M/S. Kalpataru Power Transmission ... vs Commissioner Of Central Excise & S.T., ...

(Arising out of OIA-207-2012-AHD-III-SKS-COMMR-A-AHD dated 04.01.2013, passed by Commissioner (Appeals) Central Excise, & S.T., Ahmedabad)

M/s. Kalpataru Power Transmission Limited : Appellant (s)

VERSUS

Commissioner of Central Excise & S.T., Ahmedabad : Respondent (s)

Represented by :

For Appellant (s) : Shri S.J. Vyas, Advocate For Respondent (s) : Shri S. Shukla, Authorised Representative

For approval and signature :

Mr. P.M. Saleem, Honble Member (Technical)

1 Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

No 2 Whether it should be released under Rule 27 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3 Whether their Lordships wish to see the fair copy of the Order?

Seen 4 Whether Order is to be circulated to the Departmental authorities?

Yes

CORAM :

Mr. P.M. Saleem, Honble Member (Technical)

Date of Hearing / Decision : 30.10.2015

ORDER No. A/11587 / 2015 Dated 30.10.2015

Per : Mr. P.M. Saleem

The facts of the case in the present appeal are that the appellant had filed a refund claim of Rs. 17,82,804/- on 04.5.2011, for the refund of the service tax paid in excess during the period October 2007 to March 2008. The appellant had made the payment of service tax in 2007-08under the category of Work Contract Services. The appellant submitted that the said service tax payment pertains to the gross amount received against the services provided including on amounts towards release of retention and withheld money. The appellant contended that while making payment on 05.11.2007, the amount of retention and withheld money was included in calculation of gross amount even though that amount of Rs. 1,49,15,220/- was not actually realised by them during the above period in October 2007 to March 2008. Accordingly, the appellant have paid an excess amount of service tax of Rs. 18,17,946/- on the retention/withheld amount. The said amount against retention/ withheld was in fact received by them in March 2010 and April 2010 and they have paid appropriate service tax on it which was shown in the details of service tax payment made for the relevant periods in ST-3 returns. The appellant claimed that there was an excess payment of service tax to the tune of Rs. 18,17,946/- during this period. They filed the above said refund claim accordingly. A show cause notice for rejection of the refund claim was issued to the appellant as the refund claim was filed after expiry of one year time limit under Section 11B of the Central Excise Act, 1944 read with Section 83 of the Finance Act, 1994. The adjudicating authority rejected the refund claim on the ground of time bar. The appellant filed appeal against the said Order-in-Original before the Commissioner (Appeals) who upheld the impugned Order-in-Original and rejected the appeal vide Order-in-Appeal dated 04.01.2013. Aggrieved by the same, the appellants are before us.

2. Heard both sides. The learned Counsel for the appellants contends that they have made double payment in the instant case. Initially they paid an amount of Rs. 18,17,946/- on 05.11.2007. The said payment was meant against the service tax liability on Retention/ Withheld amount of Rs. 1,49,15,220/-. However, this amount of Rs. 1,49,15,220/- was in fact, not received by them during the said year and therefore, in reality there was no service tax liability on them. The said amount was received by them in the months of March and April 2010 and they paid the appropriate service tax on the said amount in March/April 2010. He contends that therefore, the first payment was in the nature of deposit and on realising their mistake of double payment in April 2011, the appellant immediately filed refund claim on 05.04.2011. He submits that since the first payment was not against any tax liability, the limitation under Section 11B of the Central Excise Act, 1944 will not be applicable. He submits that the amount is still pending with the department and they are entitled for refund of the same. He cited a number of case laws in his favour, as follows:- (a) Hexacon (I) Limited vs. CCE Jaipur  2003 (156) ELT 357 (Tri. Del.) (b) Indo-Nippon Chemicals Company Limited vs. UOI  2005 (185) ELT 19 (Guj.) (c) CCE, Ahmedabad vs. Shayona Enterprises  2008 (230) ELT 378 (Tri. Ahmd.) (d) CCE, Mumbai vs. Atul Industries  2004 (168) ELT 353 (Tri. Mumbai) (e) Asst. Collector of Central Excise, Calcutta vs. National Tobacco Co. of India Limited  1978 (2) ELT (J 416) (SC) (f) CCE, Kolkata vs. M.A. Financial Services Pvt. Limited  2006 (2) STR 350 (Tri. Kol.) (g) Karnik Maritime Pvt. Limited vs. CCE, Mumbai  2007 (6) STR 314 (Tri. Mumbai) (h) CCE, Jaipur vs. Jai Laxmi Finance Company  2006 (3) STR 25 (Tri. Del.) (i) CCE, Raipur vs. Indian Ispar Works (P) Limited  2006 (3) STR 161 (Tri. Del.)

3. Learned Authorised Representative for the Revenue, on the other hand, strongly refutes the contentions of the learned counsel. In addition to reiterating the findings of the lower authorities, he also submits that initially the payment was made to cover service tax liability and therefore, limitation as prescribed under Section 11B of the Central Excise Act, 1944, made applicable to service tax by Section 83 of the Finance Act, 1994, would be invokable here. He also relied upon the decision of the Honble Delhi High Court in the case of Jumax Foam Pvt. Limited vs. UOI  2003 (157) ELT 252 (Del.).

4. On consideration of the arguments and case laws cited by both sides and perusal of the records, it is observed that there is no dispute that the appellant had paid the amount twice to the department. The first payment was made in 2007 when there was no liability for them to pay the said amount since they had not received retention/ withheld amount. They paid appropriate service tax in March/ April 2010 when the retention/ withheld amount received by them. The adjudicating authority has held that second payment was in fact correctly paid service tax against the payment received by them in March and April 2010 and therefore there has been no excess payment during the said period, and was in order. He also held that, though the appellant is eligible for refund of the first payment but it was time barred under the provisions of Section 11B of the Central Excise Act, 1944, since the appellant filed refund application only on 04.05.2011. The Commissioner (Appeals) also took the same view and upheld the order of the adjudicating authority. It is clear from the facts that the appellant have made first payment when there was no liability for them to pay.

The issue, whether refund of such amount can be denied under the provisions of Section 11B, is no more res-integra as the Tribunal and various High Courts including the jurisdictional High Court of Gujarat, in a number of cases have held to the contrary. For better appreciation, the relevant portions of a few decisions are reproduced below:- (a) The jurisdictional High Court viz., Honble Gujarat High Court, in the case of Indo-Nippon Chemicals  2005 (185) ELT 19 (Guj.), in Para 35, held as under:- 35. For the purpose of commencement of limitation under Clause (f) of Explanation (B) to Section 11B of the Act, even though reversal of Modvat credit was done in February/March 1995, since the mistake was discovered only in November 1995 when the Public Notice clarifying the legal position came to the knowledge of the petitioner, the period of limitation for the purpose of refund application would commence from November, 1995 i.e. on discovery of mutual mistake of the parties. In the circumstances, we hold that provisions of Section 11B of the Act are attracted to the refund application filed by the Petitioner.

On the question of limitation, our conclusion is that since the claim is based on discovery of mistake, the period of limitation would not commence from the date of reversal of Modvat credit, but from the date when the mistake committed mutually of wrong reversal of credit by the parties was discovered in November, 1995. The refund claim has therefore to be held to be within time.

(b) The Mumbai Bench of the Tribunal, in the case of Karnik Meritime Pvt. Limited vs. CCE, Mumbai  2007 (6) STR 314 (Tri. Mumbai), has followed the decision of the Honble Gujarat High Court in the case of Indo-Nippon Chemicals Company Limited (supra), wherein the Tribunal held that the limitation commences from the date of discovery of error, as prescribed by Section 17 of the Limitation Act, 1963, the period of six months prescribed by Section 11B of Central Excise Act, 1944 is inapplicable in such case. The Tribunal also held that principle of unjust enrichment will not be applicable in such cases as payment did not relate to tax. (c) The Delhi Bench of the Tribunal in the case of Hexacon (I) Limited vs. CCE, Jaipur [2003 (156) ELT 357 (Tri. Del.], held as follows:- 2. We have perused the records and heard both sides. It is not in dispute that no service tax was leviable during the period in question. Therefore, whatever payment was made did not relate to service tax at all. It was merely an erroneous collection by DOT and payment by the appellants. Therefore, provisions relating to refund of service tax, including those relating to unjust enrichment, cannot have any application to the return of the amount in question.

It is further noted that provisions contained in Section 11D of the Central Excise Act have not been made applicable to service tax. Therefore, if any amounts are collected erroneously as representing service tax, which is not in force, there is no bar to the return of such amounts. The rejection of refund application was, therefore, not correct. (d) This Bench of the Tribunal in the case of CCE, Ahmedabad vs Shayona Enterprises [2008 (230) ELT 378 (Tri. AHmd.)] held as follows:- 4.?After hearing both the sides, I agree with the appellate authority that the deposits made during the investigations are in the nature of provisional deposits and if the said deposit is not appropriated towards any final demand of duty or penalty, the same cannot be called to be deposit of duty, in which case the limitation provisions will not come into action. Learned DRs reliance on the Honble Supreme Courts decision in the case of M/s. Miles India Ltd. [1987 (30) E.L.T. 641 (S.C.)] and the Tribunals decision in the case of M/s. Bajaj Foods Limited - [2007 (209) E.L.T. 191 (Tri.-Ahmd.)] laying down that the statutory authorities are bound by the limitation provided under the Act, are not relevant inasmuch as the deposit in question is not duty and the assessee is not seeking refund of duty so as to act beyond limitation provisions.

(e) Other benches of the Tribunal have also followed the above ratio in various decisions cited by the learned Counsel for the appellant. The facts of the issue in the case law cited by the learned Authorised Representative for the Revenue are different and hence the ratio therein cannot be applied in the instant case. (f) Further, in a recent case, the Honble High Court of Karnataka in the case of CCE, Bangalore vs. KVR Construction [2012 (26) STR 195 (Karnataka)], in Paras 19, 22 and 23 held as under:- 19.?According to the appellant, the very fact that said amounts are paid as service tax under Finance Act, 1994 and also filing of an application in Form-R of the Central Excise Act would indicate that the applicant was intending to claim refund of the duty with reference to Section 11B, therefore, now it is not open to him to go back and say that it was not refund of duty. No doubt in the present case, Form-R was used by the applicant to claim refund. It is the very case of the petitioner that they were exempted from payment of such service tax by virtue of circular dated 17-9-2004 and this is not denied by the Department and it is not even denying the nature of construction/services rendered by the petitioner was exempted from to payment of Service Tax.

What one has to see is whether the amount paid by petitioner under mistaken notion was payable by the petitioner. Though under Finance Act, 1994 such service tax was payable by virtue of notification, they were not liable to pay, as there was exemption to pay such tax because of the nature of the institution for which they have made construction and rendered services. In other words, if the respondent had not paid those amounts, the authority could not have demanded the petitioner to make such payment. In other words, authority lacked authority to levy and collect such service tax. Incase, the department were to demand such payments, petitioner could have challenged it as unconstitutional and without authority of law. If we look at the converse, we find mere payment of amount, would not authorize the department to regularise such payment. When once the department had no authority to demand service tax from the respondent because of its circular dated 17-9-2004, the payment made by the respondent company would not partake the character of service tax liable to be paid by them. Therefore, mere payment made by the respondent will neither validate the nature of payment nor the nature of transaction.

In other words, mere payment of amount would not make it a service tax payable by them. When once there is lack of authority to demand service tax from the respondent company, the department lacks authority to levy and collect such amount. Therefore, it would go beyond their purview to collect such amount. When once there is lack of authority to collect such service tax by the appellant, it would not give them the authority to retain the amount paid by the petitioner, which was initially not payable by them. Therefore, mere nomenclature will not be an embargo on the right of the petitioner to demand refund of payment made by them under mistaken notion. --------------------------------------------------------------------------------------------------------

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22.?In the case of Commissioner of Central Excise, Bangalore v. Motorola India Pvt. Ltd. (supra) the Division Bench of this Court considered similar issue. It was a case where excess amount was paid over duty under Central Excise Act on the direction of the Department. There was an application for refund of amount and the same came to be rejected by the Assistant Commissioner on the ground of lapse of time. It was confirmed by both the Appellate Authority and also the Tribunal. Aggrieved by the order of the Tribunal, revenue came up before the High Court. Their lordships of the Division Bench held that order of the Tribunal to allow the claim on the basis that amount paid by mistake cannot be termed as duty in the said case was justified and therefore applying the law laid down in the decision of Apex Court in the case of India Cements Ltd. v. Collector of Central Excise - 1989 (41) E.L.T. 358, dismissed the appeal.

23.?Now we are faced with a similar situation where the claim of the respondent/assessee is on the ground that they have paid the amount by mistake and therefore they are entitled for the refund of the said amount. If we consider this payment as service tax and duty payable, automatically, Section 11B would be applicable. When once there was no compulsion or duty cast to pay this service tax, the amount of Rs. 1,23,96,948/- paid by petitioner under mistaken notion, would not be a duty or service tax payable in law. Therefore, once it is not payable in law there was no authority for the department to retain such amount. By any stretch of imagination, it will not amount to duty of excise to attract Section 11B. Therefore, it is outside the purview of Section 11B of the Act.

5. In the light of the above analysis the appellant is eligible for the refund of the amount deposited as it is double payment and it does not relate to tax, and also principle of unjust enrichment are not applicable in the instant case. Therefore, we hold that the appellant is eligible for the said refund. Therefore, the impugned orders cannot be sustained and they are set-aside.

6. Appeal is allowed with consequential relief.

(Order dictated and pronounced in the open Court)

(P.M. Saleem) Member (Technical) .KL

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