2025 (7) TMI 1454 - AT - Service Tax

Refund of service tax which was deposited by mistake - where the provision of Section 11B are not applicable can the provision of Section 11BB of the Act are applicable - HELD THAT - The said issue has been decided by this Tribunal in the case of M/s P. S. Builders Ors. Vs. Commissioner of CGST Jodhpur 2025 (5) TMI 482 - CESTAT NEW DELHI wherein this Tribunal observed that As provision of Section 11B are not applicable to the facts of the present case in that circumstances determining the rate of interest under Section 11BB of the Act is not applicable. Following the decision of this Tribunal in the case of M/s P. S. Builders Ors. it is held that the appellant is entitled interest @ 12% on delayed refunds. Appeal disposed off.

Summary

ISSUES:

Whether refund claims of service tax paid by mistake on construction of individual/independent houses are governed by Section 11B of the Central Excise Act.Whether interest on delayed refund of such mistaken service tax payment should be payable at 6% or 12% per annum.Whether provisions of Section 11BB and Notification No. 67/2003 - CE (NT) dated 12.09.2003 apply to refunds of service tax paid by mistake.Whether writ jurisdiction under Article 226 is maintainable for refund claims outside the scope of Section 11B of the Central Excise Act.

RULINGS / HOLDINGS:

The refund claims of service tax paid by mistake do not fall within the purview of Section 11B of the Central Excise Act as the amount paid was not a "duty of excise" payable in law but a "revenue deposit".Since Section 11B is not applicable, the rate of interest prescribed under Section 11BB and Notification No. 67/2003 - CE (NT) dated 12.09.2003 are also not applicable.The appellant is entitled to interest on delayed refunds at the rate of 12% per annum, as held by this Tribunal and affirmed by the Hon'ble Apex Court in relevant precedents.Writ petitions under Article 226 are maintainable for refund claims where the tax was paid by mistake and not under a valid demand, as the provisions of Section 11B do not bar such jurisdiction.

RATIONALE:

The Court applied the legal framework under the Central Excise Act, particularly Sections 11B and 11BB, and relevant judicial precedents including the decisions in KVR Constructions Ltd. and Mafatlal Industries Ltd.It was held that Section 11B applies only to refund claims of duty of excise lawfully payable and collected, and not to amounts paid under mistake of law or without authority.The Court distinguished cases where exemption was granted retrospectively or where refund claims arose under valid demands, clarifying that those precedents are not applicable to mistaken payments.The decision recognized the principle that mere payment of an amount does not validate it as a duty if it was not exigible in law, and thus such payments are outside the statutory refund regime under Section 11B.The Court relied on the classification of refund claims into categories including unconstitutional levy, mistake of law, and erroneous interpretation, recognizing that claims based on mistake of law fall outside Section 11B and may be pursued through writ jurisdiction.This represents a doctrinal clarification that refund claims for mistaken payments of service tax are treated as revenue deposits refundable with interest at a higher rate, not governed by the lower interest provisions applicable to lawful duty refunds.