S.I.PROPERTY KERALA PVT LTD V. THE COMMISSIONER OF CENTRAL EXCISE,

C.E.Appeal/1/2019

AI Insights

The case involves S.I. Property Kerala Pvt Ltd, the appellant, who sought a refund of service tax amounting to Rs.53,48,526 paid under protest. The tax was initially paid following an audit that revealed underpayment due to non-inclusion of the value of materials supplied free by clients in the taxable service value. The refund application was rejected by the Assistant Commissioner and upheld by the Tribunal, primarily on the grounds of being time-barred under Section 11B(1) of the Central Excise Act, 1944. The appellant contested this decision, arguing that the refund was not subject to the usual limitation period as the tax was paid under coercion and was not due.

• Counselvise Citation: [2019] 140 COUNSELVISE.COM (IT) 692704 (HC-KERALA)
• Appeal Type: Others
• Pronouncement Date: 20-06-2019
• Assessment Year: misc
• Other Referred Cases: Commissioner of Income Tax v. Bhayana Builders (P) Limited, Mafatlal Industries Limited v. Union of India, Commissioner of Central Excise (Appeals), Bangalore v. KVR Construction
• Laws Referred To: Central Excise Act, 1944
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: SREELAL WARRIER
• Assessee Lawyers: G JAYAPRAKASH; AMINA GOPALAKRISHNAN; MANJU RAJAN
• Keywords: Coercion; Limitation Period; Mistake of Law; Refund; Service tax
• Section: 11B(1)

Judgement Text

"IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE C.K.ABDUL REHIM & THE HONOURABLE MR. JUSTICE R. NARAYANA PISHARADI THURSDAY, THE 20TH DAY OF JUNE 2019 / 30TH JYAISHTA, 1941 C.E.Appeal.No.1 of 2019 APPELLANT/ASSESSEE: S.I.PROPERTY KERALA PVT LTD REPRESENTED BY ITS MANAGING DIRECTOR, SILVER OAKS, NEAR GOLF CLUB, KOWDIAR P.O., THIRUVANANTHAPURAM - 695 003, KERALA. BY ADVS. SRI.G.JAYAPRAKASH SMT.AMINA GOPALAKRISHNAN SMT.MANJU RAJAN RESPONDENT/REVENUE: THE COMMISSIONER OF CENTRAL EXCISE, CUSTOMS AND SERVICE TAX, CENTRAL TAX AND CENTRAL EXCISE, ICE BHAVAN, PRESS CLUB ROAD, THIRUVANANTHAPURAM - 695 001. BY ADV. SREELAL N. WARRIER, SC, CENTRAL BOARD OF EXCISE & CUSTOMS THIS CENTRAL EXICISE APPEAL HAVING BEEN FINALLY HEARD ON 04.06.2019, THE COURT ON 20.06.2019 DELIVERED THE FOLLOWING: C.E.Appeal No.1/2019 2 “CR” C.K.ABDUL REHIM & R.NARAYANA PISHARADI, JJ ************************** C.E.Appeal No. 1 of 2019 ---------------------------------------------- Dated this the 20th day of June, 2019 J U D G M E N T R.Narayana Pisharadi, J The appellant is a private limited company. It is a registered service tax assessee. The appellant is engaged in the business of construction and in the process, providing the services known as commercial or industrial construction services, construction of residential complex services etc. These services are exigible to service tax as per the provisions of the Finance Act, 1994. 2. The dispute in the case relates to refund of an amount of Rs.53,48,526/- paid by the appellant as service tax during the period between 27.08.2012 and 06.03.2013. 3. Short payment of service tax by the appellant was detected in the audit conducted by the department in May, 2012. The reason stated for the short payment was that the C.E.Appeal No.1/2019 3 appellant had not included the value of cement and steel supplied by the clients free of cost in computing the value of taxable service rendered by it during the period from January, 2008 to March, 2011. In response to the letter sent by the department to pay the amount of shortage, the appellant paid an amount of Rs.53,48,526/- on different dates during the period between 27.08.2012 and 06.03.2013. 4. On 23.10.2014, the appellant filed an application dated 14.10.2014 in the prescribed form for refund of the amount of Rs.53,48,526/-. The plea of the appellant was that in the light of the decision of the larger bench of the Customs, Excise and Service Tax Appellate Tribunal (for short 'the Tribunal') in another case, the value of materials supplied by service recipient free of cost shall not be taken into consideration in computing the taxable value of services rendered. 5. The Assistant Commissioner concerned rejected the application for refund of the amount on the ground that, it was filed beyond one year from the relevant date stipulated in Section 11B (1) of the Central Excise Act, 1944 (hereinafter referred to as 'the Act'). This order was confirmed by the first C.E.Appeal No.1/2019 4 appellate authority and the Tribunal in the appeals filed by the assessee. However, the Tribunal has found that the appeal filed by the assessee against the proceedings initiated for payment of penalty has been allowed by the appellate authority and that it gives a fresh cause of action for the appellant to file a fresh application for refund of the amount and that it can avail that opportunity. The order of the Tribunal is now challenged in the present appeal. 6. The substantial questions of law for consideration in this appeal are: (i) Whether, on the facts and circumstances of the case, Section 11B(1) of the Act was applicable in respect of the claim for refund of the amount made by the assessee? (ii) Whether, on the facts and circumstances of the case, the Tribunal was correct in finding that the application for refund of the amount filed by the assessee was beyond the period of limitation provided under C.E.Appeal No.1/2019 5 Section 11B(1) of the Act? 7. We have heard Sri. G.Jayaprakash, learned counsel for the appellant and Sri.Sreelal N.Warriar, learned Standing Counsel for the department. 8. The main contention urged by the learned counsel for the appellant is that the period of limitation provided under Section 11B of the Act is not applicable to the refund application submitted by the appellant. Learned counsel has also contended that, even before filing the application for refund in the prescribed form, the appellant had made representation to the department for refund of the amount, stating that the amount collected from the company was not due from it. Learned counsel would also contend that the amount was paid on account of coercion and threat made by the authorities and the payment was made under protest and it cannot be treated as payment of service tax to attract Section 11B of the Act. Alternatively, learned counsel would submit that the period of limitation has to be computed from the date of judgment of the Supreme Court in Commissioner of Income Tax v. Bhayana Builders (P) Limited [(2018) 3 SCC 782] which has given finality to the issue as to whether C.E.Appeal No.1/2019 6 value of materials supplied free of cost by service recipient is exigible to service tax or not. 9. Per contra, learned Standing Counsel for the department has contended that, when the amount was paid by the appellant, it had the colour of tax and therefore, Section 11B of the Act is attracted and the application for refund in the prescribed form made beyond the prescribed period was not maintainable. He has contended that there is no basis for the plea of the appellant that the amount was paid on account of coercion and threat made by the authorities. He has also contended that any representation made by the appellant for refund of the amount cannot be treated as an application for refund because the statute specifically provides for filing application for refund in the prescribed form. He has also submitted that the payment was made by the appellant not under protest. He has also urged that there is no legal basis for the contention of the appellant that the period of limitation can be computed from the date of judgment of the Supreme Court in another case in which the appellant was not a party. 10. Section 11B (1) of the Act reads as follows: “Any person claiming refund of any duty of C.E.Appeal No.1/2019 7 excise and interest, if any, paid on such duty may make an application for refund of such duty and interest, if any, paid on such duty to the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise before the expiry of one year from the relevant date in such form and manner as may be prescribed and the application shall be accompanied by such documentary or other evidence including the documents referred to in section 12A as the applicant may furnish to establish that the amount of duty of excise and interest, if any, paid on such duty in relation to which such refund is claimed was collected from or paid by him and the incidence of such duty and interest, if any, paid on such duty had not been passed on by him to any other person”. 11. Section 11B of the Act makes it clear that an application for refund of duty of excise (service tax in the case at hand) has to be made in the prescribed form before the expiry of one year from the relevant date. Explanation (B) to Section 11B of the Act states what is meant by relevant date. As per Clause (ec) of Explanation (B) to Section 11B, in case where the duty becomes refundable as a consequence of judgment, decree, order or direction of appellate authority, C.E.Appeal No.1/2019 8 Appellate Tribunal or any court, the relevant date is the date of such judgment, decree, order or direction. As per Clause (f) of Explanation (B) to Section 11B, in any case other than provided under clauses (a) to (ec), the relevant date is the date of payment of duty. 12. There is no dispute with regard to the fact the service tax payable by the appellant would come within the ambit of duty of excise mentioned in Section 11B(1) of the Act. However, the contention of the appellant is that the amount paid by it was actually not due from it as service tax because the value of the materials supplied free of cost by the service recipients cannot be included in computing the taxable value of the services. Therefore, it is contended that the amount claimed by way of refund is actually not an amount paid towards service tax and the period of limitation provided under Section 11B(1) of the Act is not applicable to the application made for refund of such amount. 13. In Bhayana Builders (supra), the Supreme Court has held that the amount of service tax charged should be for the service provided. It is not any amount charged by the service provider which can become the basis of value on which C.E.Appeal No.1/2019 9 service tax becomes payable, but the amount charged has to be necessarily a consideration for the service provided. There shall be a nexus between the amount charged and the service provided. Any amount charged which has no nexus with the taxable service and is not a consideration for the service provided does not become part of the value which is taxable. The cost of goods supplied free of cost by the service recipient to the service provider is neither an amount charged by the service provider nor can it be regarded as a consideration for the service provided by the service provider. In fact, it has no nexus whatsoever with the taxable services. The value of goods/materials provided by the service recipient free of charge is not to be included while arriving at the taxable value of services provided, simply because of the reason that no price is charged by the assessee/service provider from the service recipient in respect of such goods/materials. The value of taxable services cannot be dependent on the value of goods supplied free of cost by the service recipient. The service recipient can use any quality of goods and the value of such goods can vary significantly. Such value has no bearing on the value of services provided. The Apex Court has held that a C.E.Appeal No.1/2019 10 value which is not part of the contract between the service provider and the service recipient has no relevance in the determination of the value of taxable services provided by the service provider. 14. The decision of the Supreme Court in Bhayana Builders (supra) was rendered on 19.02.2018. The appellant had paid the amount in question as service tax. When the amount was paid, it had the colour of tax. It had the colour of legality. Demand for payment of the amount then made was legal. The levy of tax had the colour of validity when it was paid. Only consequent upon interpretation of the provisions in the relevant statute by the Supreme Court in Bhayana Builders (supra), the amount levied had lost the colour of tax. Therefore, it cannot be contended by the appellant that the amount paid by him was not towards service tax. 15. The nine-Judge Bench of the Supreme Court, in Mafatlal Industries Limited v. Union of India [(1997) 5 SCC 536], classified the claims for refund into three groups or categories as follows: (1) Where a provision of the statute under which tax is levied is struck down as unconstitutional, that is, cases of \"unconstitutional levy\" (2) Where the tax is C.E.Appeal No.1/2019 11 collected by the authorities under a statute by misconstruction or wrong interpretation of the provisions or by an erroneous determination of the relevant facts, that is, cases of illegal levy (3) The cases where the assessee disputes the levy and fights it out upto the first appellate or the second appellate/revisional level or the High Court and gives up the fight, being unsuccessful therein and pays the duty demanded or it is recovered from him, as the case may be and later, in another case of some other person, the Supreme Court holds that the levy of that kind is not exigible in law, that is, cases of mistake of law. The Apex Court has held that all claims for refund, arising in whatever situations (except where the provision under which the duty is levied is declared as unconstitutional), has necessarily to be filed, considered and disposed of only under and in accordance with the relevant provisions relating to refund, as they obtained from time to time. The Apex Court has held that where a refund of tax duty is claimed on the ground that it has been collected from a person by misinterpreting or misapplying the provisions of the relevant statute or by misinterpreting or misapplying any of the rules, regulations or notifications issued under such enactment, such C.E.Appeal No.1/2019 12 a claim has necessarily to be preferred under and in accordance with the provisions of the respective enactment before the authorities specified thereunder and within the period of limitation prescribed therein. 16. Learned counsel for the appellant has heavily relied upon the decision of the Karnataka High Court in Commissioner of Central Excise (Appeals), Bangalore v. KVR Construction (2012 (26) STR 195) to buttress his contention that the amount was paid or levied not as service tax but under a mistake and that Section 11B(1) of the Act has no application to the claim of refund made by the appellant. 17. In KVR Construction (supra), the service tax was paid without noticing the exemption provided under a notification that, where the services were rendered to a non- profit organisation, no tax was payable on the services so rendered. It was not a case in which service tax was levied on misinterpretation of the provisions of any statute. It was not a case where service tax was paid by mistake of law. It was case in which amount was paid by mistake without noticing the exemption provided. Therefore, the decision in KVR C.E.Appeal No.1/2019 13 Construction (supra) has no applicability to the facts of the case before us. 18. There is no basis for the contention raised by the learned counsel for the appellant that the amount was paid by the appellant on account of coercion and threat made by the authorities. There is no material produced in support of this contention. 19. In the instant case, as noticed earlier, when the amount was levied from the appellant, the demand for levy was legal. The amount was paid by the appellant as service tax. The amount paid lost the colour of tax only when the issue was finally decided by the Supreme Court on 19.02.2018 in Bhayana Builders (supra) to the effect that value of materials supplied free of cost by service recipient is not exigible to service tax. Applying the dictum laid down by the Supreme Court in Mafatlal Industries (supra), we hold that the claim for refund of amount made by the appellant comes within the purview of Section 11B(1) of the Act. The first substantial question of law raised is answered against the assessee and in favour of the revenue. C.E.Appeal No.1/2019 14 20. The amount was paid by the appellant on different dates during the period between 27.08.2012 and 06.03.2013. The last date of payment was 06.03.2013. It was on 23.10.2014 the appellant filed an application dated 14.10.2014 in the prescribed form for refund of the amount. The application for refund in the prescribed form was filed beyond the period of one year from the last date of payment of duty. 21. There is a feeble plea raised by the appellant that the tax was paid under protest. The second proviso to Section 11B(1) of the Act states that the limitation of one year shall not apply where the duty is paid under protest. However, there is no material to find that the payment made was under protest. Protest made subsequently in any representation made to the department is not sufficient.. 22. Learned counsel for the appellant has pointed out that the appellant had sent a letter dated 13.09.2013 (Annexure-D) to the department claiming refund of the amount and the claim made therein was within the time prescribed by Section 11B(1) of the Act. It was only a letter and not an application for refund of the amount in the C.E.Appeal No.1/2019 15 prescribed form. Section 11B (1) of the Act specifically stipulates that an application for refund of duty has to be made in such form and manner as may be prescribed. The letter sent by the appellant to the department cannot be treated as an application for refund of amount as envisaged under Section 11B (1) of the Act. 23. The only question now survives for consideration is whether the appellant can take advantage of the decision of the Supreme Court in Bhayana Builders (supra) to contend that the application for refund of amount filed by him in the prescribed form was within the time stipulated under Section 11B(1) of the Act. As noticed earlier, the issue whether value of the materials supplied by the service recipients free of cost can be included in computing the taxable value of services rendered by the assessee, was decided by the Supreme Court on 19.02.2018 in Bhayana Builders (supra). According to the learned counsel for the appellant, in view of the provision contained in Clause (ec) of Explanation (B) to Section 11B of the Act, an assessee is entitled to take advantage of the decision in Bhayana Builders (supra) and file application for refund of duty within one year from the date of that decision. C.E.Appeal No.1/2019 16 24. As noticed earlier, Clause (ec) of Explanation (B) to Section 11B of the Act states that in case where the duty becomes refundable as a consequence of judgment, decree, order or direction of appellate authority, Appellate Tribunal or any court, the relevant date from which the period of limitation is to be computed, is the date of such judgment, decree, order or direction. 25. Learned Standing Counsel for the department would contend that the “judgment, decree, order or direction of appellate authority, Appellate Tribunal or any court” referred to in Clause (ec) of Explanation (B) to Section 11B of the Act shall be a judgment, decree, order or direction of appellate authority, Appellate Tribunal or any court in a case filed or proceedings initiated by the assessee concerned and not by any other person. Learned Standing Counsel has contended that an assessee is not entitled to take advantage of a decision rendered in a case filed by another person to get extension of the period of limitation. We are inclined to accept this contention. A plain reading of the provision contained in Clause (ec) of Explanation (B) to Section 11B of the Act would show that the “judgment, decree, order or direction of C.E.Appeal No.1/2019 17 appellate authority, Appellate Tribunal or any court” mentioned therein shall be a judgment, decree, order or direction of appellate authority, Appellate Tribunal or any court in a case between the same parties. 26. Learned counsel for the appellant has contended that the appellant is entitled to take advantage of the decision in Bhayana Builders (supra) because the proceedings initiated by it for refund of the amount had not attained finality when the decision in Bhayana Builders (supra) was rendered by the Supreme Court. But, learned Standing Counsel for the department invited our attention to certain passages in Mafatlal Industries (supra) and reiterated his contention that the assessee could not rely upon the decision in another case for the purpose of refund of the amount and that it would have to obtain a final order in its own proceedings. 27. In Mafatlal Industries (supra), the Supreme Court has raised the question in the following terms: “We may now consider a situation where a manufacturer pays a duty unquestioningly - or he questions the levy but fails before the original authority and keeps quite. It may also be a case where he files an appeal, the appeal goes against him and he keeps quiet. It may C.E.Appeal No.1/2019 18 also be a case where he files a second appeal/revision, fails and then keeps quiet. The orders in any of the situations have become final against him. Then what happens is that after an year, five years, ten years, twenty years or even much later, a decision rendered by a High Court or the Supreme Court in the case of another person holding that duty was not payable or was payable at a lesser rate in such a case. (We must reiterate and emphasise that while dealing with this situation we are keeping out the situation where the provision under which the duty is levied is declared unconstitutional by a court; that is a separate category and the discussion in this paragraph does not include that situation. In other words, we are dealing with a case where the duty was paid on account of misconstruction, misapplication or wrong interpretation of a provision of law, rule, notification or regulation, as the case may be.) Is it open to the manufacturer to say that the decision of a High Court or the Supreme Court, as the case may be, in the case of another person has made him aware of the mistake of law and, therefore, he is entitled to refund of the duty paid by him?” The Apex Court has answered the question posed above as follows: “Where a duty has been collected under a particular order which has become final, the C.E.Appeal No.1/2019 19 refund of that duty cannot be claimed unless the order (whether it is an order of assessment, adjudication or any other order under which the duty is paid) is set aside according to law. So long at that order stands, the duty cannot be recovered back nor can any claim for its refund be entertained. ......... All claims for refund ought to be, and ought to have been, filed only under and in accordance with R.11/S.11B and under no other provision and in no other forum. An assessee must succeed or fail in his own proceedings and the finality of the proceedings in his own case cannot be ignored and refund ordered in his favour just because in another assessee's case a similar point is decided in favour of the manufacturer/assessee”. Finally, the Apex Court has laid down the dictum in this regard as follows: “It is not open to any person to make a refund claim on the basis of a decision of a Court or Tribunal rendered in the case of another person. He cannot also claim that the decision of the Court/Tribunal in another person's case has led him to discover the mistake of law under which he has paid the tax nor can he claim that he is entitled to prefer a writ petition or to institute a suit within three years of such alleged discovery of mistake of law. A person, whether a manufacturer or importer, must fight his own battle and must succeed or fail in such C.E.Appeal No.1/2019 20 proceedings. Once the assessment or levy has become final in his case, he cannot seek to reopen it nor can he claim refund without reopening such assessment/order on the ground of a decision in another person's case. Any proposition to the contrary not only results in substantial prejudice to public interest but is offensive to several well established principles of law. It also leads to grave public mischief”. 29. The dictum laid down by the Apex Court as above would apply if the proceedings initiated by the appellant against assessment had attained finality and if a request is made to re-open the proceedings on the basis of the decision rendered by the Supreme Court in a case filed by another person. It is true that the position or situation in the present case is slightly different. It is not a case in which assessment of service tax was made and a demand notice was issued for payment of tax and the amount was paid in response to such demand. It is a case in which audit of the records of the assessee company was conducted by the department and shortage of tax paid was pointed out in the audit and it was communicated to the assessee company and payment of the amount was required to be made as per a letter (Annexure- A) sent by the Superintendent (Audit) of the department. The C.E.Appeal No.1/2019 21 appellant paid the amount in response to this letter. It is also true that when proceedings for imposition of penalty were initiated against the appellant, a reply (Annexure-B) was sent by it to the department on 30.07.2013 stating that service tax was not payable on the value of materials supplied free of cost by the service recipients. But, the fact remains that the appellant did not make any application for refund of the amount in the prescribed form within one year from the date of last payment of tax made by it. The proceedings pending before the Tribunal, at the time when the Supreme Court rendered the decision in Bhayana Builders (supra), were not proceedings against assessment of service tax on the value of materials supplied free of cost by the service recipients. The appeal pending before the Tribunal was against the order passed by the authorities rejecting the application for refund of amount. In other words, levy of service tax from the appellant for the relevant period had attained finality by the time the Supreme Court rendered the decision in Bhayana Builders (supra). In such circumstances, the appellant cannot take advantage of the decision in Bhayana Builders (supra) to contend that the application for refund filed by it was within C.E.Appeal No.1/2019 22 the prescribed time. 30. On the basis of the discussion above, we hold that, on the facts and circumstances of the case, the Tribunal was correct in finding that the application for refund filed by the assessee was beyond the period of limitation provided under Section 11B(1) of the Act. The second substantial question of law raised is answered against the assessee and in favour of the revenue. 31. At this juncture, we may point out that the Tribunal has found that, in view of the decision of the Commissioner (Appeals) allowing an appeal filed by the appellant against another show cause notice, the appellant has got fresh cause of action to file a fresh application for refund of the amount before the original authority. The Tribunal has given liberty to the appellant to file a fresh application for refund of the amount before the original authority. The decision of the Tribunal in this regard has not been challenged by the department and therefore, the appellant can still avail this remedy. 32. Consequently, the appeal is dismissed. We make it clear that the appellant is at liberty to file fresh application for C.E.Appeal No.1/2019 23 refund of the amount before the original authority in accordance with the impugned order of the Tribunal. No costs in the appeal. (sd/-) C.K.ABDUL REHIM, JUDGE (sd/-) R.NARAYANA PISHARADI, JUDGE jsr/17/06/2019 C.E.Appeal No.1/2019 24 APPENDIX PETITIONER'S EXHIBITS: ANNEXURE A THE TRUE COPY OF LETTER DATED 01/10/12 ISSUED BY SUPD (AUDIT) HQRS. TVPM TO THE APPELLANT. ANNEXURE B THE TRUE COPY OF LETTER DATED 30/07/13 ISSUED TO JURISDICTIONAL SUPERINTENDENT GROUP B BY APPELLANT. ANNEXURE C THE TRUE COPY OF LETTER DT.30/07/13 ISSUED TO SUPERINTENDENT (AUDIT) BY APPELLANT. ANNEXURE D THE TRUE COPY OF LETTER DATED 13/09/2013 ISSUED TO SUPD. SERVICE TAX GROUP B. ANNEXURE E TRUE COPY OF REFUND APPLICATION IN FORM R DATED 14/10/2014 ALONG WITH COVERING LETTER. ANNEXURE F TRUE COPY OF SHOW CAUSE NOTICE DATED 21/11/2014. ANNEXURE G TRUE COPY OF ORDER-IN-ORIGINAL NO.02/ST/2015(REFUND) DATED 13/01/2015 ISSUED BY ASSISTANT COMMISSIONER, TVPM. ANNEXURE H TRUE COPY OF ORDER IN APPEAL NO.TVM- EXCUS-000-APP-330-15-16 DATED 30/03/2016. ANNEXURE I TRUE COPY OF MEMORANDUM IN APPEAL NO.ST/21039/2016D DT.30/6/16 BEFORE THE CESTAT, BANGALORE. ANNEXURE J TRUE COPY OF ARGUMENT NOTES IN APPEAL NO.ST/21039/2016. ANNEXURE K TRUE COPY OF ORDER IN APPEAL TVM- EXCUS-000.APP-784 & 785-2018 DATED 5/10/2018. C.E.Appeal No.1/2019 25 ANNEXURE L TRUE COPY OF IMPUGNED ORDER NO.21785/2018 DATED 19/11/2018 PASSED BY THE CESTAT, BANGALORE. ANNEXURE M THE TRUE COPY OF GOVERNMENT OF INDIA CIRCULAR NO.130/41/95-X DATED 30/05/1995. RESPONDENTS' EXHIBITS: NIL TRUE COPY PS TO JUDGE "