The Kolkata Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that a mistaken Service Tax payment is not subject to the refund limitation under Section 11B of the Central Excise Act, 1944.
National Buildings Construction Corporation Ltd, appellant-assessee, provided township development services for public sector units. It paid Service Tax under ‘construction of residential complex service’ from October 1, 2007, to June 30, 2011. After realizing the service was not taxable, it informed the authorities on August 17, 2011, and stopped paying tax. No demand was raised after that.
A refund claim was filed on September 16, 2011. After no response, an RTI application was submitted on March 30, 2013. In reply, the RTI authority informed on July 1, 2013, that the claim had been rejected on February 17, 2012, but no copy of the order was provided. Another refund claim was filed on August 22, 2013.
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The adjudicating authority rejected the claim on September 6, 2013, stating that the earlier claim had already been denied for being time-barred under Section 11B of the Central Excise Act, 1944. On appeal, the Commissioner (Appeals) dismissed it on different grounds, saying the assessee was not registered under ‘residential complex service,’ a point not raised earlier.
Aggrieved by the decision the assessee appealed before the tribunal.
The assessee’s counsel argued that Service Tax was paid by mistake and was not applicable to residential complexes for government employees. Since it was not a valid tax, Section 11B did not apply.
Reliance was placed on M/s. OIL India Ltd. v. CCE (2023), Venkatraman Guhaprasad v. Commissioner of G.S.T. (2020), and Commissioner v. KVR Construction (2018), where courts held that Section 11B did not apply to taxes paid by mistake.
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The two member bench comprising R.Muralidhar(Judicial Member) and K.Anpazhakan(Technical Member) noted that the Department claimed to have rejected the refund on February 17, 2012, but provided no proof of delivery. The assessee later learned about the rejection through an RTI reply on July 1, 2013, which did not include a copy of the order.
To be cautious, the assessee refiled the refund claim on August 22, 2013, but it was rejected as time-barred. The Commissioner (Appeals) dismissed the appeal on unrelated grounds, which were found to be unsustainable.
The appellate tribunal relied on rulings in M/s. OIL India Ltd. v. CCE (2023), Venkatraman Guhaprasad v. Commissioner of G.S.T. (2020), and Commissioner v. KVR Construction (2018), which held that mistaken tax payments were refundable without time limits. The Supreme Court also upheld this view in KVR Construction.
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Following these precedents, the bench ruled that the refund claim was valid and not subject to Section 11B. The case was sent back to the adjudicating authority for reconsideration, with a directive to decide within three months.
In short,the appeal was disposed of.
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