TaxTMI 
TaxTMI 
2025 (10) TMI 969
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.... unit for non-payment of Service tax under Reverse Charge Mechanism (RCM) in respect of the ocean freight charges incurred by them for the import of cotton on CIF basis as prescribed under Notification No. 15/2017-Service Tax dated 13.04.2017. The Appellant was informed that they were liable to pay service tax on RCM basis for the imports made under CIF basis pursuant to the aforementioned notification. The service tax liability was computed at 1.5% of the CIF value of imports and accordingly, the Appellant had remitted an amount of Rs.2,86,03,528/- vide Challans dated 28.03.2018 and 29.05.2018 for the from period April 2017 to June 2017. 2.3 The appellant had availed said service tax amount of Rs.2,66,96,722/- (Excluding KKC Cess and Swatch Bharat Cess) as IGST credit through GSTR 3B returns filed during the month of Mar and May 2018. But since the Department proceeded to deny the credit taken on various grounds, the appellant subsequently reversed the credit taken on 20.01.2024 vide DRC03's. 2.4 In the meanwhile, the Hon'ble Gujarat High Court in the matter of M/s. Sal Steel Ltd. reported in 2019 (9) TMI 1315 Gujarat High Court decided on 06.09.2019, declared that N....
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....s been preferred by the revenue against the above order in appeal. 2.9 Aggrieved by the impugned order in appeal, the Appellant has filed this captioned appeal before this Forum contesting the denial of the refund claim as time barred. 3.1 The Ld. Advocate Mr. M. Karthikeyan appearing for the appellant submitted that: - A) Pursuant to the aforementioned decision of the Hon'ble High Court of Gujarat, the levy of Service Tax on ocean freight under RCM from the importer in CIF imports has been declared ultra vires the Constitution. Article 265 of the Constitution of India expressly stipulates that "No tax shall be levied or collected except by authority of law." It follows as a matter of constitutional principle, that only a levy sanctioned by valid legal authority can acquire the status of tax. Where such authority is determined to be void ab initio, the collected sum cannot be characterized as tax in law and remains a mere deposit. Therefore, in the absence of valid levy, the impugned amount, though collected under the guise of tax, retains its essential character as a deposit. Given that the subject amount does not constitute Service Tax in law, the statutory lim....
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....ination in this appeal is whether the refund claim filed can be allowed under Section 11B of the Central Excise Act, 1944 and whether the appellant has satisfied the bar of unjust enrichment, in that he has not passed on the incidence of duty to any other person. 7. The main contention of the appellant is that the provisions of Section 11B of CEA would not apply to them and they are entitled for refund in terms of the limitation prescribed under the Limitation Act. Almost all the decisions cited by the appellant in this regard have been dealt with in detail in the recent decision of Hon'ble High Court of Delhi in the case of Tavrur Oils and Fats Pvt. Ltd. reported in 2024 (12) TMI 1030 which according to the appellant, is on the very same issue, same facts and same period. 8. At this juncture, it is necessary to notice a categorical finding rendered by the Adjudicating Authority which is as under:- "6.7 From the above referred GST provisions, I find that the subject refund application could be processed in accordance with the provisions of said the existing law except to the involvement of the amount of Rs. 2,66,96,722/- taken as "Input Tax Credit" in the GSTR-3B....
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....f the manufacturers which were not actually borne by them. As per Section 11B of the Central Excise Act, 1944 allows the manufacturer to claim refund of any duty of excise and interest, provided he makes an application for refund within a period of one year from the relevant date. The refund is granted subject to the condition that the incidence of duty is borne by the manufacturer himself and has not passed on to the buyer of excisable goods. Sub-section (1) of section 11-B reads as under: "Section 11B(1) Any person claiming refund of any duty of excise may make an application for refund of such duty to the (Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise) before the expiry of lone year) [from the relevant date) |[in such form and manner) as may be prescribed and the application shall be accompanied by such documentary or other evidence (including the documents referred to in section 12A) as the applicant may furnish to establish that the amount of duty of excise in relation to which such refund is claimed was collected from, or paid by, him and the incidence of such duty had not been passed on by him to any other person: Provide....
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....t the manufacturer. In view of the above position, the claiming of the same amount of Rs. 2,86,03,528/- as Service Tax Refund by "KPR Mills" amounts to unjust enrichment. In view of the forgoing facts I hold that the doctrine of unjust enrichment has been violated in the subject case and for the said reason also the refund is liable for rejection." 9. In the instant case, we thus notice that in the Order-in-Original itself the Adjudicating Authority has rendered a categorical finding that the refund is also barred by virtue of the claim being hit by the bar of unjust enrichment. The Adjudicating Authority has found that the appellant has transferred the credit taken to its account under the GST regime under IGST. Thus, the credit of service tax taken no more subsists in the accounts of the appellant under the CENVAT credit account of the appellant maintained under the provisions of erstwhile Act. That apart, even at the time of submitting the refund claim, it is clear that the appellant had not reversed the credit that has been transferred under the GST regime, in fact, in the Letter dated 14.12.2022 of the appellant applying for the refund in Para 4.0, the appellant has submitt....
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....023-ST(CBE) filed by M/s. KPR Mills Limited and I uphold the impugned Order in Original No.12/2023-DC- TPR(GST-Adj) dated 31.05.2023 passed by the Deputy Commissioner of GST and Central Excise of GST and Central Excise, Tirupur Division." 11. Therefore, it is evident that a mere averment of the appellant has not been accepted by the Appellate Authority who has gone ahead and upheld the Order-in-Original in toto which only means that the findings against the appellant on the unjust enrichment also has been upheld. In any event, the finding of the Lower Authority that the appellant has unjustly enriched itself remained uncontroverted. Pertinently, in the grounds of appeal raised before us, while the appellant has raised grounds on non-liability of service tax on ocean freight, inapplicability of Section 11B of the Act, submissions on limitation and constitutional validity, and inapplicability of statutory provisions of payments made under mistake of law, the appellant's silence on having crossed the bar of unjust enrichment is conspicuous by its absence. Therefore, even before this Tribunal, the appellant has not raised any ground or shown any evidence that the appellant has not p....
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....und 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.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 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 ....
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....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 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 ac....
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....entral 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/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 los....
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....emands 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 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....
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....e 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 - 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 ....
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....upon the State to refund it can also be said to flow from it. This can be called the right to refund arising under and by virtue of the Constitutional provisions, viz., Article 265. But, it does not follow from this that refund follows automatically. Article 265 cannot be read in isolation. It must be read in the light of the concepts of economic and social justice envisaged in the Preamble and the guiding principles of State Policy adumbrated in Articles 38 and 39 - an aspect dealt with at some length at a later stage. 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 has no just claim for 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. Now, the right to refund arising as a....
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....or 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 equitable considerations have no place where a claim is made under the said provision. What those equitable considerations should be is not a matter of law. That depends upon the facts of each case. But to say that equitable considerations have no place where a claim is founded upon Section 72 is, in our respectful opinion, a contradiction in terms. Indeed, in Kanhaiyalal, the Court accepts that the right to recover the taxes - or the obligation of the State to re....
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....ed 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]" 16. Thus, the Constitutional Bench has in no uncertain terms held that the burden of proof to establish that the manufacturer / assessee has not passed on the burden of duty to a third party is a matter within the exclusive knowledge of the manufacturer / assessee as he has the best knowledge in his position. Since, the manufacturer is claiming the refund and also because the act of passing on the burden of duty is within his possession and exclusive knowledge, it is entirely for him to establish by letting the evidence that he has not passed on the duty to third party. In fact, the Central Excise Act itself under Section 12B mandates a statutory presumption that the incidence of duty has been passed on to the buyer. The provisions of Section 12 B is as extracted below:- "12B. Presumption that the incidence of duty has been passed on to the buyer.- Every person who has paid t....