2025 (7) TMI 1644 - AT - Service Tax

Refund claim - barred by time limitation as stipulated u/s 11B of the Central Excise Act 1944 as made applicable to Finance Act by virtue of Section 83 of the Finance Act 1994. HELD THAT - The issue is no more res-integra. When it comes to the issues pertaining to the claim of refund being made pertaining to the Central Excise or Customs Enactments it is not required to look further than advert to the locus classicus namely the Judgement of the 9 Judge Constitution Bench in the case of Mafatlal Industries Ltd v. Union of India 1996 (12) TMI 50 - SUPREME COURT wherein in the Judgement of Hon ble J.S. Verma S.C.Agrawal B.P. Jeevan Reddy A.S. Anand and B.N. Kripal JJl delivered by B.P. Jeevan Reddy J. per majority the matter has been thrashed out exhaustively. S.C. Sen J. has authored the lone dissenting opinion. When the Apex Court sitting in a combination of nine has categorically held that in the case of mis-interpreting or mis-applying any of the rules regulations or notifications issued under the Central Excise or Customs Enactments such a claim has necessarily to be preferred under and in accordance with the provisions of the respective enactment before the authorities specified thereunder and within the period of limitation prescribed therein it is opined that even in a case of payment of service tax made by an assessee without proper examination of whether or not the activity of the assessee gets covered under the definition of works contract service that is exigible to service tax it would still have to be dealt with under the refund provisions as provided for in the Finance Act 1994 namely Section 11B as made applicable vide Section 83 of the Finance Act 1994. When the Apex Court has categorically held that the Central Excise and Customs Enactments are self-contained enactments providing for levy assessment recovery and refund of duties imposed thereunder and that Section 11B of the Central Excises and Salt Act and Section 27 of the Customs Act both before and after the 1991 (Amendment) Act are constitutionally valid and have to be followed and given effect to no assessee under these enactments or any other lower judicial forum can tenably contend to the contrary. The contentions raised by the appellant on inapplicability of time limit under Section 11B are unsustainable and the claim being barred by limitation the Appellate Authority has rightly upheld the same. The Order in Appeal passed by the Appellate Authority merits no interference - appeal dismissed.

Summary

ISSUES:

Whether the refund claim filed under Section 11B of the Central Excise Act, 1944 is barred by limitation when filed beyond one year from the relevant date of payment.Whether Section 72 of the Contract Act applies to refund claims of service tax paid under mistake of law, thereby allowing claims beyond the limitation period prescribed in Section 11B.Whether a taxpayer can claim refund based on a subsequent judicial decision in another taxpayer's case after finality of assessment in his own case.Whether equitable considerations, including the doctrine of unjust enrichment and passing on of tax burden, affect entitlement to refund under Section 11B or Section 72 of the Contract Act.Whether the defence of "spending away" of taxes collected under an unconstitutional levy is a valid defence against refund claims.

RULINGS / HOLDINGS:

The refund claim filed beyond one year from the relevant date as stipulated under Section 11B of the Central Excise Act, 1944 is barred by limitation and cannot be entertained; the limitation period is mandatory and exclusive.Section 72 of the Contract Act has no application to refund claims under the Central Excise and Customs enactments, which are self-contained and provide exclusive remedies for refund; no suit or writ petition for refund invoking Section 72 is maintainable except in cases of constitutional invalidity of the levy.A taxpayer cannot reopen or claim refund of duty paid under a final order on the basis of a judicial decision in another taxpayer's case; finality of assessment is sacrosanct and claims must be pursued within the statutory framework under Section 11B.Equitable considerations, including the requirement that the claimant must establish he has not passed on the burden of duty to others, apply only in cases where refund arises from declaration of unconstitutionality of the levy; such considerations do not extend to claims under Section 11B for misinterpretation or misapplication of law.The defence of "spending away" the taxes collected under an unconstitutional levy is valid and may bar refund claims unless the claimant proves he has borne the burden of the tax and not passed it on to others.

RATIONALE:

The Court applied the legal framework established by the nine-Judge Constitution Bench decision in Mafatlal Industries Ltd v. Union of India, which clarified the exclusive applicability of Section 11B of the Central Excise Act for refund claims arising from misinterpretation or misapplication of tax laws, and limited the applicability of Section 72 of the Contract Act to cases of unconstitutional levy only.The decision emphasized that Central Excise and Customs Acts are self-contained enactments providing comprehensive mechanisms for levy, assessment, recovery, refund, and appeals, thereby barring civil suits or writ petitions for refund outside these statutory provisions.The Court rejected the doctrine that a taxpayer can claim refund based on discovery of mistake of law through judicial decisions in other cases after finality of his own assessment, holding that such claims would undermine public interest and the finality of tax proceedings.Equity and economic justice principles were invoked to require claimants to prove they have not passed on the tax burden, reflecting the indirect nature of excise and customs duties and preventing unjust enrichment of taxpayers at the expense of the public exchequer.The Court acknowledged constitutional values embodied in Articles 38, 39, and 265 of the Indian Constitution, emphasizing the balance between individual rights and public interest in tax administration and refund claims.Precedents and statutory provisions were harmonized to uphold the validity and primacy of limitation periods and procedural safeguards in refund claims, ensuring fiscal stability and preventing administrative chaos.