Time Limit For Filing Refund Application Cannot Rejected Merely Because of Unauthorized Tax Collection: CESTAT [Read Order]

The New Delhi Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), the fact that the tax was collected illegally does not mean that the deadline for submitting a refund application can be ignored.

In accordance with Section 102 of the Finance Act, 1994, Deepak Pandey, the assessee, submitted an application to be reimbursed for the service tax paid on government employment between April and December 2015. Because the application was submitted after the six-month period allowed by Section 102 of the Finance Act, it was denied.

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The reimbursement application was denied by the Assistant Commissioner on the grounds that it was past due. Disappointed with the Assistant Commissioner's ruling, the assessee appealed to the Commissioner (Appeals), who dismissed the appeal and maintained the Assistant Commissioner's order. Before the Tribunal, the assessee has contested the Commissioner's (Appeals) ruling.

The assessee argued that although Section 102 of the Finance Act permits the assessee to request a refund, the claim must be made within a reasonable amount of time. However, the government argued that the assessee could not invoke Section 102(1) for a refund while disregarding the six-month period specified in Section 102(3). While arguing that the requirement outlined in sub-section (3) of section 102 of the Finance Act could be disregarded, the Tribunal declared that the assessee could not be allowed to claim a refund of service tax under sub-section (1) of section 102.

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According to the Tribunal, no restriction can be placed on the time frame for submitting a refund application because, once the six-month period has passed, it cannot be argued that the nature of the tax deposit would remain the same as the tax collected without legal authority. When coming to this decision, the Member neglected to take into account the provisions of section 102, sub-section (3).

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The Tribunal opined that once the time limit of six months has been provided, it cannot be contended that merely because the character of the tax deposit would continue to be in the nature of the tax collected without authority of law and, therefore, no limitation can be prescribed for filing the refund application. The Member failed to take into consideration the terms of sub-section (3) of the section 102 while arriving at such a conclusion.

The bench added that when sub-section (3) explicitly states that, regardless of Chapter 5's provisions, an application for a refund of service tax must be submitted within six months of the date the Finance Act, 2016 receives the President's assent, it is evident that the application must be submitted within that time frame and not after it has passed.

The two member bench  of Justices Dilip Gupta (President) and P. V. Subba Rao (Technical) while dismissing the appeal has noted that the appellant cannot use sub-section (1) of section 102 to request a refund of service tax, but they also argue that the requirement in sub-section (3) of section 102 of the Finance Act should be disregarded.

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