TaxTMI 
TaxTMI 
TaxTMI 
2025 (7) TMI 1710
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....ted 02.11.2018 ST/40183/2019 2. Brief facts are that the appellant is a Contractor registered with the Department, holding registration certificate No.AAOPR3712JST001 and rendering construction services to various parties including the Government Department viz., Kerala State Industrial Development Corporation Ltd., (in short 'KSIDC'). On 15.03.2017, the appellant filed the aforementioned claims for refund of the service tax paid towards the services rendered to KSIDC, claimed to be exempted under Notification No.25/2012-ST dated 20.06.2012 vide Sl.No.12(a). 3. On scrutiny of the impugned refund claims, the Department being of the view that (a) the appellant has not established its entitlement of the exemption under the notification No.25/2012-ST dated 26.06.2012 as amended; (b) that the claim appears to be hit by limitation of time bar as per Section 11B and also for the period from 01-04-2015 to 29-022016, the refund had to be applied within 6 months of the date of passing of Section 102 of the Finance Act, ( that is from 14.05.2016); (c) as the work order of KSIDC Ref. No. KSIDC/LEIP/6-8/250 dated 4.5.13 and Ref.No.KSIDC/IGC/2-80/1745 dated 14.2.12, referred to c....
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....hat they were being issued pursuant to the appellant's request that they be so issued in order for the appellant to avail service tax exemption. The appellant also reiterated the aforesaid contentions through its consultant vide two separate letters in respect of the refund claims, both dated 09.02.2018. However, in the letter pertaining to the claim for the period from October 2015 to Jan 2017, it was stated that the refund claim is filed by claiming the benefit vide Section 102 of Finance Act 2016 which granted retrospective exemption for the period 01-04-2015 to 31-03-2016, in respect of the exemption under Sl.No.12(a) which was initially withdrawn with effect from 01-042015 vide notification No.6/2015-ST dated 01.03.2015, but was restored vide entry Sl.No.12A inserted vide Notification No.9/2016-ST with effect from 01.04.2016 subject to fulfilment of the conditions that the contract should have been entered prior to 01.03.2015 and appropriate stamp duty wherever applicable should have been paid prior to that date. The letters dated 09.02.2018 also reiterated that the provisions of Section 11B is not applicable as the appellant had paid the tax mistakenly. After due process of l....
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....urt decision in Mafatlal Industries v Union of India, (1997) 5 SCC 536. 5. Aggrieved by the said orders in Original rejecting their refund claim, the appellants filed appeals before the first Appellate Authority. However, the Appellate Authority vide the impugned Orders in Appeal held that the impugned orders rejecting the claim of the appellant, on the twin grounds of merits as well as on limitation, is as per law and does not warrant any interference and thus while rejecting the appeals filed by the appellant, upheld the orders in original of the adjudicating authority. 6. It is pursuant to the litigious journey through the adjudicatory and appellate hierarchy that the appellant is presently before this Tribunal having preferred the instant appeals against the impugned Orders in Appeal on the following common grounds: A) Governmental Authority is explained in para 2(s) of the notification No.25/2012-ST which is as furnished below: Sl.No. With effect from Explanation 1 01.07.2012 "governmental authority" means a board, or an authority or any other body established with 90% or more participation by way of equity or control by Government and set up by an Act of the Parli....
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....ed that the common findings recorded in both the orders of the original authority and verbatim approved by the appellate authority to hold that KSIDC is not a governmental authority is grossly incorrect. The Ld. Counsel submits that the findings rendered that a municipality or any local body is a local government carrying on public administration and governance using public fund without any profit motive whereas KSIDC is a profit making PSU by relying on a CAG report, not made available to the appellant, to hold that KSIDC is not entrusted with any of the functions under Schedule XII of the constitution and therefore they are not a governmental authority, was followed by the first appellate authority without due application of mind. 8. The Ld. Counsel would contend that the lower authorities ought to have considered the list of work that could be entrusted on a municipality or a local body as enshrined in Schedule XII of the constitution and demonstrated that it does not fall within its ambit, which not being done, exposes the incorrectness of the findings. 9. The Ld. Counsel submits that KSIDC vide their letter dated 29.05.2017 has submitted that they are a 100% equity owned com....
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....3) STR 161 (Tri-Del). 11. Learned Authorised Representative, Ms. Anandalakshmi Ganeshram appeared for the Department and while reiterating the findings in the impugned order in appeal, she argued that the findings of the lower authority that the appellant is not a Governmental Authority is correct in as much as KSIDC does not satisfy the requirement of Governmental Authority as stipulated in the definitions provided in para 2 under clause (s) of the mega exemption notification 25/2012-ST ibid. Ld. A.R argued that it has not been shown by the appellant that KSIDC was established by the Government of Kerala to carry out any function entrusted to a municipality under article 243W of the Constitution. Ld.A.R submitted that since it is the claim of the appellant that the exemption was available it was for the appellant to have let in evidence to prove that KSIDC satisfies the definition of Governmental Authority as provided in the said Notification. Ld. A.R argues that exemption notification is to be construed strictly and it is for the appellant to demonstrate its entitlement to have the services rendered by the appellant to be considered as exempted under Sl.No.12(a) of the Exemptio....
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....3 of the Finance Act, 1994/Section 102 of the Finance Act, 1994. 14. At the outset, the notifications and its amendments and other statutory provisions and articles of constitution that are necessary for determination of the issues at hand are reproduced infra. 15. Exemption Notification No.25/2012-ST dated 20-06-2012 which came into force from 01-07-2012, stipulated that the Central Government, being satisfied that it is necessary in the public interest so to do, thereby exempts the taxable services stipulated therein from the whole of the service tax leviable thereon under section 66B of the said Act and Sl.No.12 of the said notification ibid stipulated as under: - "12. Services provided to the Government, a local authority or a governmental authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of - (a) a civil structure or any other original works meant predominantly for use other than for commerce, industry, or any other business or profession; (b) a historical monument, archaeological site or remains of national importance, archaeological excavation, or antiquity specified unde....
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....t March, 2016, the following entry shall be inserted, namely - ""12A. Services provided to the Government, a local authority or a governmental authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of - (a) a civil structure or any other original works meant predominantly for use other than for commerce, industry, or any other business or profession; (b) a structure meant predominantly for use as (i) an educational, (ii) a clinical, or (iii) an art or cultural establishment; or (c) a residential complex predominantly meant for self-use or the use of their employees or other persons specified in the Explanation 1 to clause (44) of section 65 B of the said Act; under a contract which had been entered into prior to the 1st March, 2015 and on which appropriate stamp duty, where applicable, had been paid prior to such date : provided that nothing contained in this entry shall apply on or after the 1st April, 2020;";" (emphasis supplied) 16. It is also relevant that the Finance Act, 2016, which received the assent of the President on 14th May, 2016, vide Section 159 thereof, p....
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....on of plans for economic development and social justice; (ii) the performance of functions and the implementation of schemes as may be entrusted to them including those in relation to the matters listed in the Twelfth Schedule; (b) the Committees with such powers and authority as may be necessary to enable them to carry out the responsibilities conferred upon them including those in relation to the matters listed in the Twelfth Schedule." (emphasis supplied) 18. Furthermore, the twelfth Schedule of the Constitution is as under: "TWELFTH SCHEDULE (Article 243W) 1. Urban planning including town planning. 2. Regulation of land-use and construction of buildings. 3. Planning for economic and social development. 4. Roads and bridges. 5. Water supply for domestic, industrial and commercial purposes. 6. Public health, sanitation conservancy and solid waste management. 7. Fire services. 8. Urban forestry, protection of the environment and promotion of ecological aspects. 9. Safeguarding the interests of weaker sections of society, including the handicapped and mentally retarded. 10. Slum improvement and upgradation. 11. Urban poverty ....
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....d for insertion of a new section 102 in the Finance Act, 1994 which stipulated that no service tax shall be levied or collected during the period commencing from the 1st day of April, 2015 and ending with the 29th day of February, 2016 (both days inclusive), in respect of taxable services provided to the Government, a local authority or a Governmental authority, essentially as had been provided for in the entry 12A inserted by Notification No.9/2016-ST dated 01-032016. viii) On 15.03.2017, the appellant filed the aforementioned claims for refund of the service tax paid towards the services rendered to KSIDC, claimed to be exempted under Notification No.25/2012-ST dated 20.06.2012 vide Sl.No.12(a). 20. Thus, evidently, during the relevant period, being a registered service tax assessee, the appellant had been self-assessing their service tax liability and declaring the same in their Service Tax Returns. If at all the appellant felt that it was entitled to the benefit of the notification 25/2012-ST ibid, it was open to the appellant to avail the same at that point in time. It is not the case of the appellant that the Department had persuaded or coerced the appellant not to claim t....
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.... to take additional grounds. Suffice to say, we do not appreciate such bald averments sans any evidence. Such averments cannot be countenanced and are hence rejected. We say no more. 23. Be that as it may, we note that the refund claims of the appellant hinge on the crucial contention that KSIDC is a governmental authority. This is so, for the reason that it is the benefit of exemption under Sl.No.12(a) of the notification 25/2012-ST ibid as amended that the appellant seeks to rely on to contend that the said benefit was available to the appellant, but instead of availing the same, the service tax had been paid mistakenly by the appellant. In order to avail such benefit, the service need to have been provided, inter-alia, to a "governmental authority". 24. Bearing the applicable statutory provisions reproduced above and the factual aspects in mind, it can be seen that Sl.No.12(a) of the notification 25/2012-ST ibid provides exemption, inter-alia, to Services provided to a governmental authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of a civil structure or any other original works mean....
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.... (380) ELT 130 (SC), as "Substitution of a provision results in repeal of the earlier provision and its replacement by the new provision [See in this regard, a discussion in Justice G.P. Singh, Principles on Statutory Interpretation (12th Edition) page No. 676.]." 25.5 The principles of law with regard to the interpretations of the word "substitute" has already been settled in matter of Zile Singh v. State of Haryana & Ors. reported in (2004) 8 SCC 1 and the relevant portions of the above decision are quoted below : "23. The text of Section 2 of the Second Amendment Act provides for the word "up to" being substituted for the word "after". What is the meaning and effect of the expression employed therein - "shall be substituted"? 24. The substitution of one text for the other pre-existing text is one of the known and well-recognised practices employed in legislative drafting. "Substitution" has to be distinguished from "supersession" or a mere repeal of an existing provision. 25. Substitution of a provision results in repeal of the earlier provision and its replacement by the new provision (see principles of Statutory Interpretation, ibid., p. 565). If any authority is need....
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.... body; other than that set up by an Act of Parliament or a State Legislature; the definition of "governmental authority" as provided in the substituted clause (s), would be satisfied only when: i) an authority or a board or any other body is established by Government, ii) such an authority or a board or any other body established by Government should be with 90% or more participation by way of equity or control by Government. iii) Such an authority or a board or any other body established with the aforesaid equity participation or control by Government should also have been so established to carry out any function entrusted to a municipality under article 243W of the Constitution. 25.9 Furthermore, as can be seen from Article 243W and the twelfth schedule to the constitution reproduced above, functions entrusted to a municipality can be: i) to function as institutions of self-government, as per the devolution of powers and responsibilities subject to such conditions as may be specified by the legislature of the State by law with respect to (a) the preparation of plans for economic development and social justice;(b) the performance of functions and the implementation of sch....
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....is ambiguity in exemption notification which is subject to strict interpretation, the benefit of such ambiguity cannot be claimed by the subject/assessee and it must be interpreted in favour of the revenue. (3) The ratio in Sun Export case (supra) is not correct and all the decisions which took similar view as in Sun Export case (supra) stands overruled." (emphasis supplied) 28 In light of the aforesaid judgement, the position in law is pellucid that it is necessarily the burden of the appellant herein to demonstrate that KSIDC is a "governmental authority", if the appellant desires to claim the benefit of Sl.No.12(a) of the exemption notification No.25/2012-ST ibid as amended and the consequent entitlement to the refund claimed. 29 We notice that in response to the show cause notices the appellant in its replies have stated that the proof that KSIDC is a "governmental authority" is available on the official website of KSIDC-www.ksidc.org and had produced purported extracts therefrom. The appellant has also enclosed a letter dated 29th May 2017 signed by the General Manager on behalf of KSIDC which is as under: 30 As can be seen from the aforesaid letter, the same has bee....
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....contend that KSIDC is carrying out functions entrusted to a municipality under Sl.No.3 "planning for economic and social development" as stipulated in the Twelfth Schedule to the Constitution. 33 It is seen from the Order in Original of the Adjudicating Authority, which has been upheld by the Appellate Authority, that the Adjudicating Authority has rendered findings as under: "8.5 It is observed that KSIDC is established as a Public Sector Unit (PSU) by the Kerala Government under the Indian Companies Act 1956 and that KSIDC is promotional agency working for the industrial and investment promotion. As the nodal agency for foreign and domestic investments in Kerala, KSIDC provides comprehensive set of services that include developing business ideas, identifying viable projects, feasibility study and providing financial assistance and guidance for implementation as evident from the website www.ksidc.org. Municipality or any local body is a local government which carries out public administration and governance using public fund without any profit motive whereas it is observed that KSIDC is a profit making PSU as per the CAG Audit of PSUs in Kerala vide report No.4 of 2017 (PSUs) f....
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....t any function entrusted to a municipality under article 243W of the Constitution. We are of the view that, absent any averment or evidence as to the veracity of the contents on the website displayed, and given the variation in the contents being relied on as purportedly available on the website both by the appellant and the adjudicating authority, the contents of the website cannot be given much credence or can be relied upon as a legal or statutory document to determine that KSIDC is so established by the Government of Kerala to carry out any function entrusted to a municipality under article 243W of the Constitution. Therefore, absent any legal or statutory order that the appellant has been able to produce to evidence that KSIDC is a "governmental authority" as defined in clause (s) of para 2 of the notification No.12/2012-ST ibid as amended, we are unable to concur with the contention of the appellant that KSIDC is a governmental authority established to carry out any function entrusted to a municipality under article 243W of the Constitution, premised on the contents of the website. We also disagree with the contention of the counsel for the appellant, stated in the synopsis f....
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....s amended and thus satisfy the definition of 'governmental authority'. 38 Hence, when it was only by the Constitution (74th Amendment) Act, 1992 that the Parliament had inserted Part IXA of the Constitution providing for the constitution of Municipalities and the twelfth Schedule was added by section 4 of the Constitution (Seventy Fourth Amendment) Act, 1992, with effect from 01-06-1993, the crucial and germane position in law emanating is that it is only after 1992 that the functions entrusted to a municipality has been codified under article 243W. Thus, we are of the considered view that, as a sequitur, it is only an authority or board or any other body established by the Government after 1992, with the specified equity participation or control by Government, which could possibly be so entrusted to carry out any function entrusted to a municipality under article 243W of the Constitution. Furthermore, the stand of the appellant in its reply filed is that KSIDC has been established as a company in 1961. Hence, it is inconceivable, nay, an impossibility, that KSIDC is a body established by the Government of Kerala to carry out any function entrusted to a municipality under article ....
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.... placed in the appeal records. 41 In as much as we have found that the appellant does not succeed on merits, the second question formulated for our determination, i.e, whether the claim though tenable on merits, is however barred by limitation under Section 11B of the Central Excise Act, 1944 as made applicable to Finance Act by virtue of Section 83 of the Finance Act, 1994/Section 102 of the Finance Act, 1994, strictly does not require further examination. Nevertheless, since the appellant has contended that section 11B or Section 102 would not apply in the appellant's case, we are not baulking from addressing the contentions raised by the appellant, and examine them as below. 42 The appellant has contended that the levy is unauthorised and the payment is due to mistake of law, and hence the limitation has to be computed from the date of knowing the mistake and not as per the time limit prescribed under Section 11B of the Central Excise Act. Ld. Counsel would also submit that the period of six months adopted by the lower authority for holding the claim for the period 01.04.2015 to 31.03.2016 to be barred by limitation only shows that he has otherwise admitted to the collection o....
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....rises outside the provisions of the Act, for this is not a situation contemplated by the Act. 18. Second situation is where the tax is collected by the authorities under the Act by mis-construction or wrong interpretation of the provisions of the Act, Rules and Notifications or by an erroneous determination of the relevant facts, i.e., an erroneous finding of fact. This class of cases may be called, for the sake of convenience, as illegal levy. In this class of cases, the claim for refund arises under the provisions of the Act. In other words, these are situations contemplated by, and provided for by, the Act and the Rules. Xxxxxx 22. There is as yet a third and an equally important category. It is this : a manufacturer (let us call him "X") pays duty either without protest or after registering his protest. It may also be a case where he disputes the levy and fights it out up to first Appellate or second Appellate/Revisional level and gives up the fight, being unsuccessful therein. It may also be a case where he approaches the High Court too, remains unsuccessful and gives up the fight. He pays the duty demanded or it is recovered from him, as the case may be. In other wor....
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....of this Court under Article 32 - cannot be circumscribed by the provisions of the said enactments, they will certainly have due regard to the legislative intent evidenced by the provisions of the said Acts and would exercise their jurisdiction consistent with the provisions of the Act. The writ petition will be considered and disposed of in the light of and in accordance with the provisions of Section 11B. This is for the reason that the power under Article 226 has to be exercised to effectuate the rule of law and not for abrogating it. The said enactments including Section 11B of Central Excises and Salt Act and Section 27 of the Customs Act do constitute "law" within the meaning of Article 265 of the Constitution of India and hence, any tax collected, retained or not refunded in accordance with the said provisions must be held to be collected, retained or not refunded, as the case may be, under the authority of law. Both the enactments are self-contained enactments providing for levy, assessment, recovery and refund of duties, imposed thereunder . Section 11B of the Central Excises and Salt Act and Section 27 of the Customs Act, both before and after the 1991 (Amendment) Act a....
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....above or in a suit or writ petition in the situations contemplated by Proposition (ii) above, can succeed only if the petitioner/plaintiff alleges and establishes that he has not passed on the burden of duty to another person/other persons. His refund claim shall be allowed/decreed only when he establishes that he has not passed on the burden of the duty or to the extent he has not so passed on, as the case may be. Whether the claim for restitution is treated as a constitutional imperative or as a statutory requirement, it is neither an absolute right nor an unconditional obligation but is subject to the above requirement, as explained in the body of the judgment. Where the burden of the duty has been passed on, the claimant cannot say that he has suffered any real loss or prejudice. The real loss or prejudice is suffered in such a case by the person who has ultimately borne the burden and it is only that person who can legitimately claim its refund. But where such person does not come forward or where it is not possible to refund the amount to him for one or the other reason, it is just and appropriate that that amount is retained by the State, i.e., by the people. There is no imm....
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....ation, equitable considerations cannot be ruled out while applying the said provision. (vii) While examining the claims for refund, the financial chaos which would result in the administration of the State by allowing such claims is not an irrelevant consideration. Where the petitioner-plaintiff has suffered no real loss or prejudice, having passed on the burden of tax or duty to another person, it would be unjust to allow or decree his claim since it is bound to prejudicially affect the public exchequer. In case of large claims, it may well result in financial chaos in the administration of the affairs of the State. (viii) The decision of this Court in Sales Tax Officer, Benaras v. Kanhaiyalal Mukundlal Saraf [1959 S.C.R. 1350] must be held to have been wrongly decided insofar as it lays down or is understood to have laid down propositions contrary to the propositions enunciated in (i) to (vii) above. It must equally be held that the subsequent decisions of this Court following and applying the said propositions in Kanhaiyalal have also been wrongly decided to the above extent. This declaration - or the law laid down in propositions (i) to (vii) above - shall not however ent....
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.....C. [1993 (67) E.L.T. 3 (SC) = 1993 Suppl. (4) S.C.C. 326] have been correctly decided. It is, of course, obvious that where the refund proceedings have finally terminated - in the sense that the appeal period has also expired - before the commencement of the 1991 (Amendment) Act [September 19, 1991], they cannot be re-opened and/or governed by Section 11B(3) [as amended by the 1991 (Amendment) Act]. This, however, does not mean that the power of the Appellate Authorities to condone delay in appropriate cases is affected in any manner by this clarification made by us. (xii) Section 11B does provide for the purchaser making the claim for refund provided he is able to establish that he has not passed on the burden to another person. It, therefore, cannot be said that Section 11B is a device to retain the illegally collected taxes by the State. This is equally true of Section 27 of the Customs Act, 1962." (emphasis supplied) 45 In fact, while laying down the aforesaid propositions, the Honourable Apex Court has also stated that these propositions are set out merely for the sake of convenient reference and are not supposed to be exhaustive and in case of any doubt or ambiguity i....
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.... 6, 1977 and November 17, 1980 contained sub-rule (4) which expressly declared: "(4) Save as otherwise provided by or under this rule, no claim of refund of any duty shall be entertained". Section 11B, as in force prior to April, 1991 contained sub-section (4) in identical words. It said : "(4) Save as otherwise provided by or under this Act, no claim for refund of any duty of excise shall be entertained". Sub-section (5) was more specific and emphatic. It said : "Notwithstanding anything contained in any other law, the provisions of this section shall also apply to a claim for refund of any amount collected as duty of excise made on the ground that the goods in respect of which such amount was collected were not excisable or were entitled to exemption from duty and no court shall have any jurisdiction in respect of such claim." It started with a nonobstante clause; it took in every kind of refund and every claim for refund and it expressly barred the jurisdiction of courts in respect of such claim. Sub-section (3) of Section 11B, as it now stands, is to the same effect - indeed, more comprehensive and all-encompassing. It says, "(3) Notwithstanding anything to the contrary contain....
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....and ancillary provisions. As pointed out in the Statement of Objects and Reasons appended to the Bill which became the Act, the Act along with the Rules was intended to "form a complete central excise code". The idea was "to consolidate in a single enactment all the laws relating to central duties of excise". The Act is a self-contained enactment. It contains provisions for collecting the taxes which are due according to law but have not been collected and also for refunding the taxes which have been collected contrary to law, viz., Sections 11A and 11B and its allied provisions. Both provisions contain a uniform rule of limitation, viz., six months, with an exception in each case. Sections 11 and 11B are complimentary to each other. To such a situation, Proposition No. 3 enunciated in Kamala Mills becomes applicable, viz., where a statute creates a special right or a liability and also provides the procedure for the determination of the right or liability by the Tribunals constituted in that behalf and provides further that all questions about the said right and liability shall be determined by the Tribunals so constituted, the resort to civil court is not available - except to....
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....he Contract Act. So far as the jurisdiction of the High Court under Article 226 - or for that matter, the jurisdiction of this court under Article 32 - is concerned, it is obvious that the provisions of the Act cannot bar and curtail these remedies. It is, however, equally obvious that while exercising the power under Article 226/Article 32, the Court would certainly take note of the legislative intent manifested in the provisions of the Act and would exercise their jurisdiction consistent with the provisions of the enactment. (emphasis supplied) 69. There is, however, one exception to the above proposition, i.e., where a provision of the Act whereunder the duty has been levied is found to be unconstitutional for violation of any of the constitutional limitations. This is a situation not contemplated by the Act. The Act does not contemplate any of its provisions being declared unconstitutional and therefore it does not provide for its consequences. Rule 11/Section 11B are premised upon the supposition that the provisions of the Act are good and valid. But where any provision under which duty is levied is found to be unconstitutional, Article 265 steps in. In other words, the per....
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....es paid under an unconstitutional provision of law is treated as a constitutional right flowing from Article 265 or as a statutory right/equitable right affirmed by Section 72 of the Contract Act, the result is the same - there is no automatic or unconditional right to refund. 70. Re : (II) : We may now consider a situation where a manufacturer pays a duty unquestioningly - or he questions the levy but fails before the original authority and keeps quiet. It may also be a case where he files an appeal, the appeal goes against him and he keeps quiet. It may also be a case where he files a second appeal/revision, fails and then keeps quiet. The orders in any of the situations have become final against him. Then what happens is that after an year, five years, ten years, twenty years or even much later, a decision is rendered by a High Court or the Supreme Court in the case of another person holding that duty was not payable or was payable at a lesser rate in such a case. (We must reiterate and emphasise that while dealing with this situation we are keeping out the situation where the provision under which the duty is levied is declared unconstitutional by a court; that is a separate....
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....ct, the limitation generally prescribed is about three months (little more or less does not matter). But according to the present practice, writs and suits are being filed after lapse of a long number of years and the rule of limitation applicable in that behalf is said to be three years from the date of discovery of mistake of law : The incongruity of the situation needs no emphasis. And all this because another manufacturer or assessee has obtained a decision favourable to him. What has indeed been happening all these years is that just because one or a few of the assessees succeed in having their interpretation or contention accepted by a High Court or the Supreme Court, all the manufacturers/Assessees all over the country are filing refund claims within three years of such decision, irrespective of the fact that they may have paid the duty, say thirty years back, under similar provisions - and their claims are being allowed by courts. All this is said to be flowing from Article 265 which basis, as we have explained hereinbefore, is totally unsustainable for the reason that the Central Excise Act and the Rules made thereunder including Section 11B/Rule 11 too constitute "law" wi....
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....not be said that the decision of the authority is without jurisdiction. We respectfully agree with the above propositions and hold that the said principles apply with equal force in the case of both the Central Excises and Salt Act and the Customs Act. Once this is so, it is un-understandable how an assessment/adjudication made under the Act levying or affirming the duty can be ignored because some years later another view of law is taken by another court in another person's case. Nor is there any provision in the Act for re-opening the concluded proceedings on the aforesaid basis. We must reiterate that the provisions of the Central Excise Act also constitute "law" within the meaning of Article 265 and any collection or retention of tax in accordance or pursuant to the said provisions is collection or retention under "the authority of law" within the meaning of the said article. In short, no claim for refund is permissible except under and in accordance with Rule 11 and Section 11B. An order or decree of a court does not become ineffective or unenforceable simply because at a later point of time, a different view of law is taken. If this theory is applied universally, it will l....
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....y obtained by another person on another ground; this is for the reason that so far as he is concerned, the decision has become final and cannot be re-opened on the basis of a decision on another person's case; this is the ratio of the opinion of Hidayatullah, CJ. in Tilokchand Motichand and we respectfully agree with it. In such cases, the plaintiff may also invoke Section 17(1)(c) of the Limitation Act for the purpose of determining the period of limitation for filing a suit. It may also be permissible to adopt a similar rule of limitation in the case of writ petitions seeking refund in such cases. But whether the right to refund or restitution, as it is called, is treated as a constitutional right flowing from Article 265 or a statutory right arising from Section 72 of the Contract Act, it is neither automatic nor unconditional. The position arising under Article 265 is dealt with later in Paras 75 to 77. Here we shall deal with the position under Section 72. Section 72 is a rule of equity. This is not disputed by Sri F.S. Nariman or any of the other counsel appearing for the appellants-petitioners. Once it is a rule of equity, it is un-understandable how can it be said that equi....
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.... within his special and exclusive knowledge, it is for him to allege and establish that he has not passed on the duty to a third party. This is the requirement which flows from the fact that Section 72 is an equitable provision and that it incorporates a rule of equity. This requirement flows not only because Section 72 incorporates a rule of equity but also because both the Central Excise duties and the Customs duties are indirect taxes which are supposed to be and are permitted to be passed on to the buyer. That these duties are indirect taxes, meant to be passed on, is statutorily recognised by Section 64A of the Sale of Goods Act, 1930 [which was introduced by Indian Sale of Goods (Amendment) Act, 1940 and substituted later by Act 33 of 1963]. As originally introduced, Section 64A read : "64A. In the event of any duty of customs or excise on any goods being imposed, increased, decreased or remitted after the making of any contract for the sale of such goods without stipulation as to the payment of duty where duty was not chargeable at the time of the making of the contract, or for the sale of such goods duty-paid where duty was chargeable at that time - (a) if such imposi....
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....eral Court in The Province of Madras v. M/s. Boddu Paidanna & Sons [1942 F.C.R. 90] and by this Court in R.C. Jall v. Union of India [1962 Suppl. S.C.R. 436]. In such a situation, it would be legitimate for the court to presume, until the contrary is established, that a duty of excise or a customs duty has been passed on. It is a presumption of fact which a court is entitled to draw under Section 114 of the Indian Evidence Act. It is undoubtedly a rebuttable presumption but the burden of rebutting it lies upon the person who claims the refund (plaintiff/petitioner) and it is for him to allege and establish that as a fact he has not passed on the duty and, therefore, equity demands that his claim for refund be allowed. This is the position de hors 1991 (Amendment) Act - and as we shall point out later, the said Amendment Act has done no more than to give statutory recognition to the above concepts. This is the position whether the refund is claimed by way of a suit or by way of a writ petition. It needs to be stated and stated in clear terms that the claim for refund by a person who has passed on the burden of tax to another has nothing to commend itself; not law, not equity an....
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....resulting from the holding that expending the taxes collected by the State is not a valid defence. (see Paras 39 and 40). This would not be a case of unjust enrichment of the State, as suggested by the petitioners appellants. The very idea of "unjust enrichment" is inappropriate in the case of the State, which is in position of parens patrea, as held in Charan Lal Sahu v. Union of India [1990 (1) S.C.C. 613 at 649]. And even if such a concept is tenable, even then, it should be noticed that the State is not being enriched at the expense of the petitioner plaintiff but at someone else's expense who is not the petitioner plaintiff. As rightly explained by Saikia, J. in Mahabir Kishore & Ors. v. State of Madhya Pradesh [1989 (43) E.L.T. 205 (SC) = 1989 (3) S.C.R. 596], "the principle of unjust enrichment requires - first that the defendant has been `enriched' by the receipt of a `benefit'; secondly, that this enrichment is `at the expense of the plaintiff'; and thirdly, that the retention of the enrichment be just. This justifies restitution." We agree with the holding in Air Canada (quoting Professor George C. Palmer) that in such a case, "it seems preferable to leave the enrichment ....
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....on of wealth and means of production to the common detriment". Refunding the duty paid by a manufacturer/assessee in situations where he himself has not suffered any loss or prejudice (i.e., where he has passed on the burden to others) is no economic justice; it is the very negation of economic justice. By doing so, the State would be conferring an unearned and unjustifiable windfall upon the manufacturing community thereby contributing to concentration of wealth in a small class of persons which may not be consistent with the common good. The preamble and the aforesaid articles do demand that where a duty cannot be refunded to the real persons who have bore the burden, for one or the other reason, it is but appropriate that the said amounts are retained by the State for being used for public good (See Amar Nath Om Prakash). Indeed, even in an economically neutral Constitution, like that of United States of America, such a course has been adapted by the State and upheld by the Courts. It would be rather curious - nay, ridiculous - if such a course were held to be bad under our Constitution which speaks of economic and distributive justice, opposes concentration of wealth in a few h....
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....ontract Act (containing as it does an equitable principle) - for that matter, in construing any other provision of the Constitution and the laws. Accordingly, we hold that even looked at from the constitutional angle, the right to refund of tax paid under an unconstitutional provision of law is not an absolute or an unconditional right. Similar is the position even if Article 265 can be invoked - we have held, it cannot be - for claiming refund of taxes collected by misinterpretation or misapplication of a provision of law, rules, notifications or regulation." (emphasis supplied) 46 To our mind, with the deliberations in the aforesaid paragraphs being the guiding factors, the answers to the four questions posed by the Apex Court in paragraph 67, as given by the Honourable Supreme Court in the subsequent paragraphs, can be distilled as under: 1) In answer to the first question, whether where the taxes are paid under a mistake of law, the person paying it is entitled to recover the same from the State on establishing a mistake and that this consequence flows from Section 72 of the Contract Act, the Hon'ble Apex Court has emphatically answered that the Act is a self-contained en....
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....refund. It would be a parody of economic justice to refund the duty to a claimant who has already collected the said amount from his buyers. The refund should really be made to the persons who have actually borne its burden - that would be economic justice. Conferring an unwarranted and unmerited monetary benefit upon an individual is the very anti-thesis of the concept of economic justice and the principles underlying Articles 38 and 39. 2) To the second query, whether it is open to an assessee to claim refund of tax paid by him under orders which have become final - or to reopen the orders which have become final in his own case - on the basis of discovery of a mistake of law based upon the decision of a court in the case of another assessee, regardless of the time-lapse involved and regardless of the fact that the relevant enactment does not provide for such refund or reopening, the Apex Court after reiterating and emphasising that while dealing with this situation the Apex Court is keeping out the situation where the provision under which the duty is levied is declared unconstitutional by a court and further stating that the Court was dealing with a case where the duty was pa....
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..... The Apex Court then states that the decisions of the Apex Court saying to the contrary must be held to have been decided wrongly and are accordingly overruled herewith. 3) To the third question formulated by the Apex Court whether equitable considerations have no place in situations where Section 72 of the Contract Act is applicable; the Apex Court itself emphatically states that in view of what has been held by the Apex Court with respect to the questions posed at (1) and (2) ( which is at paragraph 67 of its decision), the only situation surviving is the situation arising from the declaration of invalidity of a provision of the Act under which duty has been paid or collected, and is taken as the basis for its discussion with regard to the third question. The Apex Court then stating that the Court is of the opinion that equitable considerations cannot be held to be irrelevant where a claim for refund is made under Section 72 goes on to observe that one of the equitable considerations may be the fact that the person claiming the refund has passed on the burden of duty to another. In other words, the person claiming the refund has not really suffered any prejudice or loss. If so....
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....mphasizes that this is the position whether the refund is claimed by way of a suit or by way of a writ petition and further observes "It needs to be stated and stated in clear terms that the claim for refund by a person who has passed on the burden of tax to another has nothing to commend itself; not law, not equity and certainly not a shred of justice or morality. In the case of a writ petition under Article 226, it may be noted, there is an additional factor : the power under Article 226 is a discretionary one and will be exercised only in furtherance of interests of justice. This factor too obliges the High Court to enquire and find out whether the petitioner has in fact suffered any loss or prejudice or whether he has passed on the burden. In the latter event, the court will be perfectly justified in refusing to grant relief. The power cannot be exercised to unjustly enrich a person." Thus, to our mind, the Apex Court has in unequivocal terms, confined the applicability of equitable consideration as flowing from Section 72 only to the context of the declaration of invalidity of a provision of the Act under which duty has been paid or collected, and that too only in the case of ....
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....ming refund of taxes collected by misinterpretation or misapplication of a provision of law, rules, notifications or regulation and hastened to add that they have held that Article 265 cannot be invoked for claiming refund of taxes collected by misinterpretation or misapplication of a provision of law, rules, notifications or regulation. 47 In the instant case, the appellant has self-assessed the duty and paid the service tax during the relevant period. Later on, being of the view that the appellant is entitled to the benefit of Sl.No.12(a) of the exemption notification 25/2012-ST ibid, the appellant has preferred the claim for refund contending that the service tax has been paid mistakenly and is therefore a payment made by mistake of law. In light of the aforesaid decision of the Apex Court, we are of the considered view that even if the appellant feels that it was entitled to the benefit of notification and had not claimed it while assessing its tax liability, that at best is a payment made out of non-applying the notification that was perceived as available and is squarely covered by the Apex Court decision, particularly as dealt with in para 67 and 68 of the Mafatlal Judgemen....
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.... has in no uncertain terms held that Section 72 of the Contract Act has no application to such a claim of refund as elucidated supra. In light of the categorical finding of the Honourable Supreme Court in the aforesaid judgement in Mafatlal Industries case that all claims for refund (excepting those which arise as a result of declaration of unconstitutionality of a provision whereunder the levy was created) have to be preferred and adjudicated only under the provisions of the respective enactment, this Tribunal, as a creature of statute is well aware of its jurisdiction. Thus, we have no hesitation to hold that the appellant's contentions to the contrary as to the inapplicability of the time limit prescribed under Section 11B, are wholly untenable and cannot be countenanced. We also notice that the larger bench of this Tribunal in two decisions, Veer Overseas Ltd v. CCE, Panchkula, 2018 (15) GSTL 59 (Tri-LB) and M/s. Oil and Natural Gas Corporation Limited v The Commissioner of GST & Central Excise, Tiruchirappalli, 2024(6) TMI 1417-CESTAT CHENNAI (LB) have held that claims for refund under the Central Excise and Service Tax enactments are governed by the provisions of Section 11B ....
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....devoid of merits. In this regard, we find the reliance placed by the Ld. A.R on the decision in MDP Infra (India) Ltd v. CC, C.Ex & CGST, 2019 (29) GSTL 296 (M.P) to support her contention as to the application of time limit for preferring refund claim as prescribed under Section 102 of the Finance Act, to be apposite. 52 The contention of the appellant in the grounds of appeal that refund claim has to be disposed off in terms of sub-section 6 of Section 73A of the Finance Act, 1994 and the period of limitation would apply from the date of public notice to be issued by the Central Excise Officer for the refund of such surplus amount and in asmuch as the public notice is yet to be issued, the claim is not hit by limitation; is fallacious. We are of the view that such a ground has been raised based upon an incorrect appreciation of Section 73A of the Finance Act, 1994 as a plain reading of the said Section would itself indicate. Section 73A deals with the situation where a person who is liable to pay service tax under the provisions of the Finance Act and rules made thereunder, goes on to collect service tax in excess of the service tax so assessed or determined or paid on any taxab....