitution.The Court mandated that evidence to establish non-enrichment must be credible and preferably certified by an independent professional, not merely self-certified, to ensure integrity in refund claims involving public funds.