TaxTMI 
TaxTMI 
2026 (9) TMI 1384
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.... Appellant procures them either on cost, insurance, freight ("CIF") basis or on free on board ("FOB") basis. In case of CIF imports, the exporter engages the shipping lines located in its country. The Appellant's records were audited by the department for the period April 2017 to June 2017 on 03.07.2018. During audit, the department raised an objection that the Appellant, being an importer of raw materials, had not paid service tax on ocean freight regarding CIF transactions. The Appellant deposited Rs.22,07,529/- as service tax of Rs.18,73,318/- and interest of Rs.3,34,211/- on ocean freight under reverse charge mechanism. Thereafter, the High Court of Gujarat in the case of SAL Steel Limited vs. UOI [2020 (37) G.S.T.L.3 (Guj.)] took the view that service tax was not payable on such transactions. Hence, the Appellant filed a refund application on 23.09.2020 before the Assistant Commissioner in terms of provisions of Section 83 of the Finance Act, 1994 read with Section 11B of the Central Excise Act, 1944. Subsequent to the filing of the refund claim, Show Cause Notice No.V(25)/JKT/RFD/011/ 2020/992 dated 20.10.2020 [SCN], was issued proposing to reject the refund on the ground....
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.... the Appellant due to lack of any provision for claiming refund of tax paid mistakenly or tax paid where it wasn't liable to be paid. Learned counsel further stated that merely because an application for refund has been filed under Section 11B, it would not mean that such application would also attract the limitation period prescribed therein, when the amount paid by the assessee is in the nature of an erroneous payment and does not qualify as "tax" or "duty" payable by the assessee. In this regard, learned counsel placed reliance on the decision in Mahindra World City Ltd. v. Commissioner of Central Excise, Jaipur [2013(32) STR 93 (Tri-Del.)] wherein it was held that since there is no provision in the notification for refund of amount erroneously paid as tax, the refund has to be examined in terms of Section 11B of the Excise Act. However, the Tribunal recognized that the mere use of the Section 11B channel does not convert the nature of the payment from "deposit" to "duty." The settled legal position is that if an assessee pays an amount which was not leviable as duty, the same has to be treated as a "deposit" with the Central Government, and the provisions of Section 11B rel....
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....axation. He also submitted that Section 11BB of the Excise Act creates a statutory obligation upon the Department to pay interest when refund is not granted within three months of the application. This provision, borrowed into the service tax regime by Section 83 of the Finance Act, operates automatically once the three-month period expires. The refund application in the present case was filed on 23.09.2020 and therefore refund for the relevant period should be extended along with applicable interest from the date immediately after expiry of three months from 23.09.2020 i.e., from 24.12.2020 till the date of actual refund. 4. Learned authorized representative submitted that the appellant has agreed with the contention of the audit officers and voluntary deposited the due service tax amounting to Rs. 18,73,318/-along with the interest Rs.3,34,211/- vide challan dated 24.07.208. Whereas, they had filed the return claim on 23.09.2020 means almost after expiry of more than two years whereas section 11B provides that claim of refund may be filed before expiry of one year from the relevant date. The plea of appellant is an afterthought. Learned authorized representative also submitted....
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....y and interest, if any, paid on such duty has not been passed on by the persons concerned to any other person. xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Explanation - For the purposes of this section, (A) "refund" includes rebate of duly of excise on excisable goods exported out of India or on excisable materials manufacture of goods which are exported out of India; (B) "relevant date " means, - (a) in the case of goods exported out of India where a refund of excise duty paid is available in respect of the goods themselves or, as the case maybe, the excisable materials used in the manufacture of such goods, (i) if the goods are exported by sea or air, the date on which the ship or the aircraft in which such goods are loaded leaves India, or (ii) if the goods are exported by land, the date on which such goods pass the frontier, or (iii) if the goods are exported by post, the date of dispatch of goods by the Post Office concerned to a place outside India; (b) in the case of goods returned for being remade, refined, reconditioned, or subjected to any other similar process, in any factory, the ....
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....e is no infirmity in the order of the adjudicating authority. 6.2 The learned Counsel has submitted that the time bar of refund claim does not arise as the said levy was held as unconstitutional by the Gujarat High Court. He has relied on several judgments of the Tribunal in this regard. In the instant case, I note that the adjudicating authority, in the order in original has observed that the exemption to ocean freight was withdrawn w.e.f 22.1.2017 and the person liable to pay this tax was notified vide the explanation to inserted to Notification No. 30/2012-ST dated 23.4.2017. Hence, on pointing out by the Audit staff, the said amount was paid by the appellant as service tax on 24.07.2018. Hence, the said amount is clearly covered by the provisions of Section 11B. Consequently, I hold that there is no infirmity in the findings that the refund claim is time barred. As regards the submissions of the learned Counsel, that time bar aspect is not attracted as the entire levy was held to be unconstitutional, I note that the Hon'ble Supreme Court in its judgment in M/s Mafatlal Industries has itself preserved this exception. The said judgment held that Section 11B is a complete code ....
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.... 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 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/assesses on the declaration of invalidity of the provisions 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 78 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 ....