Refund of Service Tax paid by Mistake cannot be denied on grounds of Limitation: Karnataka HC [Read Order]

A division bench of the Karnataka High Court has held that Justice P.S. Dinesh Kumar and Mr. Justice Anant Ramanath Hegde has held that the limitation period cannot be invoked to deny the refund of service tax paid by mistake.

The appellant, M/S Bellatrix Consultancy Services had entered into an agreement with a Professional Lien Search LLC, a Company based in the United States of America (USA), and providing support services to real estate property buyers in the USA. The appellant's activity is to verify the information on various types of issues related to the property proposed to be purchased by the prospective purchasers such as Property Tax information, Building Permits, unpaid bills for utilities, Property maintenance, etc.

During the relevant year, theAssessee obtained service tax registration and paying service tax on the consideration charged on the client periodically. Ithas filed returns for the half yearly period from April to September, 2016, October 2016 to March 2017 and for the quarterly period from April to June, 2017. Subsequently, the assessee came to know that it was not liable to pay service tax on export of services and claimed refund of service tax paid on the same. However, the same was rejected by the department on the ground that the claim was barred by limitation.

The division bench of the Karnataka High Court, after hearing both sides, the assessee had paid service tax on an erroneous assumption that it was liable to pay the taxes. The Assessing Authority has allowed a part of the claim.

“Thus, according tothe Assessing Authority, appellant is not liable to pay service tax, but the application in respect of the taxes paid for the period between April 2016 to December 2016, are barred by time under Section 11B of Central Excise Act,” the Court held.

Allowing the plea of the assessee, the Court held that “In view of the admitted fact that the services rendered by the assessee satisfy all conditions of Rule 6A of the Service Tax Rules, 1994 and the services provided by it are export services, it is entitled for refund of the tax. In view of authority in the case of Shiv Shanker Dal Mills, the refund cannot be denied on the ground of limitation.”

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