2025 (5) TMI 645 - AT - Service Tax

Refund of service tax paid on development charges collected by SIPCOT - rejection on the ground that the refund claim was filed with a delay of 31 days beyond the time-limit stipulated under Section 104 of Chapter V of the Finance Act 1994 - rejection also on the ground of unjust enrichment. Whether the claim should have been filed by SIPCOT who had deposited the service tax with the Government? - HELD THAT - In JSW Dharmatar Port 2018 (12) TMI 1118 - BOMBAY HIGH COURT the Hon ble Bombay High Court held that the time taken by the Ministry in processing and granting certificate under Section 103 of the Act to enable the assessee to file refund claim must be ignored for the purpose of computing the limitation for making refund application - it is found that in JSW Dharmatar Port cited by the appellant itself the Hon ble High Court held that the limitation prescribed is mandatory. It further stated that Section 103 of the Finance Act 1994 (which is similar to Section 104 as per which the refund has been filed in this case) is a complete mechanism for recognition of exemption refund of the tax so exempted with retrospective effect and the mechanism for claiming such refund. Such limitation period cannot be interpreted as merely directory particularly when subsection (3) in addition to providing the period of limitation overrides any other provisions of the chapter which may be to the contrary - the judgments cited by the appellant are distinguished and do not support their case. Since the amount paid was not service tax it ought to be automatically refunded to the Appellant without filing a refund claim - HELD THAT - All refund claims except that of an unconstitutional levy must be filed and adjudicated under the refund provisions of the Central Excises and Salt Act 1944 (as made applicable in Service Tax matters also) or the Customs Act 1962 as the case may be. Once the amount is collected as Service Tax and is deposited to Government any refund can be claimed only as per the provisions of the said Act. As stated in the Mafatlal industries judgment 1996 (12) TMI 50 - SUPREME COURT even a finding regarding the invalidity of a levy need not automatically result in a direction for a refund of all collections thereof made earlier. As per Section 17(1)(c) of the Limitation Act the period of limitation in an application filed for obtaining relief from the consequences of a mistake would begin from the moment the applicant has discovered the mistake - HELD THAT - The Finance Act 1994 is a self-contained Code exhaustive of the matters dealt with therein. The purpose of the Act is to levy a tax on service assess and collect the same. It follows therefore that all the provisions contained in the Act have been designed with the object of achieving that purpose - the Limitation Act is not applicable to the Finance Act 1994 and hence the appellants plea on this account fails. It is a well-accepted norm of judicial discipline that a Bench of lesser quorum / strength should follow the view taken by Bench of larger quorum / strength in a case whose ratio covers the legal issue involved in the impugned matter. Conclusion - i) The Finance Bill 2017 was passed on 01.04.2017 hence the last date for filing the refund claim was 30.09.2017. As the appellant filed the refund claim on 31.10.2017 which is beyond 6 months time limit prescribed under Section 104(3) of the FA 2017 it is hit by time bar and thus the respondent has correctly rejected the refund claim as time barred and the impugned order is upheld. ii) The appellant has borne the ultimate incidence of the tax and not the Trust who is the eligible claimant of the refund and is not barred from claiming the same. Appeal rejected.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Tribunal are:

(i) Whether the refund claim filed by the appellant under Section 104 of the Finance Act, 1994, for service tax paid on development charges collected by SIPCOT, is barred by the prescribed time limit under Section 104(3) of the Act;

(ii) Whether the refund claim should have been filed by SIPCOT, the entity that deposited the service tax with the Government, or whether the appellant, as the ultimate consumer who bore the incidence of the tax, has locus standi to file the refund;

(iii) Whether the delay in filing the refund claim by the appellant was caused by administrative delay on the part of SIPCOT, and if so, whether such delay should be excluded in computing the limitation period;

(iv) Whether the amount paid as development charges or premium is exigible to service tax under the relevant provisions of the Finance Act;

(v) Whether the Limitation Act, 1963, particularly Section 17(1)(c), can be invoked to condone the delay in filing the refund claim;

(vi) Whether amounts collected without authority of law are entitled to automatic refund without adherence to statutory limitation provisions;

(vii) The applicability of the principle of unjust enrichment in the context of the refund claim.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i): Time Bar under Section 104(3) of the Finance Act, 1994

The appellant filed a refund claim on 31.10.2017 for service tax paid on development charges collected by SIPCOT during 1.6.2007 to 21.9.2016. Section 104(3) prescribes a six-month time limit for filing such refund claims from the date the Finance Bill, 2017 received presidential assent, i.e., 01.04.2017. Hence, the last date was 30.09.2017. The claim was filed 31 days late.

The Original Authority and Commissioner (Appeals) rejected the claim as time barred. The Tribunal upheld this view, emphasizing the mandatory nature of the limitation period under Section 104(3), which contains a non obstante clause overriding other provisions.

The Tribunal relied on the Supreme Court ruling in Chief Commissioner of Central Goods and Service Tax & Ors. Vs. M/s Safari Retreats Private Ltd. & Ors., which mandates strict interpretation of taxing statutes, disallowing additions or subtractions based on legislative intent or equitable considerations. The Tribunal noted that even if the delay was caused by administrative reasons, such as SIPCOT's delay in instructing the appellant to file the claim, such delay cannot be excluded unless specifically provided by statute.

Precedent decisions cited by the appellant involving exclusion of delay due to third-party or official delays were distinguished on facts, as those cases involved statutory requirements for certificates or documents before filing refund claims, which are absent here.

The Tribunal also noted that some Single Member orders cited by the appellant lacked detailed legal reasoning and were not binding.

Issue (ii): Locus Standi of the Appellant to File Refund Claim

The appellant contended that SIPCOT, having deposited the service tax, should have filed the refund claim. The Tribunal examined this issue with reference to Section 11B(1) of the Central Excise Act, 1944, as applicable, and relevant judicial precedents.

The Tribunal referred to a prior decision in K. Ramani Vs Commissioner of GST & Central Excise, which held that the term "any person" in Section 11B(1) is broad and does not restrict refund claims only to the person who deposited the tax with the Government.

Section 12B of the Central Excise Act presumes that the incidence of duty has been passed on to the buyer, but this presumption can be rebutted by evidence. The appellant demonstrated that they bore the ultimate incidence of the tax and did not pass it on, thus having locus standi to claim refund.

The Tribunal also cited the Supreme Court's ruling in Commissioner, Central Excise, Madras Vs M/S. Adison & Co. Ltd., which confirmed that consumers who bear the incidence of tax are entitled to claim refunds and that the burden of proof lies on the claimant to show no unjust enrichment.

Issue (iii): Administrative Delay by SIPCOT and Exclusion of Delay

The appellant argued that the delay in filing the refund claim was caused by SIPCOT's administrative delay in advising them to file the claim and that such delay should be excluded in computing limitation.

The Tribunal found no evidence of official or statutory delay by SIPCOT amounting to an impediment recognized by law. The Tribunal rejected the appellant's characterization of the delay as 'administrative' without documentary proof of correspondence or official impediments.

The Tribunal held that accepting such an argument would render the statutory limitation meaningless and open the door to indolence or strategic delay by applicants.

The Tribunal distinguished the appellant's reliance on the JSW Dharmatar Port case, where the High Court excluded time taken by a Government Ministry to issue a mandatory certificate required by statute before filing refund claims. Here, no such statutory requirement exists.

Issue (iv): Exigibility of Development Charges or Premium to Service Tax

The appellant contended that the one-time upfront development charges or premium paid for long-term lease allotted by SIPCOT were not exigible to service tax, and hence the amounts collected as service tax were erroneous and should be refunded without limitation.

The Tribunal noted that the Show Cause Notice and lower authorities did not adjudicate on the merits of the levy. The appellant's plea on this issue was raised for the first time in a miscellaneous application and was rejected as beyond the scope of the proceedings.

The Tribunal referred to a Larger Bench decision in Rajasthan State Industrial Development & Investment Corporation Ltd. Vs CCE & ST, which held that such premiums are exigible to service tax under the category of "renting of immovable property" for the relevant period.

The Tribunal emphasized judicial discipline, noting that a Bench of lesser strength must follow the view of a Larger Bench on the same issue.

Issue (v): Applicability of the Limitation Act, 1963

The appellant invoked Section 17(1)(c) of the Limitation Act, which provides that limitation begins from the time the mistake is discovered.

The Tribunal examined Supreme Court precedents, including Sakuru Vs Tanaji and Commissioner of Customs and Central Excise Vs M/s Hongo India (P) Ltd., which establish that the Limitation Act does not apply to proceedings before quasi-judicial authorities or tribunals unless expressly provided.

The Finance Act, 1994, is a self-contained code with specific limitation provisions, excluding the applicability of the Limitation Act for condonation of delay.

The Tribunal also distinguished cases cited by the appellant where delay was caused by bona fide prosecution of wrong proceedings before wrong authorities, which is not the case here.

Issue (vi): Automatic Refund of Amounts Collected Without Authority of Law

The appellant contended that since the service tax on development charges was retrospectively exempted, the amounts collected without authority of law should be refunded automatically without filing a refund claim.

The Tribunal extensively analyzed the Supreme Court's nine-judge judgment in Mafatlal Industries Ltd. & Ors. v. Union of India & Ors., which clarified that:

• Taxes collected without authority of law must be refunded, but the refund must be claimed and adjudicated under the statutory provisions unless the charging provision is declared unconstitutional;
• Claims for refund outside statutory provisions are maintainable only if the charging provision is unconstitutional;
• The Central Excise Act and Rules constitute "law" under Article 265 of the Constitution, and refund claims must comply with these provisions;
• Section 72 of the Contract Act cannot be invoked to claim refund when statutory provisions provide a complete code for refund;
• Refund is not automatic even if the levy is invalid; it must be claimed and adjudicated through prescribed procedures.

The Tribunal also referred to Section 73A of the Finance Act, 1994, which mandates that any amount collected as service tax must be deposited with the Central Government forthwith, reinforcing that refund claims must follow statutory processes.

Issue (vii): Unjust Enrichment

The Show Cause Notice raised the issue of unjust enrichment, requiring the appellant to prove that the tax paid was not passed on to any other person.

The Tribunal found that the Original Authority accepted that unjust enrichment did not apply as the appellant bore the incidence of the tax and did not pass it on.

This finding supported the appellant's locus standi to claim refund.

3. SIGNIFICANT HOLDINGS

The Tribunal held:

"In terms of Section 104(3) a separate period of limitation has been prescribed and it is a special provision providing for a relief to the persons who have allotted industrial plots either on long term lease or otherwise. Section 104(3) provides that an application of claim of refund of service tax shall be made within a period of six months from the date on which the Finance Bill, 2017 receives the assent of the President. The Finance Bill, 2017 was passed on 01.04.2017 hence the last date for filing the refund claim was 30.09.2017. As the appellant filed the refund claim on 31.10.2017, which is beyond 6 months' time limit prescribed under Section 104(3) of the FA, 2017, it is hit by time bar and thus I find that the respondent has correctly rejected the refund claim as time barred and the impugned order is upheld."

"The appellant has borne the ultimate incidence of the tax, and not the Trust, who is the eligible claimant of the refund and is not barred from claiming the same. Further the question of unjust enrichment also does not arise as the amount has been paid from the appellant's own resources and has not been shown to have been passed on."

"The time taken by the Ministry in processing and granting certificate under Section 103 of the Act to enable the assessee to file refund claim must be ignored for the purpose of computing the limitation for making refund application. We find that there is no such requirement / condition for an applicant to file any certificate for the grant of refund and hence the facts are distinguished."

"A taxing statute must be read as it is with no additions and no subtractions on the grounds of legislative intendment or otherwise; If the language of a taxing provision is plain, the consequence of giving effect to it may lead to some absurd result is not a factor to be considered when interpreting the provisions. It is for the legislature to step in and remove the absurdity; While dealing with a taxing provision, the principle of strict interpretation should be applied; If two interpretations of a statutory provision are possible, the Court ordinarily would interpret the provision in favour of a taxpayer and against the revenue; In interpreting a taxing statute, equitable considerations are entirely out of place."

"No case for automatically refunding money collected as 'service tax' has been made out. Once the amount is collected as Service Tax and is deposited to Government any refund can be claimed only as per the provisions of the said Act."

"The Limitation Act is not applicable to the Finance Act 1994 and hence the appellants plea on this account fails."

"The plea of the appellant on the exigibility of the activity to service tax submitted in the miscellaneous application filed by them is found to be beyond the SCN and is rejected as inadmissible at this stage as it would allow a totally new proceedings to be started."

The Tribunal concluded that the refund claim was barred by limitation under Section 104(3) of the Finance Act, 1994, and rejected the appeal and miscellaneous application accordingly.