Refund filed for tax paid erroneously is also governed by the time limit under section 11B.

Case:- COMMR. OF C. EX., GOA Versus ANDREWS TELECOMMUNICATIONS INDIA P. LTD.

Citation:- 2012 (28) S.T.R. 588 (Tri. - Mumbai)

Brief Facts:- M/s. Andrew Telecommunication (I) Pvt. Ltd. manufacture and export telecommunication products. They entered into an agency commission agreement with their foreign principal. In terms of this agreement, they carried out marketing efforts to find Indian customers for the products manufactured by the principal. In return they were paid agency commission at specified percentage for the said services in the convertible foreign exchange which they realized through normal banking channel. Since assessee was under bona fide belief that the said marketing services amounted to Business Auxiliary Services in terms of Section 65(19) of the Finance Act, 1994 read with 65(105)(zzb) of the Finance Act, they paid Service Tax at appropriate rates and in case of delayed payment of said tax they also paid penal interest. In their view this agency commission service activity amounted to export of services in terms of Export of Services Rules, 2005 and they were entitled to refund of the said service tax which they had paid on agency commission service activity erroneously. The respondent filed a refund claim on 28-4-2010 for the refund of service tax paid by them. A show cause notice dated 11-5-2010 was issued to the respondent for rejection of their claim on the ground that their claim was filed beyond the period of one year from the relevant date. Vide Order-in-Original No. R-36/10-11 dated 28-6-2010, the Assistant Collector of Service Tax, Panaji rejected their claim on the ground that application for refund was filed beyond the one year period prescribed in Section 11B of the Central Excise Act read with Section 83 of the Finance Act. The respondent preferred an appeal before the Commissioner of Central Excise & Customs (Appeals) Goa, who vide the impugned order allowed the appeal holding that the activity of marketing services for overseas principal was amounting to export of services and therefore they were not required to pay any service tax on the said activity. The Commissioner (Appeals) relied upon the following three decisions holding that the time limitation of Section 11B will not be applicable in the present case.

(1) Collector of Customs, Madras v. Indo Swiss Synthetics Gem Mfg. Co. Ltd. - 2003 (162) E.L.T. 121 (Mad.)

(2) Nataraj and Venkat Associates - 2010 (17) S.T.R. 3 (Mad.) = 2010 (249) E.L.T. 337 (Mad.) ITC Limited - 1993 (67) E.L.T. 3 (S.C.)

Revenue have filed this appeal against the impugned order before this Tribunal.

Appellant’s Contention:-The Revenue submitted that it is seen from the TR-6 challans submitted along with the refund claim that the service tax payments were made during the period 2006-07 to 2007-08 and the last such challan is dated 1-12-2007. Since, the refund claim was filed on 28-4-2010 the claim is clearly time-barred in terms of Section 11B of the Central Excise Act, as made applicable to Service Tax matter vide Section 83 of the Finance Act, 1994, and therefore the claim was rightly rejected by the original authority. She further submitted that the Supreme Court in the case of Mafatlal Industries Ltd. v. Union of India reported in 1997 (89) E.L.T. 247 (S.C.) has clearly held that all claims for refund except where levy is held to be unconstitutional are to be preferred and adjudicated upon under Section 11B of the Central Excise Act. She further contended that there was service tax liability in respect of such services provided by the assessee even prior to 2005 (i.e. before the introduction of Export of Services Rules, 2005). Therefore, the benefit of introduction of Export of Services Rules cannot be extended to the respondent as the part of service tax liability has arisen much before the date of introduction of Export of Services Rules, 2005. She also relied upon the decision of Tribunal in the case of MGM International Exports Ltd. v. Commissioner of C. Ex. (S.T.), Chennai reported in 2010 (20) S.T.R. 663 (Tri.-Chennai) wherein it was held by the Hon'ble Tribunal that the Tribunal is governed by the statutory provisions under the Central Excise Act, 1944 and only High Court have the powers in exercising writ jurisdiction under Article 226 of the Constitution of India.

Respondent’s Contention:-The Respondent submitted that time-limit under Section 11B is applicable only to those cases where refund pertains to any duty or tax paid by the assessee and the limitation will not be applicable when no tax is payable at all and the tax is paid due to misunderstanding of the law. He submitted that they were paying the service tax on the agency commission received by them from their principal 'under the bona fide mistake that such service activity would not amount to export of service. When the Board has issued a circular in February 2009, they came to know that they were not supposed to pay service tax on the agency commission covered under Export of Services Rules, 2005. Since the service tax was paid by them under the bona fide mistake and this tax was not payable, time-limit of Section 11B shall not be attracted in their case and therefore Commissioner of Central Excise Appeals) has rightly allowed their appeal as per law. He relied upon the decision of K.V.R. Constructions v. Commissioner of Central Excise, Bangalore - 2010 (17) S.T.R. 6 (Kar.) wherein it was held by the Court that since the sums deposited by be petitioner are held to be a deposit and not as a duty, therefore there was no necessity for the petitioner to have made a claim under Section 115 of the Act. He relied upon the decision in case of Natraj and Venkat Associateswhich is also relied by the learned Commissioner (Appeals) in the impugned order braiding that provisions of Section 115 are not applicable. He also relied on the following decisions:

(1)Ranadip Shipping and Transport Co. Pvt. Ltd. v. Collector of Customs - 1989 (42) E.L.T. 398 (Tri.-Mum.)

(2)SGS India Pvt. Ltd. v. Commissioner of S. Tax Mumbai -2011 (24) S.T.R. 60 (Tri.-Mum.)

He therefore submitted that in view of various decisions the time-limit of Section 118 will not be applicable to the refund claim filed by them and therefore Revenue appeal needs to be dismissed.

Learned Advocate has made alternative submission with reference to the compliance of Section 11B of the Central Excise Act, wherein the relevant date for computing the limitation is the date of filing the refund claim. He submitted that consequent upon the Board's Circular dated 24-2-2009, the respondent sent a letter addressed to the Superintendent of Central Excise, Mapusa Range Goa, on 5th March 2009 requesting therein that no service tax was required to be paid and stated that they want to take the credit of the service tax already paid. He submitted that this letter dated 5th March 2009 may be treated as their application for refund. He relied on the decision of Wood Working Centre CCE, Indorereported in 1996 (85) E.L.T. 201 (Tri.-Del.) and CCE, Mumbai v. precisionDies and Pouching reported in 2003 (160) E.L.T. 412 (Tri.-Mum.) and K.S.Nagarajan v. CCE, Salemreported in 2010 (18) S.T.R. 168.

Reasoning of Judgment:-Tribunal has considered the submissions by both parties. That issue involved in the present appeal is whether the refund claim filed by the respondent is hit by the time limitation as prescribed under Section 11B of the Central Excise Act. The refund claim in present case was filed on 28th April 2010 for refund of service tax paid by them. The original authority in para 2.1 of the Order-in-Original has stated that the TR-6/GAR-7 challans filed along with the claim and the statement furnished by the claimant shows that the service tax payments were made during the period 2006-07 and 2007-08 and last such challan was dated 1st December 2007 and it was also noticed that service tax liability for the period May 2004 to March 2006 was discharged in May 2006. We find that refund claim was submitted by the respondent with the office of Assistant Commissioner of Central Excise on 28-4-2010 under Section 11B of the Central Excise Act as made applicable to the service tax matters vide Section 83 of the Finance Act, 1994. Refund claim was to be filed within a period of one year from the date of payment of excise duty/service tax. We, therefore, find that the refund claim was filed much after the time-limit of one year as prescribed under Section 11(B) of the Central Excise Act. We find that the Commissioner (Appeals) has allowed the appeal of the respondent against the rejection of refund claim by the original authority relying upon the decisions of the Madras High Court in case of Collector of Customs Madras v. Indo-Swiss Synthetics Gem Mfg. Co. Ltd:and Nataraj and Venkat Associates v. Assistant Commissioner of Service Tax Chennai-II cited (supra) and also the Hon'ble Supreme Court decision in case of Union of India v ITC Ltd.(supra) holding that when the tax is paid under mistake of law the provisions of Section 11B are not applicable. We find that the issue regarding the applicability of Section 11B of the Central Excise Act or Section 27 of the Customs Act was examined by the Hon'ble Supreme Court in case of Mafatlal Industries Ltd. v. Union of Indiareported in 1997 (89) E.L.T. 247 (S.C.) and the Hon'ble Supreme Court has observed in the judgment as under :-

"By virtue of sub-section (3) to Section 11B of the Central Excise and Salt Act as amended by the aforesaid Amendment Act, and by virtue of the provisions contained in sub-section (3) of Section 27 of the Customs Act, 1962 as amended by the said Amendment Act, all claims for refund (excepting those which arise as a result of declaration of unconstitutionality of a provision whereunder the levy was created) have to be preferred and adjudicated only under the provisions of the respective enactment. No suit for refund of duty is maintainable in that behalf. So far as the jurisdiction of the High Court’s under Article 226 of the Constitution or of this Court under Article 32 is concerned, it remains unaffected by the provisions of the Act".

We find that the two judgment of the Madras High Court relied by Commissioner (Appeals) were passed in the writ petition filed by the party under Article 226 of the Constitution and the decision of the Hon'ble Supreme Court in case of ITC Ltd.was considered by the Hon'ble Supreme Court in the case of Mafatlal Industries Ltd. Therefore, we find that the reliance on these decisions by the Commissioner (Appeals) is not as per the law laid down by Hon'ble Supreme Court in the case of Mafatlal Industries Ltd. v. Union of India.

The learned Advocate has taken additional submission that their letter dated 5th March 2009 may be treated as their application for refund. We find that the application for refund are to be filed with the Assistant Collector of Central Excise under Section 11B of the Act, whereas this letter has been filed with the Superintendent of Central Excise which is not as per the provisions of Section 11B of the Act. We also find from the facts on record that the last payment of the service tax was made on 1st December 2007 and this letter dated 5th March 2009 is also beyond one year from the date of payment of last amount of service tax paid on 1st December 2007 and is also hit by the time-limitation. Therefore this alternate plea and case laws cited also do not support the case of the respondent and the claim clearly hit by the time-limit provided by Section 11B of the Act.

In view of the above Order-in-Appeal passed by the Commissioner (Appeals) is set aside and the Revenue appeal is allowed.

Decision:-Appeal allowed.

Comment:-The essence of this case is that all the refunds are governed by the provisions of section 11B except those covered by the unconstitutional levy in view of the landmark judgement of Supreme Court in Mafatlal Industries.

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PJ/Case Laws/2012-13/1475

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