No time limit applicable for refund claims of tax paid without authority of law.

PJ/CASE LAW/2014-15/2499

Case:-M/s C K P MANDAL Vs COMMISSIONER OF SERVICE TAX, MUMBAIII

Citation:-2015-TIOL-98-CESTAT-MUM

Brief facts:-The appellant is in appeal against the Order of Commissioner (appeals) upholding the Order-in-Original under which refund claim Rs. 71,759/- was rejected at time barred and refund claim of Rs. 47,029/- was sanctioned.

The appellant is a Charitable Trust. It has two halls which are given on hire for various functions. They also received donations from caterers and decorators for permitting them to use their halls. They were asked to pay Service Tax by the Superintendent on the donations received by them. As regards hire charges for the halls, they were paying Service Tax under the category of mandap keeper. After a few rounds of litigation up to the Hon'ble High Court, it was held that donations received by them from caterers are not leviable to Service Tax. Therefore, they filed two refunds claim out of which one was sanctioned and the other was rejected on the ground of time bar.

Appellant’s contention:-The learned advocate mentions that on the refund which was sanctioned, no interest has been paid till date. As regards the refund which was held time barred, he drew attention to a letter written by them on 07.06.2001 to the Assistant Commissioner, Mumbai-IV (Service Tax Sale) (sic) asking for a copy of the assessment order in respect of the Service Tax paid by them for the period 01.07.1997 to 31.03.2001, the tax having been paid on 14.03.2001. He also refers to the decision of Hon'ble High Court of Karnataka in the case of Commissioner of Central Excise (Appeals), Bangalore Vs. KVR Construction – 2012 (26) STR 195 (Karnataka) = 2010-TIOL-89-HC-KAR-ST in support of his claim that time bar under Section 11B will not apply where Service Tax is not payable under law.

Respondent’s contention:-The learned A.R. while agreeing that interest is payable under law on the refund already sanctioned, argued that in the case of M/s Mafatlal Industries 2002-TIOL-54-SC-CX, Hon'ble Supreme Court held that refund of duty will be governed by the provisions of Section 11B.

Reasoning of judgment:-The Hon’ble court have carefully considered the submissions of both sides. As regards the refund of Rs.47,029/- already sanctioned under Section 11B it is quite clear that interest has to be paid under Section 11BB of the Central Excise Act as made applicable to Service Tax. They order accordingly.

In the case of refund which was rejected, they note that the appellant requested for an assessment order in respect of the tax which they were persuaded to pay. This request was made within three months of the date of payment of Service Tax. Had they received the assessment order/adjudication order under the Finance Act confirming the tax payment, they would have applied for refund under Section 11B as made applicable to Finance Act, 1994. Notwithstanding this aspect, it has been held in various judgements pursuant to the Hon'ble Apex Court judgement in the case of M/s Mafatlal Industries and as held in the judgement of KVR Construction (supra), that the time bar under 11B will apply only if the demand has been made or paid as duty under the law. In the present case no such demand was made under law by a demand or order. Rather the tax which was collected was not payable in law and appellants were persuaded to pay the amount. Therefore, the appellant is entitled to refund along with appropriate interest payable under law.

The appeal is allowed in above terms.

Decision:-Appeal allowed.

Comment:- The analogy of the case is that the limitation prescribed under section 11B will apply only if demand has been made or paid as duty under the law. Since the tax was not payable in law but appellants were persuaded to pay the amount, refund claim is not hit by the provisions of section 11B of the Central Excise Act as held in the case of Mafatlal Industries and KVR Construction.

Prepared by:- Monika Tak

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PJ/CASE LAW/2014-15/2499

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