When service tax is paid mistakenly, Section 11B of the Central Excise Act has no application
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.
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
THE HONOURABLE MR. JUSTICE A.MUHAMED MUSTAQUE
MONDAY,THE 6TH DAY OF JULY 2015/15TH ASHADHA, 1937
WP(C).No. 18126 of 2015 (M)
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
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.
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
4. Section 11B of the Central Excise Act is quoted below for
"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
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.
A.MUHAMED MUSTAQUE, JUDGE
WP(C).No. 18126 of 2015 (M)
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
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