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When service tax is paid mistakenly, Section 11B of the Central Excise Act has no application

Issue :

whether the petitioner is entitled for refund of the amount claimed after one year from the relevant date apart from the question relating to alternate remedy available to the petitioner.

Held :

the writ petition is maintainable when service tax is paid mistakenly, Section 11B of the Central Excise Act has no application


when the amount is arbitrarily withheld without any justification under law as the refund claimed by the petitioner is not relatable to Section 11B of the Central Excise Act


IN THE HIGH COURT OF KERALA AT ERNAKULAM

PRESENT:

THE HONOURABLE MR. JUSTICE A.MUHAMED MUSTAQUE


MONDAY,THE 6TH DAY OF JULY 2015/15TH ASHADHA, 1937


WP(C).No. 18126 of 2015 (M)
----------------------------

PETITIONER :
---------------------

M/S. GEOJIT BNP PARIBAS FINANCIAL SERVICES LTD
34/659-P,CIVIL LINE ROAD, PADIVATTOM
KOCHI - 682 024

REPRESENTED BY ITS MANAGING DIRECTOR MR.C.J.GEORGE

BY ADV. SRI.JOSE JACOB

RESPONDENT(S) :
----------------------------

1. COMMISSIONER OF CENTRAL EXCISE
CUSTOMS & SERVICE TAX
OFFICE OF THE COMMISSIONER OF CENTRAL EXCISE
CUSTOMS AND SERVICE TAX, C.R.BUILDING, I.S.PRESS ROAD
KOCHI - 682 018.

2. DEPUTY COMMISSIONER OF CENTRAL EXCISE
SERVICE TAX DIVISION, CENTRAL EXCISE BHAVAN
KATHRIKKADAVU, KOCHI - 682 017.

R1 & R2 BY ADVS. SRI.RANJITH JACOB KOSHY, SC
SRI.THOMAS MATHEW NELLIMOOTTIL, SC

THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 23-06-2015,
THE COURT ON 06-07-2015 DELIVERED THE FOLLOWING:

A.MUHAMED MUSTAQUE, J.

~~~~~~~~~~~~~~~~~~~~~~~~~
W.P.(C).No.18126/2015
~~~~~~~~~~~~~~~~~~~~~~~~~
Dated this the 6th Day of July, 2015
J U D G M E N T
The petitioner is a company engaged in providing retail financial

services like share stock and share brokering, marketing of IPO of

companies and mutual funds, corporate advisory services etc. They have

approached this Court challenging an order rejecting their claim for refund

of the amount paid mistakenly as service tax.


2. The petitioner, for the payment received from the Bank of

Muscat SAOG for the service rendered, remitted service tax amounting to

Rs.1,72,339/- for the period from April 2012 to March 2013. They made an

application for refund of service tax for the reason that they need not pay

the same, since the recipient of such service was located outside India and

the payment received was in convertible foreign exchange which qualifies

as export of service. The application was submitted on 23/2/2015. The

said application was rejected by Ext.P7 order stating that it was filed

beyond one year from the relevant date. This order is under challenge

before this Court.

3. The claim was rejected citing Section 11B(1) of the Central

Excise Act, 1944 which is made applicable to service tax purposes by

virtue of Section 83 of the Finance Act, 1994. In this case, payments were

made on 6/7/2012, 5/10/2012, 5/1/2013 and 28/3/2013. It was found that

since the refund claim was submitted only on 24/02/2015, it was barred by

limitation and therefore, the petitioner is ineligible for refund of the amount

claimed.


4. Section 11B of the Central Excise Act is quoted below for

convenient reference:

"11B. Claim for refund of duty and interest, if any, paid

on such duty.--

(1) Any person claiming refund of any duty of excise and

interest, if any, paid on such duty may make an application for

refund of such duty and interest, if any, paid on such duty to

the Assistant Commissioner of Central Excise or Deputy

Commissioner of Central Excise before the expiry of one year

from the relevant date in such form and manner as may be

prescribed and the application shall be accompanied by such

documentary or other evidence (including the documents

referred to in section 12A as the applicant may furnish to

establish that the amount of duty of excise and interest, if any,

paid on such duty in relation to which such refund is claimed

was collected from or paid by him and the incidence of such

duty and interest if any, paid on such duty had not been

passed on him to any other person.

.................................."

5. The question that arises is whether the petitioner is entitled for

refund of the amount claimed after one year from the relevant date apart

from the question relating to alternate remedy available to the petitioner.


6. It was found in the impugned order that the payment received

by the petitioner is not chargeable to tax. The reason given is as follows:

"Section 66B envisages taxation of services rendered in

the taxable territory. Whether a particular service is rendered

in the taxable territory or not is a matter to be determined in

terms of Place of Provision Rules, 2012. As per rule 3 of the

said Rules, which is the relevant Rule applicable in the instant

case, the place of provision of service is the location of the

service recipient. In the instant case the recipient is

BankMuscat SAOG and their location is Sultanate of Oman.

Thus the services have been rendered outside the taxable

territory and hence are not chargeable to tax."

Therefore, the payment made by the petitioner is purely by a mistake and

not relatable to payment under service tax.


7. The learned counsel Mr.Jose Jacob appearing for the

petitioner, relying on the judgment of the Division Bench of the Karnataka

High Court in Commissioner of Central Excise (Appeals), Bangalore v.

KVR Construction [2012 (26) S.T.R 195 (Kar.)], would argue that when

service tax is paid mistakenly, Section 11B of the Central Excise Act has no

application. It is apposite to refer the dictum of the above judgment at

para.23, which reads as follows:

"23. Now we are faced with a similar situation where

the claim of the respondent/assessee is on the ground that

they have paid the amount by mistake and therefore they are

entitled for the refund of the said amount. If we consider this

payment as service tax and duty payable, automatically,

Section 11B would be applicable. When once there was no

compulsion or duty cast to pay this service tax, the amount of

Rs.1,23,96,948/- paid by petitioner under mistaken notion,

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. By any stretch of

imagination, it will not amount to duty of excise to attract

Section 11B. Therefore, it is outside the purview of Section

11B of the Act."


8. The learned counsel for the Department, relying on the

judgment of the Hon'ble Supreme Court in Mafatlal Industries Ltd. and

others v. Union of India and others [(1997) 5 SCC 536] would argue

that even if the payment was made under a mistake, the refund can only be

processed in terms of Section 11B of the Central Excise Act. In the above

case, the Apex Court elaborately classified claim for refund into three

groups or categories, vis-a-vis, (i) unconstitutional levy, (ii) illegal levy and

(iii) mistake of law, and held that the remedies involved in all the three

categories are the remedies provided under the Excise and Customs Act.

None of the above categories would attract to the case in hand. In this

case, the levy was purely on account of mistake of fact in understanding

the law. The petitioner assumed that the transaction for which he has paid

tax, is covered under the law. The law does not cover such transaction for

payment of service tax. Therefore, it is not on account of any mistake of

law but mistake of fact the service tax was paid. In that view of the matter

it has no colour of tax for the purpose of levy by the Department. The

distinguishing feature for attracting the provisions under Section 11B is that

the levy should have the colour of validity when it was paid and only

consequent upon interpretation of law or adjudication, the levy is liable to

be ordered as refund. When payment was effected, if it has no colour of

legality, Section 11B is not attracted. This Court is also of the view that

levy is not in accordance with the provisions of the service tax and

therefore, such payment cannot be taken as a payment made relatable to

Section 11B of the Central Excise Act.


9. The learned Standing Counsel for the Department would

further argue that the petitioner has an alternative remedy and therefore,

the writ is not maintainable.


10. The question of alternative remedy would arise if service tax is

otherwise leviable under the Central Excise Act. Herein, in this case, there

is no dispute with regard to the fact that no service tax is leviable for the

service extended by the petitioner to the Muscat Bank SAOG. Thus, the

writ petition is maintainable when the amount is arbitrarily withheld without

any justification under law as the refund claimed by the petitioner is not

relatable to Section 11B of the Central Excise Act. Similar view was also

taken by the Karnataka High Court in K.V.R. Constructions v.

Commissioner of Central Excise (Appeals) and another [(2010) 28 VST

190 (Karn)] and by the Madras High Court in Natraj and Venkat

Associates v. Asst.Commr. Of S.T., Chennai-II [2010 (249) E.L.T.337

(Mad.)].


11. In that view of the matter, the writ petition is allowed. There

shall be a direction to the second respondent to sanction, refund claimed

by the petitioner based on the request made by him within two months from

the date of receipt of a copy of this judgment. No costs.


Sd/-
A.MUHAMED MUSTAQUE, JUDGE


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WP(C).No. 18126 of 2015 (M)
----------------------------------------

APPENDIX

PETITIONERS' EXHIBITS :
-------------------------------------

EXT. P1: TRUE COPY OF INVOICES.

EXT. P2: TRUE COPY OF FOREIGN INWARD REMITTANCE CERTIFICATE.

EXT. P3: TRUE COPY OF SERVICE TAX WORKINGS AND CHALLANS FOR THE
RELEVANT PERIOD.

EXT. P4: TRUE COPY OF REFUND APPLICTION DATED 23/2/2015.

EXT. P5: TRUE COPY OF SHOW CAUSE NOTICE NO.06/2015 DATED 23/3/2015.

EXT. P6: TRUE COPY OF REPLY TO SCN DATED 13/4/2015.

EXT. P7: TRUE COPY OF ORDER IN ORIGINAL DATED 19/5/2015.

RESPONDENT(S)' EXHIBITS : NIL
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//TRUE COPY//

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