2025 (9) TMI 127 - AT - Service Tax

Section 11B time limit for refund claims is strict; later discovery or other cases can't extend limitation period

M/s SS Marketing Versus Commissioner of Central Excise, Ludhiana

M/s SS Marketing Versus Commissioner of Central Excise, Ludhiana - TMI ISSUES PRESENTED AND CONSIDERED 1. Whether the refund claim is maintainable when filed beyond the statutory time-limit prescribed by the refund statute (Section 11B framework) or whether limitation starts from the date of knowledge of the mistake of law. 2. Whether a taxpayer can seek refund in its own case on the basis of a decision rendered in another person's case (i.e., re-opening of final assessment or claiming refund post-finality on the strength of another party's judgment). 3. Whether the doctrine of passing on the burden/unjust enrichment limits or defeats a refund claim even where a tax/duty was collected contrary to law. 4. Whether equitable doctrines or general contract/limitation provisions (e.g., Section 72 Contract Act or Limitation Act principles) can override or supplement the statutory regime for refunds under the relevant enactment. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Limitation for refund claims under the statutory scheme (Section 11B) Legal framework: Section 11B prescribes the time-limit and complete statutory mechanism for filing and adjudicating refund claims under the central excise/customs regime; the statutory scheme is self-contained for levy, assessment, recovery and refund. Precedent Treatment: The Court follows the principle established by the authoritative precedent which holds that refund claims for taxes/duties collected by mis-interpretation or mis-application of law must be preferred and adjudicated under the relevant enactment within the statutory period; writ or suit is not the normal remedy except where the charge itself is declared unconstitutional. Interpretation and reasoning: A statutory timeline cannot be displaced by a taxpayer's assertion of a later 'date of knowledge' of legal mistake where the enactment provides specific limitation rules. While constitutional writ jurisdiction remains available, it must be exercised with due regard to legislative intent embodied in the refund statute and the limitation therein. The statutory scheme contemplates a complete mechanism to correct errors of fact or law, and the timelines must be observed to prevent administrative and fiscal uncertainty. Ratio vs. Obiter: Ratio - refund claims arising under the enactment are governed by the statutory time-limits and remedies; limitation cannot be recalibrated merely by asserting later discovery of error of law except in constitutionality cases. Obiter - comments regarding the High Court's or Supreme Court's approach to Article 226/32 when entertaining exceptional cases are explanatory but consistent with the ratio. Conclusion: The refund claim is subject to the statutory limitation under Section 11B and is not maintainable outside that regime merely on the basis of a claimed later discovery of legal error. Issue 2 - Reliance on judicial decisions in other persons' cases to reopen final assessments or to claim refunds Legal framework: The statutory scheme and settled principles restrict a taxpayer from reopening final assessments or asserting a refund based solely on a decision rendered in another person's case; only where a provision is declared unconstitutional may fresh remedies lie outside the enactment. Precedent Treatment: The Court applies the authoritative precedent that a person must 'fight his own battle' and cannot obtain refund or reopen finality in his case by pointing to adjudications in other cases; the precedent is treated as binding and directly applicable. Interpretation and reasoning: Allowing claims based on other persons' decisions would undermine finality, prejudice public exchequer, and create administrative chaos. The claimant cannot claim that another party's decision led to discovery of mistake of law for limitation purposes. The statutory scheme reserves writ/suit remedies for constitutional invalidity of the charging provision; otherwise, remedies lie within the enactment and its limitation structure. Ratio vs. Obiter: Ratio - a taxpayer cannot base a refund claim or re-open a concluded assessment solely on the basis of a decision in another taxpayer's case; such reliance does not reset limitation. Obiter - policy observations on public interest and financial chaos are explanatory but support the ratio. Conclusion: The appellant cannot claim refund or reopen its concluded position on the basis of judicial decisions in other persons' cases; such a basis is impermissible absent applicability of the constitutional-invalidity exception. Issue 3 - Passing on the burden and unjust enrichment as preconditions to granting refund Legal framework: Refunds of indirect taxes collected contrary to law are subject to the requirement that the claimant must allege and prove that the burden of duty was not passed on to others; the doctrine of unjust enrichment restricts recovery where the claimant has shifted the burden. Precedent Treatment: The Court adheres to the precedent that a refund can succeed only if the claimant establishes non-passing of burden; where the burden has been passed, the ultimate person who bore it is the rightful claimant, and equitable/financial considerations may bar refund to the collector. Interpretation and reasoning: The doctrine serves to prevent double recovery and to protect the public exchequer. The State is not subject to unjust enrichment in the same manner as private parties. Equitable considerations and the risk of destabilizing fiscal administration are relevant when assessing refund claims involving passed-on burdens. Ratio vs. Obiter: Ratio - entitlement to refund is conditional on establishing that the claimant did not pass on the tax burden; inability to do so defeats the claim. Obiter - remarks on economic justice and Preamble/Directive principles inform the interpretive approach but are ancillary to the legal rule. Conclusion: Any successful refund claim under the statutory regime requires proof that the claimant bore, and did not pass on, the burden of the tax; absent such proof, refund is not permissible. Issue 4 - Applicability of general equitable/contract/limitation doctrines (e.g., Section 72, Limitation Act) vis-à-vis the statutory refund regime Legal framework: The statutory refund provisions are self-contained; general equitable principles or provisions from other statutes cannot be invoked to circumvent specific statutory limitation or procedural requirements, except in the narrow class of cases where constitutional invalidity of the charging provision is established. Precedent Treatment: The Court follows the precedent that Section 72 of the Contract Act and general limitation doctrines do not apply to claims governed by the enactment unless the claim is founded outside the enactment (e.g., restitution for unconstitutional levy). Interpretation and reasoning: The statutory scheme contemplates exclusive procedures for refund, and allowing external equitable or limitation provisions to override it would contravene legislative intent and compromise legal certainty. Constitutional remedies remain available but will be governed by their own limitation principles when the underlying charge is declared unconstitutional. Ratio vs. Obiter: Ratio - external equitable or contract-based doctrines cannot be invoked to bypass the statutory refund mechanism; Obiter - commentary on the role of equity and limitation in constitutional suits is explanatory where constitutional challenges succeed. Conclusion: General equitable/contractual/limitation doctrines do not displace the statutory refund regime; they are relevant only where the claim lies outside the statute (e.g., unconstitutional levy). Overall Disposition The Court applied the statutory framework and binding precedent to conclude that the refund claim lacks merit: it is barred by the statutory limitation/complete remedial scheme, cannot be founded on decisions in other taxpayers' cases, and would in any event be subject to the requirement of proving non-passing of burden; accordingly the appeal is dismissed.