2025 (7) TMI 1710 - AT - Service Tax

Refund of the service tax paid towards the services rendered to KSIDC - service recipient is governmental authority or not - exemption under N/N. 25/2012-ST dated 20.06.2012 vide Sl.No.12(a) - time limitation as per Section 11B of CEA 1944 - applicability of principles of unjust enrichment - burden to prove - non-furnishing of no objection certificate from the service receiver in support of their refund claim stating that the service tax already paid was not reimbursed to them - HELD THAT - The reproduction of purported content as available on the website of KSIDC is insufficient evidence to conclude that the appellant has discharged its burden of proving that KSIDC is a Governmental Authority. In fact the appellant is seeking to obtain the benefit of the exemption notification by requiring an inference or assumption to be made premised on the contents on the website of KSIDC that the company is so established to carry out any function entrusted to a municipality under article 243W of the Constitution. It is found that absent any averment or evidence as to the veracity of the contents on the website displayed and given the variation in the contents being relied on as purportedly available on the website both by the appellant and the adjudicating authority the contents of the website cannot be given much credence or can be relied upon as a legal or statutory document to determine that KSIDC is so established by the Government of Kerala to carry out any function entrusted to a municipality under article 243W of the Constitution. Therefore absent any legal or statutory order that the appellant has been able to produce to evidence that KSIDC is a governmental authority as defined in clause (s) of para 2 of the N/N.12/2012-ST ibid as amended we are unable to concur with the contention of the appellant that KSIDC is a governmental authority established to carry out any function entrusted to a municipality under article 243W of the Constitution premised on the contents of the website - the appellant cannot shift the onus on to the Department when as per the Judgement in the case of Dilip Kumar 2018 (7) TMI 1826 - SUPREME COURT (LB) the burden to prove the entitlement to the benefit of the notification is squarely on the appellant. Claim to the benefit of Sl.No.12(a) of the exemption N/N. 12/2012-ST ibid and consequent claim of refund of service tax already paid without demur to the Exchequer cannot be entertained without the appellant establishing its entitlement to the benefit of the said exemption notification. Thus absence of any legal or statutory order that the appellant has produced to evidence that KSIDC is a governmental authority as defined in clause (s) of para 2 of the N/N.12/2012-ST ibid as amended and in light of the legal impossibility of KSIDC being a company so established by the Government of Kerala to carry out any function entrusted to a municipality under article 243W of the Constitution the appellant has on merits failed to discharge its burden in establishing its entitlement to exemption under Sl.No.12(a)/12A of the N/N. 12/2012-ST ibid as amended. Consequently the appellant s claim for refund on merits is liable to be rejected on these aspects alone. For the aforesaid reasons since the appellant has failed to establish that its claim for refund has merits the decisions relied upon by the appellant which are different from the facts and circumstances of the appellant s case herein are distinguishable and thus inapplicable. In the instant case the appellant has self-assessed the duty and paid the service tax during the relevant period. Later on being of the view that the appellant is entitled to the benefit of Sl.No.12(a) of the exemption notification 25/2012-ST ibid the appellant has preferred the claim for refund contending that the service tax has been paid mistakenly and is therefore a payment made by mistake of law - even if the appellant feels that it was entitled to the benefit of notification and had not claimed it while assessing its tax liability that at best is a payment made out of non-applying the notification that was perceived as available and is squarely covered by the Apex Court decision particularly as dealt with in para 67 and 68 of the Mafatlal 1996 (12) TMI 50 - SUPREME COURT . Section 73A deals with the situation where a person who is liable to pay service tax under the provisions of the Finance Act and rules made thereunder goes on to collect service tax in excess of the service tax so assessed or determined or paid on any taxable service; and such a person who has collected any such amount that is not so required to be collected and who has not deposited such collected amount with the Government; is called upon to show cause why the said amount as specified in the show cause notice should not be paid to the credit of the Government. The section further provides for consequent actions post such determination proceedings in sub-sections (4) (5) and (6) of the same. The provisions of section 73(6) has no application in the instant case of the appellant. The contentions raised by the appellant on inapplicability of time limit under Section 11B of the Central Excise Act 1944 as made applicable to Finance Act by virtue of Section 83 of the Finance Act 1994 as well as the contentions raised on inapplicability of time limit under Section 102 of the Finance Act the outcome of analysis is that the appellant s refund claims are not only found to be unsustainable on merits but also even otherwise are found to be barred by limitation. There are no good reason to interfere with the Orders in Appeal passed by the Appellate Authority - appeal dismissed.

Summary

ISSUES:

Whether the appellant has established that the service recipient qualifies as a "governmental authority" under clause (s) of paragraph 2 of Notification No.25/2012-ST dated 20-06-2012 as amended, thereby entitling the appellant to exemption under Sl.No.12(a)/12A of the said notification.Whether the refund claims filed by the appellant are barred by limitation under Section 11B of the Central Excise Act, 1944 as applied to service tax by Section 83 of the Finance Act, 1994, and/or under Section 102 of the Finance Act, 1994.Whether the principle of "payment by mistake of law" exempts the appellant from limitation prescribed under Section 11B or Section 102.Whether the doctrine of unjust enrichment applies to the refund claims in the absence of a no objection certificate from the service recipient.

RULINGS / HOLDINGS:

The appellant failed to discharge the burden of proving that the service recipient is a "governmental authority" as defined in clause (s) of paragraph 2 of Notification No.25/2012-ST, since the service recipient was not established by an Act of Parliament or State Legislature nor established by Government to carry out any function entrusted to a municipality under Article 243W of the Constitution. The letter produced was insufficient to establish this crucial element. Therefore, the appellant's claim for exemption under Sl.No.12(a)/12A is untenable.The refund claims are barred by limitation as per Section 11B of the Central Excise Act, 1944 and Section 102 of the Finance Act, 1994. The claims for the period 01-04-2015 to 29-02-2016 were required to be filed within six months from 14-05-2016, but were filed beyond this period, rendering them time barred.The principle that "when service tax is paid by mistake, a claim for refund cannot be barred by limitation" does not apply in this case, as per the binding Supreme Court decision in Mafatlal Industries Ltd v. Union of India. The Central Excise and Customs enactments are self-contained, and refund claims must be filed within prescribed time limits under Section 11B or relevant statutory provisions. Section 72 of the Contract Act is not applicable to such refund claims.The doctrine of unjust enrichment was found not to arise as the appellant failed to establish entitlement to exemption and did not provide sufficient evidence regarding non-reimbursement of tax by the service recipient.

RATIONALE:

The Court applied the statutory definition of "governmental authority" as amended in Notification No.2/2012-ST dated 30-01-2014, requiring either establishment by an Act of Parliament or State Legislature, or establishment by Government with 90% or more equity participation to carry out functions entrusted to a municipality under Article 243W of the Constitution. The service recipient, being a government-owned company established in 1961 and not by statute, did not satisfy these conditions.The Court relied on the Constitution (74th Amendment) Act, 1992, which inserted Article 243W and the Twelfth Schedule, codifying municipal functions. Since the service recipient was established prior to this amendment and not to perform municipal functions, it did not qualify as a governmental authority under the notification.The Court extensively relied on the Supreme Court's nine-judge Constitution Bench decision in Mafatlal Industries Ltd v. Union of India, which held that refund claims for taxes paid under mistake of law must be filed under the relevant enactments within prescribed limitation periods, and that Section 72 of the Contract Act is not applicable to circumvent these limitations. The Court emphasized the binding nature of this precedent and rejected the appellant's reliance on contrary case law.The Court noted that exemption notifications are to be strictly construed, with the burden of proof on the claimant to establish entitlement. The appellant's evidence, including uncertified letters and website extracts, was insufficient to discharge this burden.The Court also considered the legislative intent behind Section 102 of the Finance Act, 1994, which prescribed a six-month limitation period for refund claims relating to retrospective exemption for the period 01-04-2015 to 29-02-2016, and held that this limitation period is binding and cannot be overridden by general limitation principles.Regarding unjust enrichment, the Court held that since the appellant failed to establish entitlement to exemption and did not produce a no objection certificate from the service recipient confirming non-reimbursement of service tax, the doctrine was not applicable to grant refund.