Service Tax paid under Mistake of Law has to be Refunded irrespective of Period covered as Refusal: CESTAT allows Nilkamal’s Plea [Read Order]

In a major relief to Nilkamal, the Chennai bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that the Service Tax paid under mistake of law must be refunded irrespective of the period covered as refusal.

The appellant-Company, pleaded before the Tribunal to allow refund of the Service Tax and interest paid by it under Reverse Charge Mechanism on freight services received from foreign shipping line during the period from April to June 2017. This was inconsequent to a levy whereby it was required for an importer to pay Service Tax on services by way of transportation of goods by a vessel from a place outside India up to the Customs station of clearance in India even in the case of Cost, Insurance and Freight (CIF) contracts. The concerned Notifications were later struck down by the High Court of Gujarat in the case of M/s. Sal Steel Ltd, holding the same as ultra vires to Sections 64, 66B, 67, and 94 of the Finance Act, 1994.

Before the Tribunal, the appellant contended that despite being struck down, the audit officers of the Revenue insisted on the payment of Service Tax along with interest whereby the appellant was compelled to pay the same vide Challan No.00039 dated 01.03.2019.

Allowing the contentions of the Appellant, Judicial Member P Dinesh held that “the Revenue having collected perforce the Service Tax along with interest, the appellant is pushed into a situation where its refund claim is denied and even the credit of Service Tax so paid is also not allowed to be availed, with the introduction of the CGST Act in 2017. It is the settled position of law that a taxpayer cannot be a victim of the change in the law. In this regard, the reliance placed on the decision of the Hon’ble High Court of Madras in the case of M/s. 3E Infotech v. CESTAT, Chennai reported in 2018 (18) G.S.T.L. 410 (Mad.) is very apt, wherein it has been categorically held that the Service Tax paid under a mistake of law has to be refunded irrespective of the period covered as refusal thereof would be contrary to the mandate of Article 265 of the Constitution of India.”

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