TaxTMI 
TaxTMI 
2025 (8) TMI 3
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....ng refund of Rs.1,54,65,028/- on the ground that they had paid the above Service Tax to the service providers who rendered consultancy service to them. The appellant was of the view that vide Entry No. 25 of Notification No.25/2012-ST dated 20.06.2012, the service provided in relation to water supply, public health, sanitation conservancy, solid waste management or slum improvement is exempt and hence the services that were received by the Appellant from the service providers, for which they have paid service tax to these service providers, which in fact ought not to have been collected, were refundable to them. 3. The department being of the view that the appellant was not entitled to the said refund claim, issued Show Cause Notice No.31/2014(R) dated 17-09-2014. Pursuant to the reply filed by the appellant, after due process of law, the Adjudicating Authority rejected the refund claim 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. The adjudicating authority further held that the appellant has not filed any declaration to the effect t....
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.... is not applicable by relying on the decisions of the Apex Court in Mafatlal Industries vs Union of India 1997 (87) ELT 247. It was further held that on the aspect of unjust enrichment since the rejection of the refund claim on time bar aspect and on merit is not interfered with, the unjust enrichment aspect need not be gone into, since the same requires examination only when the refund claim succeeds on merits/time bar. Finding thus, the Appellate Authority upheld the impugned Order-in-Original in toto and rejected the appellant's appeal. Aggrieved by the same the appellant has preferred the appeal and is before this Tribunal. 5. Shri V. Swaminathan, Ld. Consultant appearing on behalf of the appellant submitted as under: i) That the appellant is covered under Serial No. 25 of Notification No. 25/2012 as it stood before amendment by notification 6/2014 ST dated 11.07.2014. That prior to the amendment, the notification provided exemption to service 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 healt....
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....f mistake outside the provisions of the Act or not contemplated by the Act and hence Section 11B will not apply. 6. Shri M. Selvakumar, Ld. AR appearing for the Respondent reiterated the findings in the impugned Order-in-Appeal. Ld. A.R argued that the appellate authority has rightly upheld the lower adjudicating authority's order rejecting the refund claim of the appellant on both the grounds of merits as well as limitation. Ld. A.R. cited the Judgement of the Apex Court in Dilip Kumar case for his contention as regards strict interpretation of exemption notification. 7. Heard both sides and perused the appeal records and the citation submitted as relied upon. 8. The principal issues that arise for determination are : i) Whether the Appellant's claim for refund premised on the availability of benefit of exemption under Sl.No.25(a) of the Exemption Notification 25/2012-ST ibid to its service provider is tenable? ii) 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? 9. At the outset, the notifica....
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....ing made are discussed below under three broad categories: (i) Measures to widen the tax base; [Para 2] (ii) Measures for compliance enhancement; [Para 3] and (iii) Facilitation measures. [Para 4] 2. Measures to widen the tax base : Broadening the tax base is a fiscal objective justified in itself. Primary objective of the negative list approach which came into effect from 1st July, 2012 was also to broaden the tax base. Keeping this in view, the negative list and exemptions have been reviewed. 2.1 Review of the Negative List of services : Xxxxxx 2.2 Review of General Exemptions : The following changes are being made as a result of the review of exemptions. 2.2.1: Exemptions being withdrawn (Notification 25/2012-S.T.] : (i) Presently service of passenger transportation by a contract carriage other than for the purposes of tourism, conducted tour, charter or hire, is exempt from service tax [Sl. No. 23(b)]. The scope of exemption is being reduced by withdrawing the exemption in respect of air-conditioned contract carriages. As a result, any service provided for transport of pa....
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....fter the Bill receives the assent of the President and that entries in the Bill and the notifications may be carefully read, for this purpose. In CCE v Parle Exports (P) Ltd, 1988 (38) ELT 741 (SC), the Apex Court has held that it is a well-settled principle of interpretation that courts in construing a statute or notification will give much weight to the interpretation put up on it at the time of enactment or issue, by those who have to construe, execute and apply the said enactments. They are in the nature of contemporanea expositio, furnishing legitimate aid the construction to the relevant provisions. It can thus be seen 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, we note that the refund claim was in respect of Service Tax paid during the period from July 2012 to Sept....
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....ithin the parameters of the exemption clause or exemption notification. (2) When there 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) 15. We possibly cannot, and in fact do not, have any quarrel with the aforesaid proposition. However, in the facts of the appellant's case, we find that the Show Cause Notice No.31/2014(R) dated 17-09-2014 itself acknowledges that the appellant is an implementing agency for Hogenakkal Water Supply and Flourosis Mitigation Project for Dharmapuri and Krishnagiri Districts of Tamilnadu appointed by the Government of Tamilnadu. The notice concedes that the appellant has appointed consultancy firms for receiving consultancy services and have paid for such Project Management Consultancy services for the services received for the period from October 2011 to June 2013, the payment towards which were made over a p....
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....h an issue of determining the effective date of proviso appended to Section 113 of the Income Tax Act vide Finance Act 2002, the Apex Court had delved into the general principles governing retrospectivity. The Honourable Apex Court, sitting in a combination of five, have laid down the following principles which bear reiteration and are hence reproduced below: "General Principles concerning retrospectivity 30. A legislation, be it a statutory Act or a statutory Rule or a statutory Notification, may physically consists of words printed on papers. However, conceptually it is a great deal more than an ordinary prose. There is a special peculiarity in the mode of verbal communication by a legislation. A legislation is not just a series of statements, such as one finds in a work of fiction/non fiction or even in a judgment of a court of law. There is a technique required to draft a legislation as well as to understand a legislation. Former technique is known as legislative drafting and latter one is to be found in the various principles of 'Interpretation of Statutes'. Vis-àvis ordinary prose, a legislation differs in its provenance, lay-out and features as also ....
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....on is different. If a legislation confers a benefit on some persons but without inflicting a corresponding detriment on some other person or on the public generally, and where to confer such benefit appears to have been the legislators object, then the presumption would be that such a legislation, giving it a purposive construction, would warrant it to be given a retrospective effect. This exactly is the justification to treat procedural provisions as retrospective. In Government of India & Ors. v. Indian Tobacco Association (2005) 7 SCC 396, the doctrine of fairness was held to be relevant factor to construe a statute conferring a benefit, in the context of it to be given a retrospective operation. The same doctrine of fairness, to hold that a statute was retrospective in nature, was applied in the case of Vijay v. State of Maharashtra & Ors. (2006) 6 SCC 286 It was held that where a law is enacted for the benefit of community as a whole, even in the absence of a provision the statute may be held to be retrospective in nature. However, we are confronted with any such situation here. 34. In such cases, retrospectively is attached to benefit the persons in contradistinction....
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....9;to explain' an earlier Act, it would be without object unless construed retrospective. An explanatory Act is generally passed to supply an obvious omission or to clear up doubts as to the meaning of the previous Act. It is well settled that if a statute is curative or merely declaratory of the previous law retrospective operation is generally intended. The language 'shall be deemed always to have meant' is declaratory, and is in plain terms retrospective. In the absence of clear words indicating that the amending Act is declaratory, it would not be so construed when the pre-amended provision was clear and unambiguous. An amending Act may be purely clarificatory to clear a meaning of a provision of the principal Act which was already implicit. A clarificatory amendment of this nature will have retrospective effect and, therefore, if the principal Act was existing law which the Constitution came into force, the amending Act also will be part of the existing law." The above summing up is factually based on the judgments of this Court as well as English decisions. A Constitution Bench of this Court in Keshavlal Jethalal Shah v. Mohanlal Bhagwandas & Anr. (1968) 3....
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....ch is fairly capable of either interpretation, it ought to be construed as prospective only." 17. In light of the aforesaid principles as laid down by the Honourable Apex Court, when we examine the notification No.6/2014-ST dated 11.07.2014, by which the Notification No.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, we cannot consider the substitution to be clarificatory or declaratory either and therefore, its operation can only be construed to be prospective in nature. Hence, being fortified in our view by the aforesaid Apex Court d....
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....dgements without noticing the majority Judgment. However, being the view taken by only three Judges, they are normally accorded less significance and it is the opinion of Jeevan Reddy, J. which is the unanimous verdict of five Judges, out of the nine Judges, that becomes the effective and binding judgment in this case. The relevant portions of the said majority judgement are reproduced as under: "17. We must, however, pause here and explain the various situations in which claims for refund may arise. They may arise in more than one situation. One is where a provision of the Act under which tax is levied is struck down as unconstitutional for transgressing the constitutional limitations. This class of cases, we may call, for the sake of convenience, as cases of "unconstitutional levy". In this class of cases, the claim for refund arises 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.....
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....ve laid them down in para 99, as under: (i) Where a refund of tax/duty is claimed on the ground that it has been collected from the petitioner/plaintiff - whether before the commencement of the Central Excises and Customs Laws (Amendment) Act, 1991 or thereafter - by misinterpreting or mis-applying the provisions of the Central Excises and Salt Act, 1944 read with Central Excise Tariff Act, 1985 or Customs Act, 1962 read with Customs Tariff Act or by mis-interpreting or mis-applying any of the rules, regulations or notifications issued under the said enactments, such a claim has necessarily to be preferred under and in accordance with the provisions of the respective enactment before the authorities specified thereunder and within the period of limitation prescribed therein. No suit is maintainable in that behalf. While the jurisdiction of the High Courts under Article 226 - and 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 pet....
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..... in Tilokchand Motichand and we respectfully agree with it. Such a claim is maintainable both by virtue of the declaration contained in Article 265 of the Constitution of India and also by virtue of Section 72 of the Contract Act. In such cases, period of limitation would naturally be calculated taking into account the principle underlying Clause (c) of sub-section (1) of Section 17 of the Limitation Act, 1963. A refund claim in such a situation cannot be governed by the provisions of the Central Excises and Salt Act or the Customs Act, as the case may be, since the enactments do not contemplate any of their provisions being struck down and a refund claim arising on that account. In other words, a claim of this nature is not contemplated by the said enactments and is outside their purview. (iii) A claim for refund, whether made under the provisions of the Act as contemplated in Proposition (i) 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....
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....ubstantial prejudice to public interest but is offensive to several well established principles of law. It also leads to grave public mischief. Section 72 of the Contract Act, or for that matter Section 17(1)(c) of the Limitation Act, 1963, has no application to such a claim for refund. (v) Article 265 of the Constitution has to be construed in the light of the goal and the ideals set out in the Preamble to the Constitution and in Articles 38 and 39 thereof. The concept of economic justice demands that in the case of indirect taxes Central Excises duties and Customs duties, the tax collected without the authority of law shall not be refunded to the petitioner-plaintiff unless he alleges and establishes that he has not passed on the burden of duty to a third party and that he has himself borne the burden of the said duty. (vi) Section 72 of the Contract Act is based upon and incorporates a rule of equity. In such a situation, 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 i....
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....diction under the said articles, have due regard to the legislative intent manifested by the provisions of the Act. The writ petition would naturally 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 regime of law and not for abrogating it. Even while acting in exercise of the said constitutional power, the High Court cannot ignore the law nor can it over-ride it. The power under Article 226 is conceived to serve the ends of law and not to transgress them. (xi) Section 11B applies to all pending proceedings notwithstanding the fact that the duty may have been refunded to the petitioner/plaintiff pending the proceedings or under the orders of the Court/Tribunal/Authority or otherwise. It must be held that Union of India v. Jain Spinners [1992 (61) E.L.T. 321 (SC) = 1992 (4) S.C.C. 389] and Union of India v. I.T.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....
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....ing; (3) whether equitable considerations have no place in situations where Section 72 of the Contract Act is applicable; and (4) whether the spending away of the taxes collected by the State is not a good defence to a claim for refund of taxes collected contrary to law. 68. Re. : (I) : Hereinbefore, we have referred to the provisions relating to refund obtaining from time to time under the Central Excises and Salt Act. Whether it is Rule 11 (as it stood from time to time) or Section 11B (as it obtained before 1991 or subsequent thereto), they invariably purported to be exhaustive on the question of refund. Rule 11, as in force prior to August 6, 1977, stated that "no duties and charges which have been paid or have been adjusted....shall be refunded unless the claimant makes an application for such refund under his signature and lodges it to the proper officers within three months from the date of such payment or adjustment, as the case may be". Rule 11, as in force between August 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....
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....Kamala Mills, this Court upheld the constitutional validity of Section 20 of the Bombay Sales Tax Act (set out hereinbefore) on the ground that the Bombay Act contained adequate provisions for refund, for appeal, revision, rectification of mistake and for condonation of delay in filing appeal/revision. The Court pointed out that had the Bombay Act not provided these remedies and yet barred the resort to civil court, the constitutionality of Section 20 may have been in serious doubt, but since it does provide such remedies, its validity was beyond challenge. To repeat - and it is necessary to do so - so long as Section 11B is constitutionally valid, it has to be followed and given effect to. We can see no reason on which the constitutionality of the said provision - or a similar provision - can be doubted. It must also be remembered that Central Excises and Salt Act is a special enactment creating new and special obligations and rights, which at the same time prescribes the procedure for levy, assessment, collection, refund and all other incidental and ancillary provisions. As pointed out in the Statement of Objects and Reasons appended to the Bill which became the Act, the Act alon....
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....ons would be an action taken under the "authority of law", within the meaning of Article 265. In the face of the express provision which expressly declares that no claim for refund of any duty shall be entertained except in accordance with the said provision, it is not permissible to resort to Section 72 of the Contract Act to do precisely that which is expressly prohibited by the said provisions. In other words, it is not permissible to claim refund by invoking Section 72 as a separate and independent remedy when such a course is expressly barred by the provisions in the Act, viz., Rule 11 and Section 11B. For this reason, a suit for refund would also not lie. Taking any other view would amount to nullifying the provisions in Rule 11/Section 11B, which, it needs no emphasis, cannot be done. It, therefore, follows that any and every claim for refund of excise duty can be made only under and in accordance with Rule 11 or Section 11B, as the case may be, in the forums provided by the Act. No suit can be filed for refund of duty invoking Section 72 of the Contract Act. So far as the jurisdiction of the High Court under Article 226 - or for that matter, the jurisdiction of thi....
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....ary benefit upon an individual is the very anti-thesis of the concept of economic justice and the principles underlying Articles 38 and 39. Now, the right to refund arising as a result of declaration of unconstitutionality of a provision of the enactment can also be looked at as a statutory right of restitution. It can be said in such a case that the tax paid has been paid under a mistake of law which mistake of law was discovered by the manufacturer/assessee on the declaration of invalidity of the provision by the court. Section 72 of the Contract Act may be attracted to such a case and a claim for refund of tax on this score can be maintained with reference to Section 72. This too, however, does not mean that the taxes paid under an unconstitutional provision of law are automatically refundable under Section 72. Section 72 contains a rule of equity and once it is a rule of equity, it necessarily follows that equitable considerations are relevant in applying the said rule - an aspect which we shall deal with a little later. Thus, whether the right to refund of taxes paid under an unconstitutional provision of law is treated as a constitutional right flowing from Article 265 or as ....
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....tance of the said proposition would do violence to several well-accepted concepts of law. One of the important principles of law, based upon public policy, is the sanctity attaching to the finality of any proceeding, be it a suit or any other proceeding. Where a duty has been collected under a particular order which has become final, the refund of that duty cannot be claimed unless the order (whether it is an order of assessment, adjudication or any other order under which the duty is paid) is set aside according to law. So long as that order stands, the duty cannot be recovered back nor can any claim for its refund be entertained. But what is happening now is that the duty which has been paid under a proceeding which has become final long ago - may be an year back, ten years back or even twenty or more years back - is sought to be recovered on the ground of alleged discovery of mistake of law on the basis of a decision of a High Court or the Supreme Court. It is necessary to point out in this behalf that for filing an appeal or for adopting a remedy provided by the Act, the limitation generally prescribed is about three months (little more or less does not matter). But ac....
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.... liability of the dealer to pay assessment in respect of their transactions are expressly left to be decided by the appropriate authorities under the Act as matters falling within their jurisdiction. Whether or not a return is correct and whether a transaction is exigible to tax or not are all matters to be determined by the authorities under the Act. The argument that the finding of the authority that a particular transaction is taxable under the Act is a finding on a collateral fact and, therefore, resort to civil court is open, was expressly rejected and it was affirmed that the whole activity of assessment beginning with the filing of the return and ending with the order of assessment falls within the jurisdiction of the authorities under the Act and no part of it can be said to constitute a collateral activity not specifically or expressly included in the jurisdiction of the authorities under the Act. It was clarified that even if the authority under the Act holds erroneously, while exercising its jurisdiction and powers under the Act that a transaction is taxable, it cannot be said that the decision of the authority is without jurisdiction. We respectfully agree with the abov....
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.... be ignored and refund ordered in his favour just because in another assessee's case, a similar point is decided in favour of the manufacturer/assessee. (See the pertinent observations of Hidayatullah, CJ. in Tilokchand Motichand extracted in Para 37). The decisions of this Court saying to the contrary must be held to have been decided wrongly and are accordingly overruled herewith. (emphasis supplied) 71. Re. : (III) : For the purpose of this discussion, we take the situation arising from the declaration of invalidity of a provision of the Act under which duty has been paid or collected, as the basis, inasmuch as that is the only situation surviving in view of our holding on (I) and (II). In such cases, the claim for refund is maintainable by virtue of the declaration contained in Article 265 as also under Section 72 of the Contract Act as explained hereinbefore, subject to one exception: where a person approaches the High Court or Supreme Court challenging the constitutional validity of a provision but fails, he cannot take advantage of the declaration of unconstitutionality obtained by another person on another ground; this is for the reason that so far as he is concern....
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....son claiming the refund has not really suffered any prejudice or loss. If so, there is no question of reimbursing him. He cannot be recompensated for what he has not lost. The loser, if any, is the person who has really borne the burden of duty; the manufacturer who is the claimant has certainly net borne the duty notwithstanding the fact that it is he who has paid the duty. Where such a claim is made, it would be wholly permissible for the court to call upon the petitioner/plaintiff to establish that he has not passed on the burden of duty to a third party and to deny the relief of refund if he is not able to establish the same, as has been done by this Court in I.T C. In this connection, it is necessary to remember that whether the burden of the duty has been passed on to a third party is a matter within the exclusive knowledge of the manufacturer. He has the relevant evidence - best evidence - in his possession. Nobody else can be reasonably called upon to prove that fact. Since the manufacturer is claiming the refund and also because the fact of passing on the burden of duty is within his special and exclusive knowledge, it is for him to allege and establish that he ha....
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.... such goods tax paid where tax was chargeable at that time, - (a) if such imposition or increase so takes effect that the decreased tax or increased tax, as the case may be, or any part of such tax is paid or is payable, the seller may add so much to the contract price as will be equivalent to the amount paid or payable in respect of such tax or increase of tax, and he shall be entitled to be paid and sue for and recover such addition, and (b) if such decrease or remission so takes effect that the decreased tax only, or no tax, as the case may be, is paid or is payable, the buyer may deduct so much from the contract price as will be equivalent to the decrease of tax or remitted tax, and he shall not be liable to pay, or be sued for, or in respect of, such deduction. (2) The provisions of sub-section (1) apply to the following taxes, namely : (a) any duty of customs or excise on goods; (b) any tax on the sale or purchase of goods." 73. Sub-section (2), it may be noted, expressly makes the said provision applicable to duty of customs and duties of excise on goods. This fact was also recognised by the Federal Court in The Province ....
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.... of balancing public interest vis-a-vis private interest. Where the petitioner-plaintiff has not himself suffered any loss or prejudice (having passed on the burden of the duty to others), there is no justice or equity in refunding the tax (collected without the authority of law) to him merely because he paid it to the State. It would be a windfall to him. As against it, by refusing refund, the monies would continue to be with the State and available for public purposes. The money really belongs to a third party - neither to the petitioner/plaintiff nor to the State - and to such third party it must go. But where it cannot be so done, it is better that it is retained by the State. By any standard of reasonableness, it is difficult to prefer the petitioner-plaintiff over the State. Taxes are necessary for running the State and for various public purposes and this is the view taken in all jurisdictions. It has also been emphasised by this Court In D. Cawasji wherein Mathew, J. not only pointed out the irrational and unjust consequences flowing from the holding in Bhailal Bhai and Aluminium Industries but also pointed out the adverse impact on public interest resulting from the holdin....
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....ustralia - or for that matter, United Kingdom - and the values obtaining under our Constitution. Unlike the economically neutral - if not pro-capitalist - Constitutions governing those countries, the Indian Constitution has set before itself the goal of "Justice, Social, Economic and Political" - a total re-structuring of our society - the goal being what is set out in Part IV of the Constitution and, in particular, in Articles 38 and 39. Indeed, the aforesaid words in the preamble constitute the motto of our Constitution, if we can call it one. Article 38 enjoins upon the State to "strive to promote the welfare of the people by securing and protecting as effectively as it may a social order in which justice, social, economic and political shall inform all the institutions of the national life". Article 39 lays down the principles of policy to be followed by the State. It says that the State shall, in particular, direct its policy towards securing "(b) that the ownership and control of the material resources of the community are so distributed as best to subserve the common good; and (c) that the operation of the economic system does not result in the concentration of wealth and me....
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....f law enshrined in our Constitution must and does reckon with the roaring current of change which shifts our social values and shrivels of feudal roots, invades our lives and fashions our destiny." The learned Judge quoted Granville Austin, saying : "The Judiciary was to be the arm of the social revolution upholding the quality that Indians had longed for in colonial days.... the courts were also idealised because, as guardians of the Constitution, they would be the expression of a new law created by Indians for Indians," 77. That "the material resources of the community" are not confined to public resources but include all resources, natural and man-made, public and private owned" is repeatedly affirmed by this Court. [See Ranganatha Reddy, Sanjeev Coke Manufacturing Co. v. Bharat Coking Coal [1983 (1) S.C.R. 1000] and State of Tamil Nadu etc. etc. v. L. Abu Kavur Bai & Ors. etc. [1984 (1) S.C.R. 725]. We are of the considered opinion that Sri Parasaran is right in saying that the philosophy and the core values of our Constitution must be kept in mind while understanding and applying the provisions of Article 265 of the Constitution of India and Section 72 ....
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....s in Rule 11/Section 11B. It is in this context of the duty levied being found to be unconstitutional that it is stated that the very collection and/or retention of tax without the authority of law entitles the person, from whom it is collected, to claim its refund. The Apex Court then goes on to hold that the right to refund arising as a result of declaration of unconstitutionality of a provision of the enactment can also be looked at as a statutory right of restitution. It can be said in such a case that the tax paid has been paid under a mistake of law which mistake of law was discovered by the manufacturer/assessee on the declaration of invalidity of the provision by the court. Section 72 of the Contract Act may be attracted to such a case and a claim for refund of tax on this score can be maintained with reference to Section 72. This too, however, does not mean that the taxes paid under an unconstitutional provision of law are automatically refundable under Section 72. The Apex Court further cautions that the very concept of economic justice means and demands that unless the claimant (for refund) establishes that he has not passed on the burden of the duty/tax to others, he ha....
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...."the authority of law" within the meaning of the said article. The Apex Court then holds that in short, no claim for refund is permissible except under and in accordance with Rule 11 and Section 11B and that 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. The Apex Court further goes on to hold that the Court therefore, is of the clear and considered opinion that the theory of mistake of law and the consequent period of limitation of three years from the date of discovery of such mistake of law cannot be invoked by an assessee taking advantage of the decision in another assessee's case. All claims for refund ought to be, and ought to have been, filed only under and in accordance with Rule 11/Section 11B and under no other provision and in no other forum. An assessee must succeed or fail in his own proceedings and the finality of the proceedings in his own case cannot be ignored and refund ordered in his favour just because in another assessee's case, a similar point is decided in favour of the manufacturer/assessee. (See the pertinent observations of Hidayatullah, CJ. in Tilokchand ....
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.... third party. The Apex Court goes on to hold that this is the requirement which flows from the fact that Section 72 is an equitable provision and that it incorporates a rule of equity. It is also held that 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. The Apex Court then goes on to hold that 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 the Apex Court point out later, the said Amendment Act has done no more than to give statutory recogni....
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....e petitioner-plaintiff has not himself suffered any loss or prejudice (having passed on the burden of the duty to others), there is no justice or equity in refunding the tax (collected without the authority of law) to him merely because he paid it to the State, as it would be a windfall to him. The Apex Court observed that as against it, by refusing refund, the monies would continue to be with the State and available for public purposes; the money really belongs to a third party - neither to the petitioner/plaintiff nor to the State - and to such third party it must go. The Apex Court held that but where it cannot be so done, it is better that it is retained by the State. The Supreme Court held that by any standard of reasonableness, it is difficult to prefer the petitioner-plaintiff over the State; Taxes are necessary for running the State and for various public purposes and this is the view taken in all jurisdictions. The Apex Court therefore went on to 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. The Apex Court also held that similar is the position....
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....hich the appellant's service provider was purportedly entitled, and the consequent refund claim preferred by the appellant, would still have to be dealt with under the refund provisions as provided for in the Finance Act 1994, namely Section 11B as made applicable vide Section 83 of the Finance Act, 1994. When the Apex Court has categorically held that the Central Excise and Customs Enactments are self-contained enactments providing for levy, assessment, recovery and refund of duties, imposed thereunder and that Section 11B of the Central Excises and Salt Act and Section 27 of the Customs Act, both before and after the 1991 (Amendment) Act are constitutionally valid and have to be followed and given effect to, no assessee under these enactments, or any other lower judicial forum, can tenably contend to the contrary. It is also pertinent that the Apex Court 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 re....
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....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. 28 In this regard, we find from the appeal records while the appellant has furnished affidavits from the service providers before the lower authorities averring that they have collected service tax from the Board and remitting the tax collected to the Exchequer and that they will not claim for refund of service tax remitted, however it is only before this Tribunal that the appellant has attached an affidavit of the appellant board stating that the service tax paid are not claimed as input since the consultancy fees are consumed by the Board and not forming part of any services rendered by the Board. Inasmuch as it is only before this Tribunal that the appellant has produced an affidavit attested by the Chief Audit Officer of the appellant in suppor....