2025 (7) TMI 1138 - AT - Service Tax

Refund of amount erroneously deposited by the appellant despite having no liability to deposit the same - applicability of statutory time prescribed under section 11B of CEA - HELD THAT - From Section 11B it is clear that the provision refers to the claim of refund of duty of excise only it does not refer to any other amount collected without authority of law. In the case in hand admittedly the amount sought for as refund was the amount paid under mistaken notion which even according to the Department / Adjudicating Authority was not the liability of the Appellant. In the given circumstances it would not give the Department an authority to retain the amount paid which otherwise was not payable by the Appellant. Nothing may act as an embark on the right of the Appellant to demand refund of payment made by them under the mistaken notion. The issue has been dealt by Hon ble Supreme Court in the case of Mafatlal Industries vs. CCE 1996 (12) TMI 50 - SUPREME COURT . It has been held that one has to see whether the amount claimed is unconstitutional and outside the provisions of Section 11B of the Act. The issue has repeatedly been clarified about non applicability of Section 11B upon such refunds which pertains to an amount paid under mistake without any liability. The Adjudicating Authorities are observed to have miserably failed to follow the law as got settled by the Hon ble Supreme Court by various High Courts and by various Benches of this Tribunal as in the case of M/s Chhattisgarh Civil Supplies Corporation Ltd. vs. Commissioner of Central Excise Service Tax 2020 (2) TMI 1202 - CESTAT NEW DELHI in the case of Kerala Ex-serviceman Welfare Association vs. Comm of Service Tax Central Excise 2022 (3) TMI 985 - CESTAT BANGALORE and in the case of Dexterous Products Pvt. Ltd. vs. Comm of C. Ex S.T. Indore 2018 (12) TMI 381 - CESTAT NEW DELHI . The findings of Commissioner (Appeals) in the order under challenge are held absolutely in violation of above mentioned decisions rather are held to be in complete disrespect to the judicial precedent already been made by the superior judicial authorities. The impugned order is set aside - appeal allowed.

Summary

ISSUES:

Whether the limitation period prescribed under Section 11B of the Central Excise Act applies to refund claims arising from amounts erroneously deposited without any tax liability.Whether an amount paid under a bona fide mistake, without any liability to pay service tax, qualifies as "duty of excise" for the purpose of refund under Section 11B.Whether the excess service tax deposited twice can be claimed as refund despite the introduction of GST and denial of transitional credit under Sections 140 to 142 of the CGST Act, 2017.Whether refund claims barred by limitation under Section 11B can be entertained when the payment was made under mistake of law or without jurisdiction.The legal effect of carrying forward excess payment as Input Tax Credit (ITC) under GST regime on the entitlement to refund of the same amount in cash.

RULINGS / HOLDINGS:

The limitation under Section 11B of the Central Excise Act does not apply to amounts deposited erroneously without any liability to pay tax, as such amounts are considered "revenue deposit" and not "duty of excise."An amount paid under a bona fide mistake, where there was no tax liability, is "ipso facto entitled for refund," and the statutory limitation for refund claims under Section 11B is inapplicable.Excess service tax paid twice inadvertently is refundable notwithstanding the denial of transitional credit under the CGST Act, 2017, since the payment was not legally due.Refund claims barred by limitation under Section 11B cannot be rejected if the payment was made under mistake of law or without jurisdiction; the limitation period commences from the date the mistake is discovered.Carrying forward excess payment as ITC under GST does not preclude a refund claim of the same amount in cash when the payment was made without any liability; refund in cash does not amount to double recovery if the credit was reversed or not available.

RATIONALE:

The Court applied the statutory framework of Section 11B of the Central Excise Act, which governs refund claims of "duty of excise," and distinguished between payments made under valid tax liability and those made erroneously without liability.Reliance was placed on authoritative precedents, including the Supreme Court's decision in Mafatlal Industries vs. CCE, which categorizes refund claims into groups and holds that claims for illegal or unauthorized levies are not strictly bound by statutory limitation under Section 11B.The Court referred to the principle that "the authority which recovers tax without any authority of law cannot be permitted to retain the amount," emphasizing the obligation to refund amounts paid without liability.Judicial precedents from various High Courts and Tribunal benches were cited to reinforce the non-applicability of Section 11B limitation to mistaken payments, including cases where refund claims were made shortly after the mistake was discovered.The Court noted the failure of lower adjudicating authorities to follow binding judicial precedents, describing such conduct as "callous, negligent and disrespectful behaviour" that undermines judicial discipline.The decision clarifies that refund claims involving mistaken payments are governed by general law principles and contract law (Section 72 of the Contract Act), rather than the specific limitation provisions of the Central Excise Act.