Limitation Period Not Applicable To Refund Claims For Service Tax Paid Under Mistake Of Law: CESTAT

The Mumbai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that the limitation prescribed under Section 11B of the Central Excise Act, 1944, is not applicable to refund claims for service tax paid under a mistake of law.

The bench of Ajay Sharma (Judicial Member) has observed that the appellant cannot be said to be liable to pay service tax in any way because what was paid by the appellant was not tax as defined by the Finance Act of 1994. As a result, the amount paid by the appellant does not have the character of a tax but is simply an amount paid due to a mistake of law.

The appellant/assessee is providing the services under the category of club or association services and is a society registered under the provisions of the Maharashtra Cooperative Housing Society Act, 1960.

The assessee has filed two refund claims on the ground that they have paid service tax under protest as they are cooperative societies not engaged in any activity of profit and, as per the principle of mutuality, services provided by them to their members would not be liable to service tax under the club or association service.

The department rejected the refund claims on the ground of limitation under Section 11B as made applicable to service tax matters and also on the merits by applying the provisions of Sections 66B and 66D of the Finance Act, 1994.

The appellant submitted that the appellant is a society registered under the provisions of the Maharashtra Co-operative Housing Societies Act, 1960, and its members are from the society itself. Therefore, liability to pay service tax would not arise, as the tax is payable only when a taxable service is provided by one person to another.

The appellant contended that since the amount of service tax was paid under protest, the period of limitation would not apply.

The tribunal observed that a club incorporated and formed on the principle of mutuality is not liable to pay service tax on services provided to its members as it is not a service from one legal entity to another, and though the club had a distinct legal entity, it was acting only as an agent for its members.

The CESTAT held that since the retention of the amount in issue by the department is without the authority of law, the question of applying the limitation would not arise. Even in cases where any amount is paid by way of self-assessment, if it has been paid by mistake or through ignorance, it is always open to the assessee to bring it to the notice of the authority concerned and claim a refund of the amount wrongly paid.

Case Title: M/s. Raheja Regency Cooperative Housing Society ltd. Versus Commissioner of GST & Central Excise

Citation: Service Tax Appeal No. 85076 of 2021

Date: 08.12.2022

Counsel For Appellant: Advocates Bharat Raichandani, Diksha Kukrety

Counsel For Respondent: Supdt. (AR) Prabhakar Sharma

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