TaxTMI 
TaxTMI 
2025 (12) TMI 644
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.... case, as averred in the appeal, are that the appellant/assessee is duly registered with the Service Tax Department and has been allotted Service Tax Registration No. AFUPP1402JSD001. The dispute in the present matter traces its origin to the issuance of a first summons dated 23.01.2016 under Section 14 of the Central Excise Act, 1944 read with Section 83 of the Finance Act, 1994. Along with the said summons, the Department furnished a calculation sheet alleging service tax liability of Rs. 57,80,852/- (inclusive of cess) for the period from April 2015 to December 2015. The appellant was simultaneously directed to produce year-wise contract receipts, ledgers, R.A. bills for FY 2011-12 to 2015-16 (up to December 2015), all work order agreements pertaining to the said period, and Form 26AS for FY 2011-12 to 2015-16. Prior to issuance of the aforesaid summons, the Assistant Commissioner (Preventive) had sought a clarification from the Raipur Municipal Corporation vide letter dated 27.09.2015 regarding the purpose and usage of the Multi-Level Parking constructed by the appellant. The Commissioner, Raipur Municipal Corporation, subsequently issued a clarification on 22.10.2016 categoric....
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....2018. The Tribunal, however, dismissed the appeal vide Final Order No. 50065/2025 dated 10.01.2025 (transmitted on 21.01.2025), relying on the judgment in MDP Infra (India) Pvt. Ltd. v. Commissioner of Customs, Central Excise & CGST, which had been affirmed by the Hon'ble Supreme Court in Civil Appeal No. 6335 of 2019. The Apex Court had dismissed the said civil appeal on 17.02.2021, holding that no infirmity existed in the view taken by the authorities below. It is against this order that the present appeal under Section 35G of the Central Excise Act, 1944 read with Section 83 of the Finance Act, 1994 has been filed. 3. Learned counsel for the appellant submits that the appellant had filed the refund application within a short period of approximately two months from the date of closure of the investigation, i.e., from 15.12.2016, which was the date on which the appellant first gained certainty that the works contract services rendered during the financial year 2015-16 were exempt from service tax. It is only upon such official intimation, communicated through the closure of the investigation, that the appellant became aware that the tax deposited earlier was not legally due, an....
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....ax had been deposited pursuant to an assessment or self-assessment, whereas in the present case, the appellant deposited a simpliciter amount only on the basis of a calculation sheet annexed to the summons. Thus, the factual matrix is entirely distinct. It is also emphasized that the MDP Infra case did not involve a situation where an ongoing investigation was determining whether or not the services rendered were exempt from service tax. On this ground too, the ratio of MDP cannot be applied to the facts of the present case. Additionally, learned counsel for appellant submits that for the purpose of calculating the limitation period prescribed in Section 102(2), the entire duration of the investigation ought to be excluded, as the appellant was incapable of asserting any right to refund until the investigation was formally dropped on 15.12.2016. Once the investigation was concluded and the appellant became aware that the services rendered were exempt, the appellant promptly filed the refund application. It is also urged that it is well-settled law that any amount paid under a mistake of law is liable to be refunded. The amount in the present case was deposited under such a mistake ....
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....ion is also drawn to the judgment of the Bombay High Court in The Hongkong and Shanghai Banking Corporation Ltd. v. Union of India and Another, (2023) taxcode.in 185 (HC), Commissioner of Customs v. Mahalaxmi Exports, 2009 SCC OnLine Guj 11194 / (2010) 258 E.L.T. 217, a Gujarat High Court decision holding that refund eligibility cannot arise in derogation of explicit statutory mandates. Lastly, support is taken from the judgment of the Madras High Court in M/s Shri Nandhi Dhall Mills India Pvt. Ltd. v. Senior Intelligence Officer & Ors., reported in 2021 (4) TMI 366 / [2022] 102 GSTR 449 (Mad.). 5. On the other hand, learned counsel for the respondent vehemently opposes the submissions advanced on behalf of the learned counsel for appellant and submits that due process of law was meticulously complied with prior to rejecting the refund application of appellant. The assertion of appellant that the refund was rejected solely as being time-barred under Section 102(2) of the Finance Act, 1994, is factually and legally erroneous. The rejection was in fact under Section 102(3), the special statutory provision prescribing a mandatory timeline for filing refund applications arising from....
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....om Notification No. 9/2016-ST. Furthermore, the proposition that the refund arose due to a "mistake of law" is devoid of merit. Section 102 is a self-contained legislative mechanism with its own limitation period. Once the legislature has provided a complete code for refund, the appellant cannot bypass the statutory prescription by invoking equitable doctrines or the general provisions of the Limitation Act, 1963. The attempt to rely on Section 17(1)(c) of the Limitation Act is entirely misplaced, as the Finance Act contains a specific limitation clause that overrides any general law. The learned counsel for respondents further rely on the judgment of the Madhya Pradesh High Court in MDP Infra (India), wherein the Court categorically held that refund applications filed beyond six months from 14.05.2016 are not maintainable. The Hon'ble Supreme Court subsequently dismissed the civil appeal filed against this judgment, thereby affirming the legal position that the time limit under Section 102(3) is mandatory and cannot be relaxed on equitable or other grounds. The reasoning in MDP Infra squarely applies to the present case, where the appellant has also filed the refund claim beyond t....
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....cedural deficiencies, upheld by the Commissioner (Appeals), and subsequently dismissed by CESTAT. 10. Analysis on Limitation : The Adjudicating Authority relied primarily on Section 102(3) of the Finance Act, 1994, contending that any refund claim filed beyond six months from the relevant date is barred. The appellant submits that the refund was filed within a reasonable period from the date of the closure of the departmental investigation (15.12.2016) and that the limitation clock should be read in a manner that does not unjustly deprive an assessee of a legitimate claim. 11. In Union of India v. Bundl Technologies Pvt. Ltd., reported in 2022 SCC OnLine Kar 565, the Karnataka High Court emphasized that any amount collected during a tax investigation without proper adjudication of liability is liable to be refunded. The Court drew support from earlier rulings, including Vodafone Essar South Ltd. v. Union of India (2009), where the Bombay High Court held that an assessee should not be compelled to pay during an investigation absent adjudication, and MakeMyTrip (India) Pvt. Ltd. v. Union of India (2016), which reinforced that amounts collected in the course of an investigation ....
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....deposit of an amount during pendency of an investigation is section 74(5) of the CGST Act, which is not attracted in the fact situation of the case. Therefore, it is evident that amount has been collected from company in violation of articles 265 and 300A of the Constitution. Therefore, the contention of the Department that amount under deposit be made subject to the outcome of the pending investigation can not be accepted. The Department, therefore, is liable to refund the amount to the company." 12. In the present matter, the payment made by appellant was made during an ongoing investigation and not pursuant to an assessment. The filing of the refund claim immediately after the closure letter issued by the Department demonstrates prompt action on the part of the appellant. 13. The Department relied on Section 102(3) and Notification No. 09/2016-ST to reject the claim. However, these provisions were not intended to operate rigidly in circumstances where a taxpayer could not file a refund due to ongoing verification by the Department. 14. In the matter of Commissioner of Central Excise (Appeals) Bangalore vs. KVR Construction, 2012 (7) TMI 22 - Karnataka High Court held th....
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....e character of "service tax" liable to be paid by them. Therefore, mere payment made by the respondent will neither validate the nature of payment nor the nature of transaction. In other words, mere payment of amount would not make it a "service tax" payable by them. When once there is lack of authority to demand "service tax" from the respondent company, the department lacks authority to levy and collect such amount. Therefore, it would go beyond their purview to collect such amount. When once there is lack of authority to collect such service tax by the appellant, it would not give them the authority to retain the amount paid by the petitioner, which was initially not payable by them. Therefore, mere nomenclature will not be an embargo on the right of the petitioner to demand refund of payment made by them under mistaken notion." 15. The Department also cited alleged deficiencies in documentation, including lack of work-order-wise breakup, incomplete invoices, and absence of ST-3 returns. However, the closure letter of 15.12.2016 itself confirmed that no service tax liability arose. Judicial precedent, such as Vallabh Textiles v. Senior Intelligence Officer (Delhi High Court, ....
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....:03 AM 34. It is also not in dispute, that the search proceedings commenced on 16-2-2022 at about 03:30 PM and were concluded on the following day i.e., 17-2-2022 at 09:30 A.M. 35. The fact, that deposits were made [during the early hours of 17-2-2022] when the search had not concluded, would show that the F payments were not voluntary. The deposits made were not aligned with provisions of sub-section (5) of Section 73 or sub-section (5) of Section 74. 36. As noted above, if the payments/deposits were voluntary, then an acknowledgement of having received the payment should emanate from the proper officer, as mandated in the prescribed form i.e., GST DRC-04, as prescribed under sub-section (2) of Rule 142 of the 2017 Rules. 36.1 The official respondents/revenue, in our opinion, have not been able to discharge this burden." 16. Similarly, in the matter of the Hongkong and Shanghai Banking Corporation Ltd. v. Union of India (Bombay High Court, 2023), emphasizes that procedural technicalities cannot override the substantive right to a refund once the Department has confirmed non-liability. Therefore, rejection of the refund on these grounds is uns....
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....y of abundant caution advance tax or self-assessment tax which is in excess of his liability on the basis of return furnished or by mistake or inadvertence or on account of ignorance, included in his income any amount which is exempted from payment of income tax or is not an income within the contemplation of law, he can certainly make such claim before the concerned authority for refund and he must be given that refund on being satisfied that refund is due and payable. Non giving the refund, in our view, would be in breach of Article 265 of the Constitution of India which states, "no tax shall be levied or collected except by authority of law". In New India Industries Ltd. v. Union of India AIR 1990 (Bom.) the Court held that taxes illegally levied must be refunded. The doctrine of unjust enrichment has to be applied after having regard to the facts of each case. 26. In Balmukund Acharya v. Dy. CIT (2009)_176 Taxman 316/310 ITR 310 (Bom.) the Court held that the authorities under the Act are under an obligation to act in accordance with the law. Tax can be collected only as provided under the Act. If any assessee, under a mistake, misconceptions or on not being p....
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....d that any excess payment, even if voluntary or under protest, must be refunded. It was held thus : "7. I further find that Hon'ble Madras High Court in the case of CCE vs Pricol Ltd 2015 (320) ELT 703 have held that any amount deposited during investigation has to be treated as pre-deposit and the same is neither hit by limitation nor by the clause of unjust enrichment for the purpose of refund. Similar view has been taken by Hon'ble Allahabad High Court in CCE vs Eveready Industries Ltd 2017 (357) ELT 11 and also by Hon'ble Gujarat High Court in the case of Principal Commissioner of Customs vs. H.V. Ceramics 2019 (365) ELT 390." 18. After careful consideration of the facts, submissions, and relevant legal provisions, it is evident that the appellant acted in good faith and made the refund claim promptly following the closure of the departmental investigation. The evidence submitted, including confirmation from the Raipur Municipal Corporation and supporting documentation, clearly establishes that the service provided was non-taxable and that the amount deposited by the appellant was not legally due. The reliance of the Adjudicating Authority and CESTAT on ....
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....ions of the Act. In this view of the matter, Mr. Jasani states that the petitioners could not have been denied refund sought by them. xxx xxx xxx 33. In the result, the impugned orders dated February 28, 2001, passed by the Commissioner of Income-tax, Mumbai and the order dated July 14, 2000, passed by the Assessing Officer rejecting the application for refund of TDS are set aside and it is declared that the petitioners are entitled to refund of the TDS amount. The petition is allowed. Rule is made absolute in terms of this order with no order as to costs." 21. In the matter of South India Corporation vs. Asst. Commr. Of Sales Tax, reported in 1994 SCC OnLine Ker 361, it was held as under : "7. The Supreme Court had, as early as in 1958 held in the decision in Sales Tax Officer v. Kanhaiya Lal Makund Lal Saraf, (1958) 9 STC 747 that refund of sales tax paid under a mistake of law could be claimed based on S. 72 of the Indian Contract Act, 1872. The court dealt with the scope of S. 72 and held that a person who pays money either under a mistake of law or of fact, is entitled to recover the amount so paid, and the party receiving the same is bound to rep....
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.... latter of these cases, the court ordered refund in an appeal arising out of an application under Art. 226 of the Constitution of India, filed within a period of three years from the date of discovery of the mistake, the period prescribed under the Limitation Act for a suit in a civil court for the same relief, being ordinarily taken as the period beyond which the court should not grant relief under Art. 226, though that was not an inflexible rule. Sri Ravi Oil Mills v. Commercial Tax Officer, (1990) 77 STC 7, was another case dealt with by the Supreme Court in an analogous situation where an assessee paid tax under a mistake of law and the mistake came to his knowledge years later. The assessee's approach to the High Court proved unsuccessful, the High Court dismissing the writ petition on the ground that a suit for the same relief was time-barred. The Supreme Court set aside the order of the High Court and directed refund, holding that in the absence of any denial, or controversy, as to the date on which the assessee came to know of the mistake on his part, and the excess payment, he was entitled to refund of the amount collected illegally. In Mahabir Kishore v. State of Madh....