2023 (3) TMI 740 - AT - Service Tax

Refund of service tax paid - amount paid under mistake of law - applicability of time limitation and principles of natural justice - HELD THAT:- The present case is one where the service providers (i.e. NOMC and Haliburton) as also the service recipient (i.e. the Appellant) have discharged Service Tax on the same transaction and each party has deposited the said tax with the Department. The Department has received the amounts in question twice over and there is no inter-se reimbursement of the said tax between the parties. Though contractually it was the service providers who were to discharge the tax, since they had establishments in India, and then recover the same from the Appellant, the Appellant entertained a view that it was supposed to discharge Service Tax on reverse charge and directly paid the same to the Department.

As is evident from the record,NOMC and Haliburton setup establishments in Jodhpur and Bombay respectively, obtained Service Tax registrations and discharged Service Tax. They did this correctly, in terms of the plain language of Explanation 4 to Section 65B(44). The record also indicates that communications were exchanged between the branch offices and the Appellant. Moreover, the labour force to carry out the concerned work was also sourced domestically - Tribunal in the case of M/S. NAGARJUNA OIL CORPORATION LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, PUDUCHERRY [2016 (8) TMI 41 - CESTAT CHENNAI] has held that when branch offices of foreign service providers obtained registration and discharged Service Tax in India on the transaction in question, the service recipient located in India (the assessee in that case) was not required to discharge the same,on reverse charge.

Both sides have relied on a plethora of judgments on the issue of the applicability of the limitation provided under Section 11B to amounts paid under mistake of law. The tenor of the jurisprudence on the subject indicates that the limitation prescribed under Section 11B is not applicable to a refund claim in a situation where the concerned tax was never payable by the assessee.In other words, had the Department raised a demand of such an amount, the assessee could have successfully challenged the constitutionality of the same - the statutory limitation period prescribed under Section 11B is not applicable to the refund claimed by the Appellant since the amount paid by the Appellant is not a tax.

Unjust enrichment - HELD THAT:- The appellant in its ledger accounts first discharged the Service Tax and thereafter appended certain notings in front of the said amounts stating “on hold”. It is also clear that the amounts have not been expensed out as the appellant is awaiting the outcome of the litigation. Hence the amount of Service Tax paid cannot be said to have been passed on to anyone - Moreover, the Ministry of Petroleum vide clarifications dated 1.05.2009 and 25.03.2011 has held that the refineries are only liable to discharge Sales Tax and Pipeline TransportationCharges. There is no mention of Service Tax in the same. Moreover the Crude Offtake Sales Agreements between the Appellant and Indian Oil and Numaligarh Refinery Ltd., at the relevant clauses only provide for VAT to be paid by the Appellant’s buyers. In view of the same, Service Tax paid by the Appellant never formed part of the crude oil sold by the Appellant.

The judgment of Hon’ble Supreme Court in STATE OF RAJASTHAN & ORS VERSUS HINDUSTAN COPPER LTD. [1997 (11) TMI 516 - SUPREME COURT] is applicable to the present case where it was held that there is no question of any unjust enrichment of the respondent as a result of the refund of the excise duty paid on rectified spirit because the respondent has not passed on the duty to any consumer of the final product, viz., copper, manufactured by the respondent.

The present appeal is allowed. The appellant shall be entitled to the refund amount along with interest.