The Karnataka High Court held that the limitation period is not applicable for refund of service tax wrongly paid on late payment charges (LPC).
The appellant-assessee, Way2Wealth Brokers is a private limited company registered under the provisions of Companies Act, 1956. The assessee is a holder of service tax registration and is engaged in rendering taxable services under the category of ‘Stock broker’ and ‘Banking and other Financial Services. The assessee was collecting Late Payment Charges, (LPC) from the customers for any delay in payment of the amount beyond the stipulated time. The assessee paid service tax on the LPC inadvertently for the period April 2009 to March 2011. However, as there was no mandate to pay service tax on LPC, the assessee stopped remitting service tax on this amount from 01.04.2011.
In pursuant to a clarificatory Circular issued by the Central Board of Excise and Customs, New Delhi dated 03.08.2011 clarifying that service tax need not be paid on LPC collected from stock brokers, the assessee filed a refund application for an amount of Rs.37,72,354/- being service tax inadvertently paid which was not due under the existing laws. A show-cause notice was issued by the Department alleging that no satisfactory grounds were urged with evidential factors for the claim made. Subsequently, an order was passed by the adjudicating authority dated 26.04.2012 rejecting the claim for refund of service tax.
Mr. Ashok A.Deshpande, counsel for the assessee, placing reliance on the judgment of a co-ordinate Bench of this Court in the case of Commissioner of Central Excise (Appeals), Bengaluru, .v. KVR Construction submitted that service tax paid on LPC was on a mistaken notion which was not liable to be paid. Section 11B of the Act, 1944 relates to claims for refund of duty. He submitted that ‘duty’ means the duty payable under Section 3 of the said Act. As per the Central Excise Rules, 2002 The amount of service tax paid on LPC, not being the duty payable under Section 3 of the Act, 1944, Section 11B of the Act, 1944 has no application to the present case. Therefore, he contended that the Central Government cannot withhold the amount paid as service tax without the authority of law in violation of Article 265 of the Constitution of India. The authorities having refunded the service tax paid under the mistaken notion for the period October 2010 to March 2011, ought to have refunded the same for the period in consideration also.
The division bench of Justice S.Sujatha and Justice Ravi V.Hosmani while allowing the appeal of the assessee directed the authorities to refund the amount claimed by the appellant-assessee towards service tax paid on late payment charges (LPC) for the period April 2009 to September 2010 within a period of four weeks from the date of receipt of a certified copy of the order.
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