The Delhi Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has allowed the refund of service tax paid under mistake of law allowed with 12% interest.
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Meenu Builders, the appellants/assessee, were building a single house in accordance with a work order from the Rajasthan Housing Board. They paid duty from July 1, 2008, onward, which was exempt under Notification No. 25/2012-ST dated June 20, 2012 (Sl. No. 14B). According to Notification No. 30/2012-ST dated June 20, 2012, the appellant was required to pay 50% service tax under Sl. No. 14B of the aforementioned notification, and the Rajasthan Housing Board was responsible for the remaining 50% through a reverse charge mechanism.
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The Rajasthan Housing Board received bills from the appellants. The Rajasthan Housing Board took 50% of the sum from the appellant’s running bill and deposited it with the Revenue in order to settle the payments that the appellant had raised. Revenue has documented the results.
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The appellants filed refund requests for the service tax they paid between October 1, 2008, and March 31, 2016, after determining they were not required to pay it. The appellants received a number of show-cause notices before their refund claims were rejected on the grounds of unjust enrichment and time barredness since they were submitted to the adjudicating authority more than a year after the service tax was paid.
The appellants’ reimbursement claims were first denied. The learned Commissioner (Appeals) granted the refund claims on appeal up to 50% of the service tax paid by the appellant plus 6% interest, but denied the refund claim for 50% of the service tax paid by the service recipient because the appellant had not provided any proof that the service recipient had paid the tax.
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The single bench of Ashok Jindal (Judicial Member) has observed that even though the assessee filed a claim under Form-R, indicating that they had initially treated the payment as a duty but later claimed it was not, the Central Excise Act, 1944’s section 11B provision of limitation would not apply for refunds of service tax paid in error on exempted services.
In cases where service tax is paid by mistake, the only questions are whether Section 11B’s provisions apply to refunds and whether a 6% or 12% interest rate should be applied. The tribunal concluded that the appellants could request a refund of the money they and the service receiver paid, plus 12% interest.
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