Case Note & Summary
The appellant, M/s Madura Coats Pvt. Ltd., a non-resident service provider, had paid service tax for the period 10.09.2004 to 31.12.2004 under the Finance Act, 1994. Subsequently, it was realized that the liability to pay service tax on reverse charge basis by the service recipient was introduced only with effect from 01.01.2005 by an amendment. The appellant filed a refund claim, which was allowed by the Commissioner of Central Excise and Service Tax Appellate Tribunal by order dated 28.05.2009, directing refund of the amount. The department filed an appeal against the refund order along with a stay application, which was dismissed. Despite the dismissal of the stay application, the department did not refund the amount. The appellant then filed a writ petition before the High Court, which was dismissed by the learned Single Judge. Hence, the present writ appeal. The High Court framed the issue as whether the appellant was liable for payment of service tax for the period in question, given that the tax was paid by a non-resident person. The court noted that the liability to pay service tax on reverse charge basis was introduced only from 01.01.2005, and for the prior period, the non-resident service provider was not liable to pay service tax. The court held that the appellant was not liable to pay service tax for the period 10.09.2004 to 31.12.2004 and was entitled to refund. The court further held that the principle of unjust enrichment under Section 11B of the Central Excise Act, 1944 would not apply as the tax was paid under a mistake of law and not collected from any other person. The court allowed the appeal, set aside the order of the learned Single Judge, and directed the respondents to refund the amount with interest at 6% per annum from the date of the refund order (28.05.2009) till the date of payment, within eight weeks.
Headnote
A) Service Tax - Liability of Non-Resident - Refund - Finance Act, 1994, Section 66, 68 - The appellant, a non-resident service provider, paid service tax for the period 10.09.2004 to 31.12.2004 under a mistake of law, as the liability to pay service tax on reverse charge basis was introduced only from 01.01.2005 by amendment. The Commissioner of Service Tax had allowed the refund, but the refund was not made despite dismissal of the department's stay application. The High Court held that the appellant was not liable to pay service tax for the said period and was entitled to refund, and that the principle of unjust enrichment under Section 11B of Central Excise Act, 1944 would not apply as the tax was paid under a mistake of law and not collected from any other person. (Paras 2-8) B) Service Tax - Refund - Unjust Enrichment - Section 11B of Central Excise Act, 1944 - The court held that the bar of unjust enrichment under Section 11B would not apply to a case where the tax was paid under a mistake of law by the assessee itself and not collected from any third party. The refund was directed to be paid to the appellant with interest at 6% per annum from the date of the refund order (28.05.2009) till the date of payment. (Paras 7-8)
Issue of Consideration
Whether the appellant was liable for payment of service tax for the period 10.09.2004 to 31.12.2004, as the service tax was paid by a non-resident person?
Final Decision
The appeal is allowed. The order of the learned Single Judge dated 11.03.2013 in Writ Petition No.3740/2013 is set aside. The respondents are directed to refund the amount of service tax paid by the appellant for the period 10.09.2004 to 31.12.2004 with interest at 6% per annum from the date of the refund order (28.05.2009) till the date of payment, within eight weeks from the date of receipt of the order.
Law Points
- Service tax liability
- Non-resident service provider
- Refund of tax paid under mistake of law
- Unjust enrichment
- Section 11B of Central Excise Act
- 1944
- Finance Act
- 1994
