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December 13, 2022

Limitation period to claim refund does not apply to service tax paid by mistake as same was merely a deposit, not a tax

by CA Shivam Jaiswal in GST, Legal Court Judgement

Limitation period to claim refund does not apply to service tax paid by mistake as same was merely a deposit, not a tax

Facts and issue of the case

M/s Ishwar Metal Industries (“the Appellant”) filed refund claim along with interest under Section 11B of the Central Excise Act, 1944 (“the Central Excise Act”) of mistakenly paid Service tax amounting to INR 31,50,587/- on May 25, 2011 for the period 2007-08 to 2009-10 provided to Electricity Board/Nigam.  As per Appellant, the principle of unjust any enrichment was not applicable since it had not collected tax from Electricity Board. The Appellant, thus, filed a refund claim for the amount paid mistakenly. The refund claim was rejected by the Assistant Commissioner on the ground that the amount charged was inclusive of service and the same was time-barred.

Subsequently, the Appellant preferred an appeal before the Ld. Commissioner Appeals (“the Appellate Authority”) against the decision of the Respondent, wherein the appeal was dismissed and the decision of the Respondent was upheld. Being aggrieved, the Appellant filed this appeal.

Observation of court

The court observed that service tax was not leviable on the services provided by the appellants, which was paid by mistake by the appellants, thus, it will be treated as deposit, ipso facto, and are entitled for refund.

This fact is more evident as the services provided by the appellants are – route survey, design, supply of material for construction, erection and commissioning of 33KV D/C Line on Panther Conductor for 2.5 km from 132 KV GSS, Equipment for the work of urban focus programme, equipment for providing HVD/LVD system, etc. Further Limitation u/s 11B will not be applicable as the amount deposited is not tax and, at best, revenue deposit. My view is fortified in view of the judgements passed by Madras High Court in its ruling in 3 E Infotech (supra).

As far as applicability of unjust enrichment, in view of the work orders, which were issued to the appellants in competitive open bid, as per contract it is clear that the prices are Firm in all respect and Independent of any variation. It is also not in dispute that the appellants have not charged any service tax in their invoices

Conclusion

It was held that service tax paid mistakenly by the pellant was merely a deposit and not tax. Accordingly, e limitation period u/s 11B of the Central Excise Act, $44 to claim the refund did not apply to the amount posited as the same was revenue deposit and not a Accordingly, the impugned order was set aside, and appeal was allowed. The adjudicating authority is further ordered to pay interest at 12% p.a. from the end of the three months following the date of the appellant’s refund application until the date of grant of refund. This is required under the Transitional Provisions of the CGST Act. The adjudicating authority is directed to grant refund of the said amount in cash within 45 days of receiving this order.

Case Name : Ishwar Metal Industries Vs Commissioner, Central Excise and Central Goods & Service Tax (CESTAT Delhi)

Appeal Number : Service Tax Appeal No. 51834 of 2018-SM

Date of Judgement/Order : 28/01/2022

Ishwar-Metal-Industries-Vs-Commissioner-Central-Excise-and-Central-Goods-Service-Tax-CESTAT-Delhi

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