Question Whether there is any time limit to file refund of service tax wrongly paid ?
No, Time limit of one year to file refund claim doesn’t apply to amount wrongly paid as ‘Service Tax’
Section 11B of Central Excise Act, 1944 applies only to amount having colour of ‘tax’; amount wrongly paid as ‘service tax’ without even charge of service tax, does not colour of ‘tax’ and therefore, time-limit of section 11B would not apply to refund of said amount
Service tax was wrongly paid not due to ‘mistake of law’ but due to ‘mistake of fact in understanding in law’ – Amount paid by assessee was never chargeable and hence, it did not have any colour of tax – Hence, section 11B would not apply to refund of sum not having colour of tax – Refund was allowed
HIGH COURT OF KERALA
Geojit BNP Paribas Financial Services Ltd.
Commissioner of Central Excise, Customs & Service Tax
W.P. (C) NO. 18126 OF 2015 (M)
JULY 6, 2015
■ The assessee provided retail financial services to a foreign company and received payment in foreign exchange; but, paid service tax thereon by mistake.
■ Assessee claimed that as per rule 3 ibid, Place of Provision was outside India and hence, service tax was not payable and accordingly, filed refund claim on 23-2-2015 for financial year 2012-13.
■ Department held in favour of assessee on merits that tax was not chargeable and therefore, refundable; but dismissed refund claim on ground that it was filed after 1 year from relevant date.
■ Assessee claimed that time-limit of section 11B would not apply to service tax paid by mistake.
■ The payment made by the assessee is purely by a mistake and not relatable to payment under service tax. [Para 6]
■ In Mafatlal Industries Ltd. v. Union of India  5 SCC 536, the Apex Court elaborately classified claim for refund into three groups or categories, vis-a-vis,
(i) unconstitutional levy,
(ii) illegal levy and
(iii) mistake of law,
and held that the remedies involved in all the three categories are the remedies provided under the Excise and Customs Act. None of the above categories would attract to the case in hand.
■ In this case, the levy was purely on account of mistake of fact in understanding the law. The assessee assumed that the transaction for which he has paid tax, is covered under the law. The law does not cover such transaction for payment of service tax. Therefore, it is not on account of any mistake of law but mistake of fact the service tax was paid. In that view of the matter it has no colour of tax for the purpose of levy by the department.
■ The distinguishing feature for attracting the provisions under section 11B is that the levy should have the colour of validity when it was paid and only consequent upon interpretation of law or adjudication, the levy is liable to be ordered as refund. When payment was effected, if it has no colour of legality, section 11B is not attracted. In this case, levy is not in accordance with the provisions of the service tax and therefore, such payment cannot be taken as a payment made relatable to section 11B. [Para 8]
■ The question of alternative remedy would arise if service tax is otherwise leviable under the Central Excise Act. Herein, in this case, there is no dispute with regard to the fact that no service tax is leviable for the service extended by the assessee to the foreign company. Thus, the writ petition is maintainable when the amount is arbitrarily withheld without any justification under law as the refund claimed by the assessee is not relatable to section 11B. [Para 10]
■ Hence, refund was allowed.