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2012 (7) TMI 22 - HC - Service TaxRefund limitation refund claim on the ground that building construction which was done by assessee was to a non-profit organization - construction service provided by it to non-profit organization was not liable to service tax under Circular No. 80/10/2004 dated 17-9-2004 Held that - they have paid the amount by mistake and therefore they are entitled for the refund - once there was no compulsion or duty cast to pay this service tax amount paid by petitioner under mistaken no objection would not be a duty or service tax payable in law. Therefore once it is not payable in law there was no authority for the department to retain such amount - appellant authorities is directed to refund
1. ISSUES PRESENTED and CONSIDERED
- Whether the claim for refund of service tax paid by the petitioner under mistaken belief that the tax was leviable is maintainable outside the provisions of Section 11B of the Central Excise Act, 1944. - Whether Section 11B of the Central Excise Act applies to refund claims where the amount paid was not in fact a duty or service tax payable under law but was paid under mistake of law or without authority. - Whether the limitation period prescribed under Section 11B of the Central Excise Act bars the petitioner's refund claim. - Whether the writ petition filed by the petitioner is maintainable in view of the statutory appellate remedy under Section 35B(1)(b) of the Central Excise Act. - The legal effect of the Circular No. 80/10/2004 dated 17-9-2004 exempting construction services rendered to non-profit organizations from service tax liability. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Applicability of Section 11B of the Central Excise Act to refund claims of amounts paid under mistake or without authority - Relevant legal framework and precedents: Section 11B of the Central Excise Act provides the procedure and limitation for refund of duty of excise paid, requiring an application within one year from the relevant date and proof that the duty burden was not passed on. The Supreme Court in Mafatlal Industries Ltd. v. Union of India laid down that refund claims of duty must be made under Section 11B except in cases where the levy is unconstitutional or outside the Act's provisions. The Court classified refund claims into three categories: (a) unconstitutional levy, (b) erroneous interpretation of law, and (c) mistake of law leading to refund claims following judicial pronouncements. - Court's interpretation and reasoning: The Court noted that the amounts paid by the petitioner were not service tax payable under law due to exemption granted by Circular No. 80/10/2004. The Assistant Commissioner held the amounts were deposits paid under mistake, not service tax. The Court reasoned that Section 11B applies only to refund of duty of excise properly leviable and paid, and does not cover amounts collected without authority or under mistake of law. Hence, the limitation and procedural bar under Section 11B do not apply to such refunds. - Key evidence and findings: The petitioner paid Rs. 1,24,38,991/- as service tax for construction services rendered to a non-profit trust, which was exempt under the Board's circular. The Department did not dispute the exemption or the nature of the services. The Assistant Commissioner's order explicitly stated the amounts were not service tax but deposits collected without authority. - Application of law to facts: Since the amounts were not payable service tax but collected without authority, the refund claim falls outside Section 11B. The petitioner's claim is maintainable by invoking writ jurisdiction or civil remedies, not restricted by Section 11B's limitation. - Treatment of competing arguments: The Department argued that since amounts were paid as service tax and refund application was filed in Form-R under Section 11B, the limitation applies and the writ petition is not maintainable. The Court rejected this, holding that mere payment does not validate the tax liability or the applicability of Section 11B when the levy itself was unauthorized. - Conclusion: Section 11B is inapplicable to refund claims of amounts paid under mistake or without authority; such claims can be pursued outside the Act's refund provisions. Issue 2: Maintainability of writ petition in view of statutory appellate remedy under Section 35B(1)(b) - Relevant legal framework and precedents: Section 35B(1)(b) provides a statutory appeal mechanism against orders under the Central Excise Act. The Supreme Court in United Bank of India v. Satyawati Tondon held that writ petitions under Article 226 are ordinarily not maintainable if an effective alternate remedy exists, especially in tax recovery matters. - Court's interpretation and reasoning: The Court acknowledged the principle of exhaustion of alternate remedies but held that this issue depends on whether Section 11B applies. Since the refund claim falls outside Section 11B, the statutory appeal under Section 35B(1)(b) is not applicable. Moreover, the petitioner did not approach the Tribunal after the first appellate order but filed a writ petition. Therefore, the bar on maintainability of writ petition does not arise in this factual matrix. - Key evidence and findings: The petitioner's claim was rejected on limitation grounds under Section 11B. The petitioner challenged this rejection by writ petition without exhausting appellate remedies. However, since Section 11B does not apply, the statutory appeal remedy is not available. - Application of law to facts: The Court deferred ruling on maintainability of writ petition until deciding applicability of Section 11B. Having found Section 11B inapplicable, the writ petition is maintainable. - Treatment of competing arguments: The Department's reliance on Satyawati Tondon for dismissal of writ petition was rejected because the statutory appeal remedy was not available in the circumstances. - Conclusion: The writ petition is maintainable as the statutory appeal remedy under Section 35B(1)(b) is not applicable when Section 11B does not apply. Issue 3: Effect of Circular No. 80/10/2004 exempting construction services to non-profit organizations - Relevant legal framework and precedents: The Circular clarified that construction services rendered for organizations established solely for educational, religious, charitable, health, sanitation, or philanthropic purposes and not for profit are not taxable under service tax law. - Court's interpretation and reasoning: The Court accepted the circular as authoritative clarification exempting the petitioner's services from service tax liability. The Department did not dispute the exemption or the nature of the services. The circular formed the basis for the petitioner's claim that the tax paid was not leviable and paid under mistake. - Key evidence and findings: The petitioner constructed buildings for a non-profit trust and paid service tax under mistaken belief. The circular explicitly exempts such services. - Application of law to facts: The exemption under the circular means the tax was not payable, and amounts paid are refundable as they were collected without authority. - Treatment of competing arguments: The Department did not challenge the exemption but contended refund must be claimed under Section 11B. The Court held the exemption negates the tax liability, thus refund is not governed by Section 11B. - Conclusion: The circular exempts the petitioner's services from service tax, rendering the amounts paid refundable outside Section 11B. 3. SIGNIFICANT HOLDINGS - "The order of the Assistant Commissioner clearly indicates that amount lying with the Department is not a service tax but it is in the nature of a deposit with the Government... the amount collected by the Government was not payable by the assessee, therefore, this amount would resemble the amount collected without any authority of law." - "Section 11B of the Central Excise Act refers to claim for refund of duty of excise only, it does not refer to any other amounts collected without authority of law." - "When once there is lack of authority to demand 'service tax' from the respondent company, the department lacks authority to levy and collect such amount... mere payment made by the respondent will neither validate the nature of payment nor the nature of transaction." - "An action by way of suit or a petition under Article 226 of the Constitution is maintainable to assail the levy or order which is illegal, void or unauthorized or without jurisdiction and/or claim refund, in cases... as one passed outside the Act and ultra vires." - "The learned Single Judge was justified in setting aside that portion of the order which rejected the claim of refund and accordingly same is confirmed." - The Court concluded that the refund claim of amounts paid under mistake or without authority is maintainable outside Section 11B of the Central Excise Act and that the writ petition filed by the petitioner is maintainable in the facts of the case.
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