GST Update No 146 on limitation period not applicable for refund of tax paid by mistake

It is well known fact that obtaining refund from tax department is a herculean task which requires lot of patience and efforts. At times, assessee pays tax under bonafide belief but subsequently realizes that the tax was mistakenly paid as it was not required to be paid under the law. In such scenario, the refund claims are often filed after considerable period of time and it is likely that the refund claim is being rejected on the grounds of limitation period. Recently, hon’ble Delhi Tribunal in the case of M/S ISHWAR METAL INDUSTRIES has held that the limitation period is not applicable for the refund claims filed with respect to tax paid under mistake of law. The outcome of this decision is subject matter of our today’s update. The petitioner is registered under Service Tax Department and has filed a refund claim of Rs. 31,50,587/- on 25.05.2011 on the grounds that as per Circular No. 123/5/2010-TRU dated 24.05.2010, the work undertaken by them for electricity board is not liable to service tax. It was contended that the amount was mistakenly paid and therefore, it is a deposit and not service tax. The petitioner contended that in such a case, the amount paid is refundable along with applicable interest u/s 11B. Furthermore, the petitioner submitted that unjust enrichment is not applicable to them since they did not recover the amount of service tax from the service recipient which is also evidenced from the contracts as the prices were firm and fixed. Reliance was placed on the decision given in the case of 3E Infotech V/s CESTAT Chennai [2018 (18) GSTL 410 (Mad.)] and Venkatraman Guha Prasad V/s Commissioner of CGST, Chennai [2020 (42) GSTL 124 (Tri.-Chennai)]. The counsel of the department argued that the petitioner has issued tax invoice/bill inclusive of service tax in respect of services rendered by them; out of which service tax amount was deposited to the government exchequer. The counsel argued that the petitioner was aware of the service tax liability and had also declared the same in ST-3 returns filed by them. Therefore, the amount deposited is tax amount and not any amount to be considered as deposit. Furthermore, the petitioner filed the refund claim after one year from the date of deposit of tax so it is time barred. The Court held that as service tax was not leviable on the services provided by the petitioner, limitation u/s 11B will not be applicable since amount deposited is not to be treated as tax. Further, it was stated that unjust enrichment shall not be applicable since the consideration for the services rendered are fixed, without any variation. It is crystal clear that petitioner has not charged any service tax amount in the invoices issued. Therefore, court held that refund should be granted to the petitioner along with interest @12% from the end of three months of refund application till the date of grant of refund. The above decision rendered by the Tribunal is welcomed by trade and industry. It is high time that the revenue authorities should understand that refund should not be denied merely on the grounds of limitation, particularly when the amount of tax was mistakenly paid by the assessee. The revenue authorities should understand that an speedy and hassle –free refund process is necessary for proper tax administration and releasing blocked funds of the assessee results in better management of funds by the assessee

Comments

GST Update No 146 on limitation period not applicable for refund of tax paid by mistake

Post a Comment

Query