Mistaken tax deposits and returned incidence defeat unjust enrichment and Section 11B limitation for tax and interest refunds

Refund of service tax paid on the supply of ready-mix concrete is discussed as admissible where the transaction was a pure sale, the tax was paid under a mistaken belief of liability, and the amount collected from the customer was subsequently returned through credit notes and supporting records. These facts rebut unjust enrichment because the tax incidence was not retained by the assessee. The related interest payment is treated as part of the same mistaken deposit rather than duty, so the one-year limitation under Section 11B of the Central Excise Act, 1944 does not apply. Accordingly, both tax and interest refunds are described as available.

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Issues: (i) Whether refund of service tax paid on supply of ready-mix concrete was barred by unjust enrichment, and (ii) whether refund of interest paid along with the tax was barred by limitation under Section 11B of the Central Excise Act, 1944 as made applicable to service tax.

Issue (i): Whether refund of service tax paid on supply of ready-mix concrete was barred by unjust enrichment.

Analysis: The supply of ready-mix concrete was treated as a pure sale transaction and the tax had been paid under a mistaken understanding of liability. The amount collected from the customer was subsequently returned through credit notes and later supported by payment records and certificates, showing that the incidence had been borne by the assessee and not retained. In such circumstances, the amount paid did not acquire the character of duty, and the statutory presumption of unjust enrichment stood rebutted.

Conclusion: The refund of service tax was held to be admissible and not hit by unjust enrichment.

Issue (ii): Whether refund of interest paid along with the tax was barred by limitation under Section 11B of the Central Excise Act, 1944 as made applicable to service tax.

Analysis: Interest paid along with an amount deposited under mistake of law was treated as part of the same deposit and not as duty liable to the limitation regime for duty refunds. Since the principal amount itself was held refundable and the governing provisions for duty refund were found inapplicable to such mistaken deposits, the one-year limitation under Section 11B did not govern the claim for interest refund.

Conclusion: The refund of interest was held to be admissible and not time-barred.

Final Conclusion: Both refund claims succeeded, and the assessee was found entitled to restitution of the tax and interest amounts.

Ratio Decidendi: Amounts paid under a mistaken belief of tax liability do not become duty for the purpose of unjust enrichment or statutory limitation, and once the incidence is shown to have been returned or not passed on, refund with consequential interest cannot be denied on the duty-refund framework.

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