2016 (12) TMI 1784 - HC - Service Tax

Refund of service tax - duty paid under protest - rejection on the ground of time limitation - Section 11B of the Central Excise Act 1944 - petitioners argue that the amounts were not voluntarily paid but rather under protest - HELD THAT - Section 11B clarifies that the one year period has been prescribed as the time limit for claiming refund in respect of the duty and interest paid on such duty for which refund is claimed. The second proviso states that if the duty and interest is paid under protest the one year period will not apply. In this case the Adjudicating Authority went on to hold that since the refund claim was made after the adjudication is complete it was time barred. This Court is of the opinion that the facts of the present case clearly point to the petitioner s claim falling within the second proviso to Section 11B of the Act. Concededly even during the pendency of the adjudication the petitioner s letter indicating deposits were made (in unequivocal terms) under protest. The adjudication order took note of the earlier statement which was retracted at the beginning of the adjudication proceedings and found that the retraction was genuine -The adjudication order is an exhaustive one and categorically rules that against all transactions which were stated to be taxed could not have fallen within the ambit of Service Tax. In the present case the entire proceedings seeking recovery of amounts were without jurisdiction and the amounts which were collected under ostensible authority of law could not have been collected because the transactions were not subject to levy at all. In these circumstances the collection of duties was per se illegal. The concerned authorities are hereby directed to process the petitioner s refund claim and ensure that the amounts are remitted to it with applicable interest - petition allowed.

Summary

Issues Involved:
1. Refund claim rejection.
2. Time-barred refund application.
3. Payments made under protest.
4. Applicability of Section 11B of the Central Excise Act, 1944.

Detailed Analysis:

1. Refund Claim Rejection:
The petitioner sought a direction for a refund and the quashing of an order dated 15.09.2014, which rejected its refund applications. The petitioners, engaged in the readymade garment export business, had deposited certain amounts under protest following a search and show cause notice. The adjudication order absolved them of the allegations, finding that the overseas transactions were not taxable services. Despite this, the Deputy Commissioner rejected the refund claim, deeming it time-barred under Section 11B of the Central Excise Act, 1944.

2. Time-Barred Refund Application:
The Deputy Commissioner concluded that the refund claims were filed beyond the stipulated one-year period from the relevant date of payment, as per Section 11B of the Central Excise Act, 1944. The payments were made on 11.08.2012, 16.08.2012, and 21.03.2013, while the refund claims were filed on 29.05.2014, thus exceeding the one-year limitation period and being considered time-barred.

3. Payments Made Under Protest:
The petitioners argued that the amounts were not voluntarily paid but were deposited under protest, supported by letters indicating such. The court noted that the letters and the adjudication order confirmed that the deposits were made under protest during the pendency of proceedings. The adjudication order also recognized the retraction of the petitioners' earlier statements, validating the claim of payments made under duress.

4. Applicability of Section 11B of the Central Excise Act, 1944:
Section 11B stipulates a one-year period for claiming refunds, with a proviso that this limitation does not apply if the duty was paid under protest. The court found that the petitioners' case fell within this proviso, as the payments were made under protest and the adjudication order ultimately ruled that the transactions were not subject to service tax. The court referenced the case of Mera Baba Realty Associate (P) Ltd. Vs. Commissioner of Service Tax, Delhi, where it was held that amounts paid under protest and later deemed non-taxable must be refunded as they were collected without authority of law.

Conclusion:
The court set aside the impugned order, directing the authorities to process the petitioners' refund claims and remit the amounts with applicable interest within eight weeks. The writ petitions were disposed of accordingly.