Service tax refund on cancelled advances is not time-barred, but remains subject to unjust enrichment review.

Refund of service tax paid on advances for proposed construction services was treated as maintainable where the project was cancelled and the consideration was returned, because tax collected without a corresponding taxable service is not barred by limitation under section 11B(1). The refund nevertheless remains subject to the statutory safeguard against unjust enrichment under section 11B(2) of the Central Excise Act, 1944, read with section 142(5) of the CGST Act, 2017. Rule 6(3) of the Service Tax Rules, 1994 also supports credit where service is not provided and consideration is refunded.

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Issues: Whether refund of service tax paid on advances received for services that were ultimately not rendered could be denied as time-barred under section 11B(1) of the Central Excise Act, 1944, and whether the refund remained subject to unjust enrichment under section 11B(2) of the Central Excise Act, 1944 read with section 142(5) of the CGST Act, 2017.

Analysis: The refund arose from advances received for proposed construction services, on which service tax had been paid, but the underlying project was later cancelled and the amounts were returned to the customers. The claim was therefore for return of tax paid on a transaction that did not culminate in the provision of service. The settled view applied in the decision was that such a refund is not governed by the bar of limitation under section 11B(1), because the tax collected without a corresponding taxable service cannot be retained by the department. At the same time, the entitlement to refund is not absolute and remains subject to the statutory safeguard against unjust enrichment under section 11B(2) and the transitional framework under section 142(5) of the CGST Act, 2017. Rule 6(3) of the Service Tax Rules, 1994 also supports credit where consideration is refunded and the service is not provided.

Conclusion: The refund claim could not be rejected as time-barred and was maintainable in principle, but the matter had to be examined for unjust enrichment before actual disbursement.

Final Conclusion: The limitation objection was rejected, and the matter was sent back for a limited determination on unjust enrichment, leaving the assessee entitled to pursue the refund.

Ratio Decidendi: A refund of service tax paid on advances for services that were not ultimately provided is not barred by limitation under section 11B(1), but it must still satisfy the statutory test of unjust enrichment.

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