The Chennai bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that refund of excise duty paid under mistake cannot be denied when it was filed within the time prescribed under section 11B of the Central Excise Act,1944.
M/s. JVS Export, the appellants are manufacturers of woven fabrics such as kitchen terry towels, dish cloth etc. They are paying Service Tax under Reverse Charge Mechanism (RCM) on the foreign Agents Commission used for the export of goods. They filed, a refund claim under the provisions of Notification No. 17/2009-ST dated 7.7.2009 on 6.7.2010 for refund of service tax of Rs.25,44,209/- paid by them under the category of business auxiliary service on the commission paid to their foreign agent.
They have subsequently modified the amount to Rs 25,33,516/- being the actual amount of Service Tax paid. A Show Cause Notice was issued to them proposing rejection of the said refund claim on the ground that the said business auxiliary service was not specified under the said notification.
After due process of law, the Original Authority split the refund as requested but rejected the refund claim of Rs.16,74,856/- on the ground that the impugned claim was not filed within six months stipulated under Notification No. 41/2007-ST dated 6.10.2007.
He rejected the claim of Rs.8,58,660/- also under Rule 5 of CENVAT Credit Rules, 2004 for failure of the appellants to comply with the various conditions stipulated under the Notification No. 5/2006-CE (NT) dated 14.3.2006 which was issued under the said Rule. Aggrieved by the rejection of the refund claim by the original authority, the appellants filed an appeal before Commissioner (Appeals) who after examining the matter has upheld the Order in Original and rejected the appeal.
Shri G. Shiva Kumar, Chartered Accountant on behalf of the appellant and Shri N. Sathyanarayanan for the respondent.
The appellant submitted that they are registered for payment of service tax as a recipient of services under the category of Goods Transport Agency Service and Business Auxiliary Service under reverse charge mechanism. Since they are exporters of goods, they are eligible for refund of service tax paid on input services under Notification No. 41/2007-ST dated 6.10.2007 upto 6.7.2009 and thereafter as per Notification No. 17/2009-ST and 18/2009-ST both dated 7.7.2009.
A single member comprising Shri M. Ajit Kumar, Member (Technical) observed that section 11B of the Act is a substantive provision of the statute while a notification is only part of a subordinate legislation and cannot override the parent statute.
The issue as to when the time limit of one year has to be calculated was also examined by a coordinate Bench in Balkrishna Textiles Pvt. Ltd, wherein it was held that the relevant date of computing six months under Notification 41/2007-ST is to be taken on the date when service tax is paid and not from the first day of the month following the quarter in which the export is made.
It was observed that duty has been paid under mistake of law because they followed the pattern of the earlier exemption Notification No. 41/2007 dated 6.10.2007, but when they realized their mistake, they have claimed a refund of duties paid. The refund of the same paid under a mistake, cannot be denied to them, when the claim is filed within time as per section 11B.
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