Whether refund be allowed if service tax was paid for the period prior to date when the service became taxable?

PJ/Case Law /2016-17/3321

Case:- G.B. ENGINEERS VERSUS UNION OF INDIA

Citation:- 2016 (43) S.T.R. 345 (Jhar.)

Brief Facts:-This writ petition has been preferred for getting back the amount of Rs. 2,52,762/- (Rupees two lakhs fifty two thousand seven hundred and sixty-two only), which was deposited by this petitioner despite there is no liability to make payment of any type of tax under any law much less as a service tax. Thus, the aforesaid amount was paid by mistake. Hence, it ought to have been given back to the petitioner.

Appellants Contention:-Learned counsel appearing on behalf of the petitioner has submitted that the petitioner is providing services mainly viz. “Erection, Commissioning and Installation Services”. This is added in the Finance Act, 1994, with effect from 16-6-2005. Thus, for the aforesaid services, the Service Provider has to pay the service tax after 16-6-2005 and not for the period prior to that. A show cause notice was issued by the respondents on 20-11-2009 that petitioner has to deposit service tax for the years 2004-05 and 2005-06, but, this show cause notice has never been decided at all or adjudicated upon because for the period prior to 16-6-2005, the service tax was not leviable at all. Nonetheless, the aforesaid amount was deposited by this petitioner with the respondents under the mistake of fact and law both and hence, this petitioner is seeking return of his money.

Respondents Contention:-Learned counsel appearing on behalf of the respondents has submitted that under Section 11B of the Central Excise Act, 1944 to be read with Section 83 of the Finance Act, 1994, now refund claim is time-barred and hence, this petitioner is not entitled to refund and the petitioner has not paid the tax under the protest.

Reasoning Of Judgement:- Having heard learned counsels for both the sides and looking to the facts and circumstances of the case, it appears that the petitioner is providing erection, commissioning and installation services. This service is included in the Finance Act for the payment of service tax with effect from 16-6-2005.
Thus, it appears that for the period prior to 16-6-2005, there was no liability for payment of service tax by those who are service provider for the aforesaid services.
It further appears from the facts of this case that show cause notice was given by the respondents on 20-11-2009 for the payment of service tax for the year 2004-05 and for the year 2005-06. This amount was never recovered by this petitioner from the persons to whom the services were provided by this petitioner in the relevant years.
Looking to the Paragraph No. 6 of the affidavit filed by the Assistant Commissioner, Central Excise & Service Tax, Jharkhand, which reads as under :-
That in reply to Para 11 of the writ application it is “6. stated and submitted that since the petitioner is well aware of the facts that prior to 16-6-2005 the service pertaining to electrical installation was not in the ambit of service tax, therefore, they should not pay service tax voluntarily. But in the instant case the petitioner did not pay the service tax under protest. Therefore, the clause of limitation period is applicable in this case”.
(Emphasis supplied)
In view of the aforesaid submissions of the respondent, there was no tax liability at all because, the tax liability starts from 16-6-2005 and therefore, the amount deposited by this petitioner which is at Rs. 2,52,762/-, ought to be refunded by the respondents.
Section 11B of the Central Excise Act to be read with Section 83 of the Finance Act, 1994 are not applicable to the facts of the present case because, the amount paid by the petitioner is never under the Central Excise Tax nor under the service tax when there is no liability to make the payment of the amount and under the mistake of facts or under mistake of law or under both if any amount is deposited by the assessee, the same cannot be retained by the Union of India under the one or other pretext when a service provider is not liable to make payment of the service tax and if any payment is made, it cannot be covered under Section 11B of the Central Excise Act to be read with Section 83 of the Finance Act, 1994.
In view of the aforesaid facts and reasons, the order dated 28-2-2013 which is at Annexure-4, is hereby, quashed and set aside and the amount at Rs. 2,52,762/- will be refunded to the petitioner or will be adjusted against the other future liability of this petitioner to cover the service tax.
This writ petition is allowed and disposed of.

Decision:- Petition allowed

Comment:-The essence of the case is that erection, commissioning and installation services provided by the appellant were made taxable only w.e.f. 16-6-2005 and the assessee paid service tax for period prior to this date under mistaken belief of fact or law or both. For refund of such erroneous levy, statutory provisions prescribing limitation are not applicable and refund is allowed by the High Court.

Prepared By:- Praniti Lalwani

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PJ/Case Law /2016-17/3321

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