Delay in Filing Service Tax Refund Claim, Refund is Strictly Bound by Statutory Limit: CESTAT dismisses Royal Enfield’s Appeal [Read Order]

In a major setback to Royal Enfield, the Chennai Bench of Customs Excise and Service Tax Appellate Tribunal (CESTAT) has held that a refund of service tax is strictly bound by statutory time limit and the Limitation Act is inapplicable.

The appellant/assessee, Royal Enfield had filed a refund claim for an amount of Rs.1,79,46,788 claiming that the amount was erroneously collected as service tax by SIPCOT on developmental charges.  On verification, it was observed that service tax paid on developmental charges during the period from 1.6.2007 to 21.9.2016 was liable to be refunded in terms of sec. 104 of Finance Act, 2017 (FA, 2017).

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The appellant was sent a Show Cause Notice with the intention of rejecting the whole refund amount on the grounds that the refund claim was submitted 31 days beyond the deadline set forth in Section 104 of Chapter V of the Finance Act, 1994. Following the proper legal procedure, the Original Authority denied the whole reimbursement claim due to a time bar. Before the Commissioner (Appeals), the appellant filed an appeal, which was denied for the same reason.

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According to Section 17(1)(c) of the Limitation Act, it was argued that the statute of limitations in an application for relief from the effects of an error would start as soon as the applicant realized the error or as soon as the error could have been identified with reasonable care. Thus, he begged that their appeal would be granted.

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It was argued that a statute's special provisions will take precedence over its general provisions in the event of a dispute. Therefore, where applicable, the deadline set forth in Section 104 of the Finance Act will take precedence over that of Section 11B of the Central Excise Act. Since the Tribunal is a product of the statute, it is unable to go beyond its express provisions and excuse a claim's filing delay in cases where the statute itself makes no mention of such provisions.

The two member bench of M. Ajit Kumar (Technical Member) and Ajayan T.V., (Judicial Member) has observed that the ultimate consumer can claim a refund of service tax but is bound by the time limit in the statute .

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It is not acceptable to lose time due to third-party delays. The Limitation Act cannot be used to extend the time restriction for allowing a delay in filing for a refund. Only the provisions of the aforementioned statute permit a reimbursement of money collected or paid as tax under FA 1994. The Tribunal cannot consider any new issue that was submitted as a miscellaneous petition that goes beyond the parameters of the Show Cause Notice and would permit the initiation of an entirely new case.

The CESTAT rejected the appeal, ruling that the Finance Act of 1994 is not covered by the Limitation Act.

To Read the full text of the Order CLICK HERE

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