Custom, Excise & Service Tax Tribunal
Ms Vels Engineers vs Principal Commissioner Of Gst& Central ... on 23 July, 2025
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
CHENNAI
REGIONAL BENCH - COURT No. I
Service Tax Appeal Nos.40183 & 40184 of 2019
(Arising out of Order-in-Appeal CMB-CEX-000-APP-251 -18 dated 02.11.2018 & Order-
in-Appeal CMB-CEX-000-APP-252-18 dated 02.11.2018, both passed by Commissioner
of GST & CE (Appeals) Coimbatore)
M/s. Vels Engineers, .... Appellant
41, Balaji Nagar, New Sidhapudur,
Coimbatore-641 044.
VERSUS
The Commissioner of GST & CE, ...Respondent
No.6/7, A.T.D. Street,
Race Course, Coimbatore-641 018.
APPEARANCE :
Shri N. Viswanathan, Advocate for the Appellant
Ms. Anandalakshmi Ganeshram, Authorised Representative for
the Respondent
CORAM :
HON'BLE MR. VASA SESHAGIRI RAO, MEMBER (TECHNICAL)
HON'BLE MR. AJAYAN T.V, MEMBER (JUDICIAL)
FINAL ORDER Nos.40757-40758/2025
DATE OF HEARING: 04.04.2025
DATE OF DECISION:23.07.2025
Per Mr. Ajayan T.V.
The issue involved in these appeals being rejection of refund claims
filed by the appellant, these appeals, as per details below, were heard
analogously and are being disposed of by this common order.
Sl. Date of Period Refund Order-in- Appeal No.
No. Filing of Covered Claim for Original Order-in-
Refund Rs. No. for & Appeal
Claim Date No. for &
Date
1. 15.03.2017 01.11.2012 35,12,755/- 24/2018 CMB-CEX- ST/40184/2019
to (R) dated 000-APP-
31.03.2015 27.04.2018 252 -18
dated
02.11.2018
2
2. 15.03.2017 01.08.2015 40,85,608/- 20/2018 CMB-CEX- ST/40183/2019
to (R) dated 000-APP-
31.12.2016 27.04.2018 251 -18
dated
02.11.2018
2. Brief facts are that the appellant is a Contractor registered with the
Department, holding registration certificate No.AAOPR3712JST001 and
rendering construction services to various parties including the
Government Department viz., Kerala State Industrial Development
Corporation Ltd., (in short 'KSIDC'). On 15.03.2017, the appellant filed
the aforementioned claims for refund of the service tax paid towards
the services rendered to KSIDC, claimed to be exempted under
Notification No.25/2012-ST dated 20.06.2012 vide Sl.No.12(a).
3. On scrutiny of the impugned refund claims, the Department being of
the view that (a) the appellant has not established its entitlement of the
exemption under the notification No.25/2012-ST dated 26.06.2012 as
amended; (b) that the claim appears to be hit by limitation of time bar
as per Section 11B and also for the period from 01-04-2015 to 29-02-
2016, the refund had to be applied within 6 months of the date of
passing of Section 102 of the Finance Act, ( that is from 14.05.2016);
(c) as the work order of KSIDC Ref. No. KSIDC/LEIP/6-8/250 dated
4.5.13 and Ref.No.KSIDC/IGC/2-80/1745 dated 14.2.12, referred to
contract amount being inclusive of service tax payable by both the
contractor as service provider and KSIDC as service recipient under
reverse charge mechanism, which is also claimed as refund by the
appellant, the question of unjust enrichment arises and d) the appellant
has not furnished no objection certificate from the service receiver in
support of their refund claim stating that the service tax already paid
was not reimbursed to them; citing these as reasons, issued two
separate Show Cause Notices to the appellant, both dated 25.05.2017,
proposing rejection of the said refund claims.
4. In reply to the show cause notices, the appellant filed separate replies
both dated 28-08-2017 stating, inter-alia, that they had provided work
contract service to KSIDC. KSIDC is fully owned by Government of
Kerala. The construction provided by the appellant to KSIDC is not for
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business or commerce and are covered under Section 12(a) of
Notification 25/2012 dated 20.06.2012 and the same are exempted
from service tax. By mistake they have paid the service tax and
therefore they have filed the impugned refund claim on 14.03.2017 in
terms of the said notification. That on perusal of the allegation and the
exemption provisions, it is evident that the reason for the proposed
rejection of refund claim are that no evidence was adduced to prove
that KSIDC is a governmental authority and that services are rendered
for industrial purpose. The appellant contended in its reply that proof is
available in the official website of KSIDC-www.ksidc.org and
reproducing purported extracts therefrom contended that it is evident
that KSIDC is established by Government of Kerala for the purpose of
social and economic development of Kerala. Social and economic
development is one of the functions listed in Article 243W of the
Constitution (12th Schedule) and therefore the exemption under
notification 25/2012-ST-sl.No.12(a) is applicable for these services. The
appellant also enclosed two letters from KSIDC dated 29.05.2017, one
stating that they had no objection to the appellant seeking refund from
service tax authorities for the service tax paid by him mistakenly for the
works executed as per the work orders issued to the appellant and the
other certifying that KSIDC is a 100% equity owned company of
Government of Kerala and that they are a Government Company. Both
letters also stated that they were being issued pursuant to the
appellant's request that they be so issued in order for the appellant to
avail service tax exemption. The appellant also reiterated the aforesaid
contentions through its consultant vide two separate letters in respect
of the refund claims, both dated 09.02.2018. However, in the letter
pertaining to the claim for the period from October 2015 to Jan 2017,
it was stated that the refund claim is filed by claiming the benefit vide
Section 102 of Finance Act 2016 which granted retrospective exemption
for the period 01-04-2015 to 31-03-2016, in respect of the exemption
under Sl.No.12(a) which was initially withdrawn with effect from 01-04-
2015 vide notification No.6/2015-ST dated 01.03.2015, but was
restored vide entry Sl.No.12A inserted vide Notification No.9/2016-ST
with effect from 01.04.2016 subject to fulfilment of the conditions that
the contract should have been entered prior to 01.03.2015 and
appropriate stamp duty wherever applicable should have been paid
prior to that date. The letters dated 09.02.2018 also reiterated that the
provisions of Section 11B is not applicable as the appellant had paid the
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tax mistakenly. After due process of law, the adjudicating authority vide
the Orders in Original aforementioned, rejected the refund claims, inter-
alia, on the following grounds: -
i) The Kerala State Industrial Development Corporation Ltd., (KSIDC)
is established as a Public Sector Unit by the Kerala Government
under the Indian Companies Act 1956 and is a promotional agency
working for the industrial and investment promotion. As the nodal
agency for foreign and domestic investments in Kerala, KSIDC
provides comprehensive set of services that include developing
business ideas, identifying viable projects, feasibility study and
providing financial assistance and guidance for implementation as
is evident from the website www.ksidc.org. That in the instant
case, KSIDC cannot be considered as a Government authority and
the services rendered to KSIDC are predominantly for industry or
commerce and not otherwise thereby not fulfilling the conditions
laid down under Notification No.09/2016-ST dated 01.03.2016
read with Notification No.25/2012-ST dated 20.06.2012.
ii) After tabulating the service tax amounts paid, challan number and
payment date as well as computing the period till the date of filing
of the refund claim, it was observed that the refund claim has been
filed beyond one year from the date of service tax payments as
detailed and hence the refund claim is time barred in terms of the
time limit prescribed under Section 11B of the Central Excise Act,
1944.
iii) that the claims are hit by limitation of time as per Section 102
inserted in the Finance Act 1994 vide Finance Act 2016 since for
the services provided during 01.04.2015 to 29.02.2016 for which
contracts were entered into prior to 01.03.2015, ,the refund claim
ought to have been filed within six months from the date of passing
of the Finance Act 2016; that Finance Act 2016 was enacted on
14.05.2016 and the refund claim for the relevant period was to be
filed on or before 14.11.2016. It is on record that that the refund
claim filed was on 15.03.2017, i.e. after a period of 10 months
from the enactment of the Finance Act 2016 and thus being beyond
the stipulated time frame as provided in the said section 102 read
with Section 11B of the Central Excise Act 1944 made applicable
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to Service Tax matters vide Section 83 of the Finance Act, 1994,
the refund claim is hit by limitation. Reliance was placed on various
citations including Apex court decision in Mafatlal Industries v
Union of India, (1997) 5 SCC 536.
5. Aggrieved by the said orders in Original rejecting their refund claim, the
appellants filed appeals before the first Appellate Authority. However,
the Appellate Authority vide the impugned Orders in Appeal held that
the impugned orders rejecting the claim of the appellant, on the twin
grounds of merits as well as on limitation, is as per law and does not
warrant any interference and thus while rejecting the appeals filed by
the appellant, upheld the orders in original of the adjudicating authority.
6. It is pursuant to the litigious journey through the adjudicatory and
appellate hierarchy that the appellant is presently before this Tribunal
having preferred the instant appeals against the impugned Orders in
Appeal on the following common grounds:
A) Governmental Authority is explained in para 2(s) of the notification
No.25/2012-ST which is as furnished below:
Sl.No. With effect Explanation
from
1 01.07.2012 "governmental authority" means a board, or
an authority or any other body established
with 90% or more participation by way of
equity or control by Government and set up
by an Act of the Parliament or a State
Legislature to carry out any function
entrusted to a municipality under article
243W of the Constitution;
2 30.01.2014 "governmental authority" means an
authority or a board or any other body;
(i) set up by an Act of Parliament or a State
Legislature; or
(ii) established by Government,
with 90% or more participation by way of
equity or control, to carry out any
function entrusted to a municipality
under article 243W of the Constitution;'.
The proof to establish that KSIDC is a government authority is
available in the official website of www.ksidc.org and further
KSIDC vide their letter dated 29.05.2017 has certified that it is
owned by Government of Kerala. In view of the above KSIDC is a
wholly owned company of Government of Kerala, for the
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promotion and development of medium and large scale units in
the State. It is established by Government of Kerala for the
purpose of social and economic development of Kerala. Social and
economic development is one of the functions listed in Article
243W of the Constitution (12th Schedule) and therefore the
exemption under notification 25/2012-ST -Sl.No.12(a) is
applicable.
B) Reliance is placed on the judgement rendered by the Hon'ble High
Court of madras in the case of 3E Infotech, Kanyakumari v Cestat &
Commissioner Appeals, Madurai, reported in 2018-TIOL-1268-HC-
MAD-ST wherein it is held that when service tax is paid by mistake,
a claim for refund cannot be barred by limitation, merely because
the period of limitation under section 11B has expired.
C) Without prejudice to the above, it is submitted that refund claim has
to be disposed off in terms of sub-section 6 of Section 73A of the
Finance Act, 1994 and the period of limitation would apply from the
date of public notice to be issued by the Central Excise Officer for
the refund of such surplus amount. In the instant case, the public
notice is yet to be issued and so, the claim is not hit by limitation.
D) As regards unjust enrichment, the refund sanctioning authority in
para 8.7 of the order in original held that question of unjust
enrichment does not arise in this case.
E) In the appeal ST/40283/2019, the appellant has also raised the
ground that appellant is eligible for refund of Rs.27,83,379/-, which
is within one year period under Section 11B of CEA, 1944.
7. Shri. N. Viswanathan, Advocate, appearing for the appellant submitted
that the common findings recorded in both the orders of the original
authority and verbatim approved by the appellate authority to hold that
KSIDC is not a governmental authority is grossly incorrect. The Ld.
Counsel submits that the findings rendered that a municipality or any
local body is a local government carrying on public administration and
governance using public fund without any profit motive whereas KSIDC
is a profit making PSU by relying on a CAG report, not made available
to the appellant, to hold that KSIDC is not entrusted with any of the
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functions under Schedule XII of the constitution and therefore they are
not a governmental authority, was followed by the first appellate
authority without due application of mind.
8. The Ld. Counsel would contend that the lower authorities ought to have
considered the list of work that could be entrusted on a municipality or
a local body as enshrined in Schedule XII of the constitution and
demonstrated that it does not fall within its ambit, which not being
done, exposes the incorrectness of the findings.
9. The Ld. Counsel submits that KSIDC vide their letter dated 29.05.2017
has submitted that they are a 100% equity owned company of the
Government of Kerala besides producing the website details of the said
company showing they are only engaged in the promotion of industries
in Kerala to sustain the economic development which indicates that
KSIDC is engaged in an activity prescribed under serial no. iii of
Schedule XII of the Constitution, which was omitted to be taken note of
by the lower authorities. He would also submit that the denial of the
benefit of exemption as provided under Sl.No.12(a) of the mega
exemption notification is incorrect as the express entry appearing in the
said notification restricts the said issue on commerce or industry to the
civil structure or original works and not the status of the governmental
authority which has also been clarified by Board vide its circular
B2/8/2004-TRU dated 10-09-2004.
10. Ld. Counsel submits that the claims have been dismissed on time bar
for the only reason of the authorities finding the levy to be authorised
and not otherwise and since the case of the appellant is that the levy is
unauthorised and the payment is due to mistake of law, the limitation
has to be computed from the date of knowing the mistake and not as
per the time limit prescribed under Section 11B of the Central Excise
Act. Ld. Counsel would also submit that the period of six months
adopted by the lower authority for holding the claim for the period
01.04.2015 to 31.03.2016 to be barred by limitation only shows that
he has otherwise admitted to the collection of tax by mistake of law in
which case the limitation period of 3 years from the date of knowledge
should only apply. Ld. Counsel submitted the following decisions:
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i) 3E Infotech v Cestat, Chennai, 2018 (18) GSTL 410 (Mad)
ii) Parijat Construction v CCE, Nashik, 2018 (359) ELT 113 (Bom)
iii) Hongkong and Shanghai Banking Corporation ltd v UOI, (2023) 13
Centax 113 (Bom)
iv) Tamil Nadu Ex-Servicemen's Corpn ltd v Commr of GST & C.Ex,
Chennai, 2020 (38) GSTL 98 (Tri-Chennai)
v) PKF Sridhar & Santhanam LLP v Commr of GST & C.Ex, Chennai North,
2022 (58) GSTL 423 (Tri-Chennai)
vi) S. Sakthikumar v Commr of GST & Central Excise, Madurai, 2022 (61)
GSTL 364 (Tri-Chennai)
vii) Gail India Ltd v Commr of GST & Central Excise, Puducherry, 2023 (79)
GSTL 403 (Tri-Chennai)
viii) Hexacom (I) Ltd v CCE, Jaipur, 2003 (156) ELT 357 (Tri-Del)
ix) CCE, Raipur v Indian Ispat Works (P) Ltd, 2006 (3) STR 161 (Tri-Del).
11. Learned Authorised Representative, Ms. Anandalakshmi Ganeshram
appeared for the Department and while reiterating the findings in the
impugned order in appeal, she argued that the findings of the lower
authority that the appellant is not a Governmental Authority is correct
in as much as KSIDC does not satisfy the requirement of Governmental
Authority as stipulated in the definitions provided in para 2 under clause
(s) of the mega exemption notification 25/2012-ST ibid. Ld. A.R argued
that it has not been shown by the appellant that KSIDC was established
by the Government of Kerala to carry out any function entrusted to a
municipality under article 243W of the Constitution. Ld.A.R submitted
that since it is the claim of the appellant that the exemption was
available it was for the appellant to have let in evidence to prove that
KSIDC satisfies the definition of Governmental Authority as provided in
the said Notification. Ld. A.R argues that exemption notification is to be
construed strictly and it is for the appellant to demonstrate its
entitlement to have the services rendered by the appellant to be
considered as exempted under Sl.No.12(a) of the Exemption
notification 25/2012-ST as claimed. Ld. A.R. further argued that the
lower authority has clearly tabulated the details of the service tax
payment along with the computation of period from the date of service
tax payment which clearly evidences that the period of limitation for the
claim to which Section 11B was applicable was evidenced as being
beyond the prescribed period of one year and for the claim pertaining
to the period from 01-04-2015 to 29-02-2016, during which the
exemption was withdrawn and service tax was made payable and which
was thereafter subsequently retrospectively exempted by the insertion
of Section 102 into the Finance Act 1994 by the Finance Act 2016 which
came into effect from 14-05-2016, the refund claim ought to have been
preferred within the period of six months from the date it came into
9
effect, that is within 14-11-2016. Thus, the Ld. A.R. would submit, the
lower authorities were right in rejecting the claim for the aforesaid
period by citing Section 102, for being beyond the period of six months
stipulated therein. Ld. A.R therefore argued that the appellate authority
has rightly upheld the lower adjudicating authority's order rejecting the
refund claim of the appellant on both the grounds of merits as well as
limitation. Ld. A.R. cited the Judgement of the Apex Court in Dilip Kumar
case for her contention as regards strict interpretation of exemption
notification and submitted the case law in MDP Infra (India) Ltd v. CC,
C.Ex & CGST, 2019 (29) GSTL 296 (M.P) to support her contention as
to the application of time limit for preferring refund claim as prescribed
under Section 102 of the Finance Act.
12. We have heard both sides, carefully perused the appeal records and the
case laws cited and submitted.
13. The principal issues that arise for determination are :
i) Whether the Appellant has succeeded in establishing that KSIDC is a
Governmental Authority as defined in clause (s) of para 2 of the
Exemption Notification 25/2012-ST dated 20-06-2012 as amended
and thus the Appellant's consequent claims for refund premised on
the availability of benefit of exemption under Sl.No.12(a)/12A of the
Exemption Notification 25/2012-ST ibid is tenable?
ii) Whether the claim though tenable on merits, is however barred by
limitation under Section 11B of the Central Excise Act, 1944 as made
applicable to Finance Act by virtue of Section 83 of the Finance Act,
1994/Section 102 of the Finance Act, 1994.
14. At the outset, the notifications and its amendments and other statutory
provisions and articles of constitution that are necessary for
determination of the issues at hand are reproduced infra.
15. Exemption Notification No.25/2012-ST dated 20-06-2012 which came
into force from 01-07-2012, stipulated that the Central Government,
being satisfied that it is necessary in the public interest so to do, thereby
exempts the taxable services stipulated therein from the whole of the
service tax leviable thereon under section 66B of the said Act and
Sl.No.12 of the said notification ibid stipulated as under: -
"12. Services provided to the Government, a local authority or a
governmental authority by way of construction, erection,
10
commissioning, installation, completion, fitting out, repair,
maintenance, renovation, or alteration of -
(a) a civil structure or any other original works meant
predominantly for use other than for commerce, industry, or any
other business or profession;
(b) a historical monument, archaeological site or remains of national
importance, archaeological excavation, or
antiquity specified under the Ancient Monuments and Archaeological Sites
and Remains Act, 1958 (24 of 1958);
(c) a structure meant predominantly for use as (i) an educational, (ii) a
clinical, or (iii) an art or cultural establishment;
(d) canal, dam or other irrigation works;
(e) pipeline, conduit or plant for (i) water supply (ii) water treatment, or
(iii) sewerage treatment or disposal; or
(f) a residential complex predominantly meant for self-use or the use of
their employees or other persons specified in the Explanation 1 to clause
44 of section 65B of the said Act;" (emphasis supplied)
15.1 Para 2 of the said notification provided for Definitions and stipulated
that "For the purposes of this notification, unless the context otherwise
requires, - ". At clause (s) of para 2, Governmental authority was
defined as under:
" "governmental authority" means a board, or an authority or any
other body established with 90% or more participation by way of
equity or control by Government and set up by an Act of the Parliament
or a State
Legislature to carry out any function entrusted to a municipality under
article 243W of the Constitution."
15.2 The said definition of "governmental authority" was substituted vide
Notification No.2/2012-ST dated 30-01-2014, which provided as
under:
"In the said notification, in the paragraph 2, for clause(s), the following
shall be substituted, namely: -
'(s) "governmental authority" means an authority or a board or any
other body;
(i) set up by an Act of Parliament or a State Legislature; or
(ii) established by Government,
with 90% or more participation by way of equity or control, to carry
out any function entrusted to a municipality under article 243W of the
Constitution;'."
15.3 The Central Government, vide notification No.6/2015-ST dated 01-
03-2015, amended the entry Sl.No.12 of the Notification
No.25/2012-ST dated 20.06.2012 as follows:
"1. In the said Notification, -
(i)xxx
(ii) in entry 12, items (a), (c) and (f) shall be omitted;"
(emphasis supplied)
The notification further provided that save as provided in the
notification, it shall come into force on the 1st of April, 2015.
11
15.4 The Central Government again, vide Notification No.9/2016-ST dated
01-03-2016, further amended notification No.25/2012-ST vide para
1(a)(iv) which stipulated as under:
"after entry 12, with effect from the 1st March, 2016, the following
entry shall be inserted, namely -
""12A. Services provided to the Government, a local authority
or a governmental authority by way of construction, erection,
commissioning, installation, completion, fitting out, repair,
maintenance, renovation, or alteration of -
(a) a civil structure or any other original works meant
predominantly for use other than for commerce, industry, or
any other business or profession;
(b) a structure meant predominantly for use as (i) an educational, (ii)
a clinical, or (iii) an art or cultural establishment; or
(c) a residential complex predominantly meant for self-use or the use
of their employees or other persons specified in the Explanation 1 to
clause (44) of section 65 B of the said Act;
under a contract which had been entered into prior to the 1st
March, 2015 and on which appropriate stamp duty, where
applicable, had been paid prior to such date :
provided that nothing contained in this entry shall apply on or after
the 1st April, 2020;";" (emphasis supplied)
16. It is also relevant that the Finance Act, 2016, which received the assent
of the President on 14th May, 2016, vide Section 159 thereof, provided
for insertion of new sections 101, 102 and 103 in the Finance Act, 1994
and stipulated as under:
"159. In the 1994 Act, after section 100, the following sections shall be
inserted, namely: --
"101. Xxxxx
102. (1) Notwithstanding anything contained in section 66B, no service
tax shall be levied or collected during the period commencing from the 1st
day of April, 2015 and ending with the 29th day of February, 2016 (both
days inclusive), in respect of taxable services provided to the Government,
a local authority or a Governmental authority, by way of construction,
erection, commissioning, installation, completion, fitting out, repair,
maintenance, renovation or alteration of--
(a) a civil structure or any other original works meant predominantly for
use other than for commerce, industry or any other business or
profession;
(b) a structure meant predominantly for use as--
(i) an educational establishment;
(ii) a clinical establishment; or
(iii) an art or cultural establishment;
(c) a residential complex predominantly meant for self-use or for the use
of their employees or other persons specified in Explanation 1 to clause
(44) of section 65B of the said Act,
under a contract entered into before the 1st day of March, 2015 and on
which appropriate stamp duty, where applicable, had been paid before
that date.
(2) Refund shall be made of all such service tax which has been collected
but which would not have been so collected had sub-section (1) been in
force at all material times.
(3) Notwithstanding anything contained in this Chapter, an
application for the claim of refund of service tax shall be made
within a period of six months from the date on which the Finance
Bill, 2016 receives the assent of the President." (emphasis
supplied)
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17. It is also pertinent to note that Article 243W of the Constitution reads
as under :
"243W. Powers, authority and responsibilities of Municipalities, etc. -
Subject to the provisions of this Constitution, the Legislature of a
State may, by law, endow -
(a) the Municipalities with such powers and authority as may be
necessary to enable them to function as institutions of self-
government and such law may contain provisions for the devolution
of powers and responsibilities upon Municipalities, subject to such
conditions as may be specified therein, with respect to -
(i) the preparation of plans for economic development and social
justice;
(ii) the performance of functions and the implementation of schemes
as may be entrusted to them including those in relation to the matters
listed in the Twelfth Schedule;
(b) the Committees with such powers and authority as may be necessary to
enable them to carry out the responsibilities conferred upon them including
those in relation to the matters listed in the Twelfth Schedule." (emphasis
supplied)
18. Furthermore, the twelfth Schedule of the Constitution is as under:
"TWELFTH SCHEDULE
(Article 243W)
1. Urban planning including town planning.
2. Regulation of land-use and construction of buildings.
3. Planning for economic and social development.
4. Roads and bridges.
5. Water supply for domestic, industrial and commercial purposes.
6. Public health, sanitation conservancy and solid waste
management.
7. Fire services.
8. Urban forestry, protection of the environment and promotion of
ecological aspects.
9. Safeguarding the interests of weaker sections of society,
including the handicapped and mentally retarded.
10. Slum improvement and upgradation.
11. Urban poverty alleviation.
12. Provision of urban amenities and facilities such as parks,
gardens, playgrounds.
13. Promotion of cultural, educational and aesthetic aspects.
14. Burials and burial grounds; cremations, cremation grounds; and
electric crematoriums.
15. Cattle pounds; prevention of cruelty to animals.
16. Vital statistics including registration of births and deaths.
17. Public amenities including street lighting, parking lots, bus stops
and public conveniences
18.Regulation of slaughter houses and tanneries."
19. Having noted the notifications and its amendments and other statutory
provisions and articles of constitution as are necessary for deciding the
lis, upon perusing the appeal records, the indisputable facts emanating
are:
i) The appellant is a Contractor registered with the Department,
holding registration certificate No. AAOPR3712JST001 and
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rendering construction services to various parties including the
Government Department viz., Kerala State Industrial Development
Corporation Ltd., (in short 'KSIDC').
ii) As regards the services rendered to KSIDC, the appellant had
rendered works contract service to the service receiver KSIDC vide
work order Ref No. KSIDC/IGC/2-80/1745 dated 14.02.2012, and
subsequent work orders thereafter
iii) The notification No.25/2012-ST dated 26.06.2012 was notified
with effect from 01.04.2012
iv) The appellant had commenced payment of service tax with respect
to the services rendered to KSIDC vide challan No.18 dated
23.04.2013 and by subsequent challans.
v) The exemption that provided at Sl.No.12(a) of notification
No.25/2012-ST dated 26.06.2012 stood withdrawn with effect
from 01.04.2015 vide Notification No.6/2015-ST dated 01-03-
2015
vi) The exemption that was provided at Sl.No.12(a) was restored
retrospectively with effect from 01-03-2016 till 31.03.2020, albeit
with conditions, vide insertion of another entry Sl.No.12A by
Notification No.9/2016-ST dated 01-03-2016, into the Notification
No.25/2012-ST ibid, the two conditions stipulated being that the
services provided ought to be under a contract which had been
entered into prior to the 1st March, 2015 and on which appropriate
stamp duty, where applicable, had been paid prior to such date.
vii) The Finance Act, 2016, which received the assent of the President
on 14th May, 2016, vide Section 159 thereof, inter-alia, provided
for insertion of a new section 102 in the Finance Act, 1994 which
stipulated that no service tax shall be levied or collected during the
period commencing from the 1st day of April, 2015 and ending with
the 29th day of February, 2016 (both days inclusive), in respect of
taxable services provided to the Government, a local authority or
a Governmental authority, essentially as had been provided for in
the entry 12A inserted by Notification No.9/2016-ST dated 01-03-
2016.
viii) On 15.03.2017, the appellant filed the aforementioned claims for
refund of the service tax paid towards the services rendered to
KSIDC, claimed to be exempted under Notification No.25/2012-ST
dated 20.06.2012 vide Sl.No.12(a).
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20. Thus, evidently, during the relevant period, being a registered service
tax assessee, the appellant had been self-assessing their service tax
liability and declaring the same in their Service Tax Returns. If at all the
appellant felt that it was entitled to the benefit of the notification
25/2012-ST ibid, it was open to the appellant to avail the same at that
point in time. It is not the case of the appellant that the Department
had persuaded or coerced the appellant not to claim the benefit of any
exemption notification, in spite of the Appellant's desire to avail the
same. It is also not the case of the appellant that they have paid the
service tax under protest.
21. In such circumstances, when the appellant has preferred the refund
claims dated 15.03.2017, claiming that they had paid the service tax
mistakenly, as they were otherwise entitled to the benefit of
Sl.No.12(a) of the Notification 25/2012-ST ibid, it was incumbent upon
the appellant to have given cogent reasons as to why they had not
claimed the benefit of the notification which they now felt they were
covered under and also when they became aware of their entitlement.
Nothing on these aspects have been brought to our notice or placed on
record. In fact, neither in the proceedings before the lower authorities
nor in the appeal preferred before us, the appellant has stated any
particular date as that on which the appellant has realised that it was
entitled to the benefit of the aforesaid exemption notification and had
thus realised that it had paid service tax that the appellant felt it ought
not to have paid.
22. However, in the common synopsis submitted by the counsel for the
appellant on 04-04-2025, it is seen stated "The appellant submits that
it was only upon their constant persuasion KSIDC later informed them
that they being a governmental authority no service tax is payable on
the construction services provided to them and thereupon after
obtaining appropriate legal advice they preferred the two refund claims
with their jurisdictional authority claiming that the tax in question was
not payable by them as per law apart from obtaining and providing the
necessary certification from KSIDC for the non-reimbursement of the
tax to them and also that they are a governmental authority." We are
constrained to say that such bald averments, especially regarding the
service receiver KSIDC informing them that they being a governmental
authority no service tax is payable, have not been reflected in the
15
replies to the SCN brought on record. Neither is any such contention
seen raised in the appeals filed before the first appellate authority, nor
has it been raised in the grounds of appeal preferred before this
Tribunal. No evidence has been let in to support such averments nor
have such averments been brought on record by filing a proper
application seeking leave of this Tribunal to take additional grounds.
Suffice to say, we do not appreciate such bald averments sans any
evidence. Such averments cannot be countenanced and are hence
rejected. We say no more.
23. Be that as it may, we note that the refund claims of the appellant hinge
on the crucial contention that KSIDC is a governmental authority. This
is so, for the reason that it is the benefit of exemption under Sl.No.12(a)
of the notification 25/2012-ST ibid as amended that the appellant seeks
to rely on to contend that the said benefit was available to the appellant,
but instead of availing the same, the service tax had been paid
mistakenly by the appellant. In order to avail such benefit, the service
need to have been provided, inter-alia, to a "governmental authority".
24. Bearing the applicable statutory provisions reproduced above and the
factual aspects in mind, it can be seen that Sl.No.12(a) of the
notification 25/2012-ST ibid provides exemption, inter-alia, to Services
provided to a governmental authority by way of construction, erection,
commissioning, installation, completion, fitting out, repair,
maintenance, renovation, or alteration of a civil structure or any other
original works meant predominantly for use other than for commerce,
industry, or any other business or profession.
25. The definition of "governmental authority" as was originally provided in
clause (s) of paragraph 2 of the notification 25/2012-ST ibid, when it
was notified, stipulated as under:
"governmental authority" means a board, or an authority or any
other body established with 90% or more participation by way of
equity or control by Government and set up by an Act of the
Parliament or a State
Legislature to carry out any function entrusted to a municipality
under article 243W of the Constitution.
25.1 This would mean that the definition of "governmental authority",
would be satisfied by:
16
i) only a board, or an authority or any other body established by
Government, with 90% or more participation by way of equity or
control by Government.
ii) Such a board, or an authority or any other body established with
the aforesaid equity participation or control by Government
should also have been so set up by an Act of the Parliament or a
State Legislature and
iii) Such a board, or an authority or any other body established with
the aforesaid equity participation or control by Government
should and so set up by an Act of the Parliament or a State
Legislature, should also have been so set up to carry out any
function entrusted to a municipality under article 243W of the
Constitution.
Thus, only upon cumulatively satisfying all the aforesaid
conditions would such a board or an authority or any other body
established satisfy the definition of "governmental authority."
25.2 Furthermore, the said definition of "governmental authority" in
clause (s) of paragraph 2, was substituted vide Notification
No.2/2012-ST dated 30-01-2014, which provided as under:
'(s) "governmental authority" means an authority or a board or
any other body;
(i) set up by an Act of Parliament or a State Legislature; or
(ii) established by Government,
with 90% or more participation by way of equity or control, to
carry out any function entrusted to a municipality under article
243W of the Constitution;'."
25.3 At this juncture, it would also be necessary to note the effect of
substitution of the definition of "governmental authority" in clause
(s) of para 2 of the Notification.
25.4 The effect of substitution of a provision has been stated in Chandra
Sekhar Jha v Union of India, 2022 (380) ELT 130 (SC), as
"Substitution of a provision results in repeal of the earlier provision
and its replacement by the new provision [See in this regard, a
discussion in Justice G.P. Singh, Principles on Statutory
Interpretation (12th Edition) page No. 676.]."
25.5 The principles of law with regard to the interpretations of the word
"substitute" has already been settled in matter of Zile Singh v.
17
State of Haryana & Ors. reported in (2004) 8 SCC 1 and the
relevant portions of the above decision are quoted below :
"23. The text of Section 2 of the Second Amendment Act provides for the
word "up to" being substituted for the word "after". What is the meaning and
effect of the expression employed therein - "shall be substituted"?
24. The substitution of one text for the other pre-existing text is one of the
known and well-recognised practices employed in legislative drafting.
"Substitution" has to be distinguished from "supersession" or a mere repeal
of an existing provision.
25. Substitution of a provision results in repeal of the earlier provision and
its replacement by the new provision (see principles of Statutory
Interpretation, ibid., p. 565). If any authority is needed in support of the
proposition, it is to be found in West U.P. Sugar Mills Assn. v. State of U.P.,
State of Rajasthan v. Mangilal Pindwal, Koteswar Vittal Kamath v. K.
Rangappa Baliga and Co. and A.L.V.R.S.T. Veerappa Chettiar v. S. Michael.
In West U.P. Sugar Mills Assn. case a three-Judge Bench of this Court held
that the State Government by substituting the new rule in place of the old
one never intended to keep alive the old rule. Having regard to the totality of
the circumstances centring around the issue the Court held that the
substitution had the effect of just deleting the old rule and making the new
rule operative. In Mangilal Pindwal case this Court upheld the legislative
practice of an amendment by substitution being incorporated in the text of a
statute which had ceased to exist and held that the substitution would have
the effect of amending the operation of law during the period in which it was
in force. In Koteswar case a three-Judge Bench of this Court emphasised the
distinction between "supersession" of a rule and "substitution" of a rule and
held that the process of substitution consists of two steps: first, the old rule
is made to cease to exist and, next, the new rule is brought into existence in
its place."
25.6 In as much as the definition of "governmental authority" was so
substituted, we are of the view that it is the said substituted
definition that would have to be considered in order to ascertain
whether KSIDC is a "governmental authority" as has been claimed
by the appellant to derive the benefit of the exemption at
Sl.No.12(a) of the Notification 25/2012-ST ibid as amended.
25.7 By the said substitution, the Central Government divested an
authority or a board or any other body set up by an Act of
Parliament or a State Legislature from the requirement that it should
be so set up with 90% or more participation by way of equity or
control and further that it should have been so set up to carry out
any function entrusted to a municipality under article 243W of the
Constitution in order to be considered a "governmental authority".
In other words, the mere setting up of an authority or a board or
any other body by an Act of Parliament or a State Legislature
was sufficient for the said authority or a board or any other body to
qualify as a "governmental authority".
25.8 However, in the case of an authority or a board or any other body;
other than that set up by an Act of Parliament or a State Legislature;
18
the definition of "governmental authority" as provided in the
substituted clause (s), would be satisfied only when:
i) an authority or a board or any other body is established by
Government,
ii) such an authority or a board or any other body established by
Government should be with 90% or more participation by way
of equity or control by Government.
iii) Such an authority or a board or any other body established
with the aforesaid equity participation or control by
Government should also have been so established to carry out
any function entrusted to a municipality under article 243W of
the Constitution.
25.9 Furthermore, as can be seen from Article 243W and the twelfth
schedule to the constitution reproduced above, functions entrusted
to a municipality can be:
i) to function as institutions of self-government, as per the
devolution of powers and responsibilities subject to such conditions
as may be specified by the legislature of the State by law with
respect to (a) the preparation of plans for economic development
and social justice;(b) the performance of functions and the
implementation of schemes as may be entrusted to them including
those in relation to the matters listed in the Twelfth Schedule.
26 Therefore, "governmental authority", in so far as it is such an authority
or a board, or any other body established with 90% or more
participation by way of equity or control by Government, should also
have been so established to carry out the functions as stated in para
25.9 above.
27 At this juncture, it would also be apposite to notice the Judgement of
the Honourable Apex Court in Commissioner of Cus. (Import),
Mumbai v. Dilip Kumar & Company, 2018 (361) ELT 577 (SC),
19
wherein the Honourable Supreme Court has held that when an assessee
claims tax exemption under a notification, the burden to prove its
entitlement to the benefit of such exemption notification is on the
assessee who is claiming such exemption. The relevant portions are as
under:
"41. After thoroughly examining the various precedents some of which
were cited before us and after giving our anxious consideration, we would
be more than justified to conclude and also compelled to hold that
every taxing statute including, charging, computation and
exemption clause (at the threshold stage) should be interpreted
strictly. Further, in case of ambiguity in a charging provisions, the
benefit must necessarily go in favour of subject/assessee, but the
same is not true for an exemption notification wherein the benefit
of ambiguity must be strictly interpreted in favour of the
Revenue/State.
Xxxx
48. The next authority, which needs to be referred is the case in
Mangalore Chemicals (supra). As we have already made reference to the
same earlier, repetition of the same is not necessary. From the above
decisions, the following position of law would, therefore, clear.
Exemptions from taxation have tendency to increase the burden
on the other unexempted class of taxpayers. A person claiming
exemption, therefore, has to establish that his case squarely falls
within the exemption notification, and while doing so, a
notification should be construed against the subject in case of
ambiguity.
Xxxxx
52. To sum up, we answer the reference holding as under -
(1) Exemption notification should be interpreted strictly; the
burden of proving applicability would be on the assessee to show
that his case comes within the parameters of the exemption clause
or exemption notification.
(2) When there is ambiguity in exemption notification which is
subject to strict interpretation, the benefit of such ambiguity
cannot be claimed by the subject/assessee and it must be
interpreted in favour of the revenue.
(3) The ratio in Sun Export case (supra) is not correct and all the
decisions which took similar view as in Sun Export case (supra) stands
overruled." (emphasis supplied)
28 In light of the aforesaid judgement, the position in law is pellucid that
it is necessarily the burden of the appellant herein to demonstrate that
KSIDC is a "governmental authority", if the appellant desires to claim
the benefit of Sl.No.12(a) of the exemption notification No.25/2012-ST
ibid as amended and the consequent entitlement to the refund claimed.
20
29 We notice that in response to the show cause notices the appellant in
its replies have stated that the proof that KSIDC is a "governmental
authority" is available on the official website of KSIDC-www.ksidc.org
and had produced purported extracts therefrom. The appellant has also
enclosed a letter dated 29th May 2017 signed by the General Manager
on behalf of KSIDC which is as under:
21
30 As can be seen from the aforesaid letter, the same has been issued on
the letter head, albeit without indicating the name of the official or any
designation seal of the person signing, or even any company seal of
KSIDC. Further, it states that it has been issued on the appellant's
request dated 23-07-2017 for a certification to the effect that KSIDC is
a company owned by Government of Kerala in order to avail service tax
exemption applicable to services provided to the Government or
governmental authority as per exemption notification No.25 of 2012-
Service Tax. Accordingly, the letter certifies that KSIDC is a 100%
equity owned company of Government of Kerala and that KSIDC is a
Government Company.
31 In our view, the said letter which has been issued to substantiate that
KSIDC is a "governmental authority" as defined in clause (s) of
paragraph 2 of the notification 25/2012-ST ibid, even if one were to
momentarily ignore the deficiencies of lack of the name of the signatory
and lack of seals thereon, at best, satisfies the requirement of the said
definition only to the extent of certifying that KSIDC is a body
(company) established by Government with 90% or more participation
by way of equity or control by Government and nothing more. Evidently,
the letter does not certify that KSIDC is so established by the
Government to carry out any function entrusted to a municipality under
article 243W of the Constitution. It is also pertinent that KSIDC while
issuing the letter has cited the appellant's request and that the
certification has been requested by the appellant to avail the service tax
exemption applicable to services provided to governmental authority as
per exemption notification No.25 of 2012-Service Tax. Therefore, it
must be taken that appellant has informed, and KSIDC is aware, as to
the definition of "governmental authority" in the said notification. Yet,
while issuing the letter the concerned official has refrained from
certifying that the company is so established to carry out any function
entrusted to a municipality under article 243W of the Constitution.
Thus, the letter which does not certify this crucial aspect and is not
properly authenticated, fails to substantiate the appellant's contention
that KSIDC is a "governmental authority."
32 The appellant has in its reply, drawn the attention of the adjudicating
authority to the website of KSIDC and the purported extracts therefrom
reproduced therein to contend that KSIDC is carrying out functions
22
entrusted to a municipality under Sl.No.3 "planning for economic and
social development" as stipulated in the Twelfth Schedule to the
Constitution.
33 It is seen from the Order in Original of the Adjudicating Authority, which
has been upheld by the Appellate Authority, that the Adjudicating
Authority has rendered findings as under:
"8.5 It is observed that KSIDC is established as a Public Sector Unit
(PSU) by the Kerala Government under the Indian Companies Act 1956
and that KSIDC is promotional agency working for the industrial and
investment promotion. As the nodal agency for foreign and domestic
investments in Kerala, KSIDC provides comprehensive set of services
that include developing business ideas, identifying viable projects,
feasibility study and providing financial assistance and guidance for
implementation as evident from the website www.ksidc.org.
Municipality or any local body is a local government which carries out
public administration and governance using public fund without any
profit motive whereas it is observed that KSIDC is a profit making PSU
as per the CAG Audit of PSUs in Kerala vide report No.4 of 2017 (PSUs)
for the year ended 31.03.2016." ..... "
34 The Adjudicating Authority has then gone on to render a finding that in
the instant case KSIDC cannot be considered a Governmental Authority.
It is pertinent that neither in the appeal preferred before the first
appellate authority, nor in the appeal preferred before this Tribunal, the
appellant has specifically rebutted the above observations of the
Adjudicating Authority, which the Adjudicating Authority states, is
evident from the website of KSIDC. It is only in the synopsis filed by
the counsel for the appellant that it is stated that the findings in both
paras of 8.5 of both the orders in original is grossly incorrect and
unfounded. Such a contention has been raised without categorically
asserting that the observations as made by the Adjudicating Authority
are not available on the KSIDC website, especially when in fact, it was
the appellant itself that had drawn attention of the adjudicating
authority to the KSIDC website, to refer. It is only in the synopsis that
the counsel for the appellant has stated that CAG report as observed by
the adjudicating authority was not made available to the appellant. As
stated in paragraph 22 of this order supra, such a contention being so
raised without a proper application preferred to raise additional grounds
23
and raised at this second appellate stage, especially when such a
contention about the CAG report, is absent in the grounds of appeal
preferred before this Tribunal and was also never raised before the first
appellate authority, is rejected as unsustainable. It is also pertinent that
it is not the contention of the appellant that the CAG report was not
available on the KSIDC website at the time when the adjudicating
authority had accessed it and premised his observations on what was
found on the KSIDC website. In any event, that alone is not the sole
criteria for the findings of the lower authorities.
35 That apart, we are of the view that reproduction of purported content
as available on the website of KSIDC is insufficient evidence to conclude
that the appellant has discharged its burden of proving that KSIDC is a
Governmental Authority. In fact, the appellant is seeking to obtain the
benefit of the exemption notification by requiring an inference or
assumption to be made premised on the contents on the website of
KSIDC that the company is so established to carry out any function
entrusted to a municipality under article 243W of the Constitution. We
are of the view that, absent any averment or evidence as to the veracity
of the contents on the website displayed, and given the variation in the
contents being relied on as purportedly available on the website both
by the appellant and the adjudicating authority, the contents of the
website cannot be given much credence or can be relied upon as a legal
or statutory document to determine that KSIDC is so established by the
Government of Kerala to carry out any function entrusted to a
municipality under article 243W of the Constitution. Therefore, absent
any legal or statutory order that the appellant has been able to produce
to evidence that KSIDC is a "governmental authority" as defined in
clause (s) of para 2 of the notification No.12/2012-ST ibid as amended,
we are unable to concur with the contention of the appellant that KSIDC
is a governmental authority established to carry out any function
entrusted to a municipality under article 243W of the Constitution,
premised on the contents of the website. We also disagree with the
contention of the counsel for the appellant, stated in the synopsis filed,
that it was for the lower authorities to consider the list of work that
could be entrusted on a municipality or a local body as enshrined in
schedule XII of the constitution and demonstrate that the activities of
KSIDC does not fall within its ambit. We are of the considered view that
the appellant cannot shift the onus on to the Department when as per
24
the Judgement in the case of Dilip Kumar cited supra, the burden to
prove the entitlement to the benefit of the notification is squarely on
the appellant. Claim to the benefit of Sl.No.12(a) of the exemption
notification 12/2012-ST ibid and consequent claim of refund of service
tax already paid without demur to the Exchequer, cannot be entertained
without the appellant establishing its entitlement to the benefit of the
said exemption notification. We are of the considered view that the
appellant has failed to discharge this burden cast upon it.
36 At this juncture, it is apposite also to note that it was only by the
Constitution (74th Amendment) Act, 1992 that the Parliament had
inserted Part IXA of the Constitution providing for the constitution of
Municipalities. The twelfth Schedule was added by section 4 of the
Constitution (Seventy Fourth Amendment) Act, 1992, with effect from
01-06-1993.
37 Therefore, in the notification 25/2012-ST ibid, when the definition of
"governmental authority" in clause (s) of paragraph 2 was amended, it
lends itself only to the explanation that legislature in its wisdom had
decided that while the mere setting up of an authority or a board or any
other body by an Act of Parliament or a State Legislature was sufficient
for the said authority or a board or any other body to qualify as a
"governmental authority", however, when an authority or a board or
any other body is otherwise established by the Government, then such
an authority or board or any other body established with 90% or more
participation by way of equity or control by Government, should also
have been so established to carry out any function entrusted to a
municipality under article 243W of the Constitution. We have elucidated
the functions entrusted to a municipality under article 243W of the
constitution supra. Concededly, KSIDC is not established under an Act
of the Parliament or the State Legislature so as to fall under sub-clause
(i) of clause (s) of paragraph 2 of the Notification 25/2012-ST ibid as
amended and thus satisfy the definition of 'governmental authority'.
38 Hence, when it was only by the Constitution (74th Amendment) Act,
1992 that the Parliament had inserted Part IXA of the Constitution
providing for the constitution of Municipalities and the twelfth Schedule
was added by section 4 of the Constitution (Seventy Fourth
Amendment) Act, 1992, with effect from 01-06-1993, the crucial and
25
germane position in law emanating is that it is only after 1992 that the
functions entrusted to a municipality has been codified under article
243W. Thus, we are of the considered view that, as a sequitur, it is only
an authority or board or any other body established by the Government
after 1992, with the specified equity participation or control by
Government, which could possibly be so entrusted to carry out any
function entrusted to a municipality under article 243W of the
Constitution. Furthermore, the stand of the appellant in its reply filed
is that KSIDC has been established as a company in 1961. Hence, it is
inconceivable, nay, an impossibility, that KSIDC is a body established
by the Government of Kerala to carry out any function entrusted to a
municipality under article 243W of the Constitution. Given that the
definition of "governmental authority" continues to remain unchanged,
the aforesaid analysis holds good for the appellant's contention
regarding entitlement to the benefit of Sl.No.12A inserted vide
Notification No.9/2016-ST with effect from 01.04.2016 in the said
Notification 25/2012-ST ibid as amended. For the aforesaid reasons,
while the appellant's contention that the express entry appearing in the
said notification restricts the said issue on commerce or industry to the
civil structure or original works, though correct, is however rendered
irrelevant given that the service receiver KSIDC to whom such service
is rendered to, itself does not answer the definition of "governmental
authority" so as to come within the ambit of Sl.No.12(a)/12A of the
Notification 25/2012-ST ibid as amended.
39 Therefore, absent any legal or statutory order, that the appellant has
produced to evidence that KSIDC is a "governmental authority" as
defined in clause (s) of para 2 of the notification No.12/2012-ST ibid as
amended, and in light of the legal impossibility of KSIDC being a
company so established by the Government of Kerala to carry out any
function entrusted to a municipality under article 243W of the
Constitution as per our analysis above, we are of the considered view
that the appellant has on merits failed to discharge its burden in
establishing its entitlement to exemption under Sl.No.12(a)/12A of the
notification No.12/2012-ST ibid as amended. Consequently, the
appellant's claim for refund on merits is liable to be rejected on these
aspects alone. For the aforesaid reasons since the appellant has failed
to establish that its claim for refund has merits, the decisions relied
upon by the appellant, which are different from the facts and
26
circumstances of the appellant's case herein, are distinguishable and
thus inapplicable.
40 Furthermore, given that the appellant is also claiming the benefit of
Sl.No.12A of the notification 25/2012-ST as amended, we notice from
the appeal records, that despite the benefit of the said Sl.No. being
premised on the condition that the services rendered ought to be on a
contract which had been entered into prior to the 1st March, 2015 and
on which appropriate stamp duty, where applicable, had been paid prior
to such date, no evidence substantiating the fulfilment of the said
conditions is seen placed in the appeal records.
41 In asmuch as we have found that the appellant does not succeed on
merits, the second question formulated for our determination, i.e,
whether the claim though tenable on merits, is however barred by
limitation under Section 11B of the Central Excise Act, 1944 as made
applicable to Finance Act by virtue of Section 83 of the Finance Act,
1994/Section 102 of the Finance Act, 1994, strictly does not require
further examination. Nevertheless, since the appellant has contended
that section 11B or Section 102 would not apply in the appellant's case,
we are not baulking from addressing the contentions raised by the
appellant, and examine them as below.
42 The appellant has contended that the levy is unauthorised and the
payment is due to mistake of law, and hence the limitation has to be
computed from the date of knowing the mistake and not as per the time
limit prescribed under Section 11B of the Central Excise Act. Ld. Counsel
would also submit that the period of six months adopted by the lower
authority for holding the claim for the period 01.04.2015 to 31.03.2016
to be barred by limitation only shows that he has otherwise admitted to
the collection of tax by mistake of law in which case the limitation period
of 3 years from the date of knowledge should only apply. Dehors the
fact that the appellant has never stated a particular date as the date of
"knowing the mistake", we find these contentions wholly misconceived
as elaborated infra.
43 When it comes to the issues pertaining to the claim of refund being
made pertaining to the Central Excise or Customs Enactments, we need
to look no further than advert to the locus classicus, namely, the
27
Judgement of the 9 Judge Constitution Bench in the case of
Mafatlal Industries Ltd v. Union of India, 1996 INSC 1514:
(1997) 5 SCC 536: 1997 (89) E.L.T. 247 (S.C.), wherein, in the
Judgement of Hon'ble J.S. Verma, S.C.Agrawal, B.P. Jeevan Reddy, A.S.
Anand and B.N. Kripal JJl, delivered by B.P. Jeevan Reddy, J., per
majority, the matter has been thrashed out exhaustively. S.C. Sen, J.
has authored the lone dissenting opinion. The celebrated Judgement also comprises of two other separate, albeit, more or less concurring views, authored by Ahmadi, C.J. and Paripoornan, J. (speaking for Justice Hansaria and himself), that captures the opinion of these three Honourable Judges. These two judgements while substantially concurring with the views of Jeevan Reddy, J., however, differ in few details on the issue of the remedy of refund from that of the views expressed in the Judgement of Jeevan Reddy, J on behalf of the other four Honourable Judges and himself. Presumably inadvertently, there have been decisions rendered premised on the concurring judgements without noticing the majority Judgment. However, being the view taken by only three Judges, they are normally accorded less significance and it is the opinion of Jeevan Reddy, J. which is the unanimous verdict of five Judges, out of the nine Judges, that becomes the effective and binding judgment in this case. The relevant portions of the said majority judgement are reproduced as under:
"17. We must, however, pause here and explain the various situations in which claims for refund may arise. They may arise in more than one situation. One is where a provision of the Act under which tax is levied is struck down as unconstitutional for transgressing the constitutional limitations. This class of cases, we may call, for the sake of convenience, as cases of "unconstitutional levy". In this class of cases, the claim for refund arises outside the provisions of the Act, for this is not a situation contemplated by the Act.
18. Second situation is where the tax is collected by the authorities under the Act by mis-construction or wrong interpretation of the provisions of the Act, Rules and Notifications or by an erroneous determination of the relevant facts, i.e., an erroneous finding of fact. This class of cases may be called, for the sake of convenience, as illegal levy. In this class of cases, the claim for refund arises under the provisions of the Act. In other words, these are situations contemplated by, and provided for by, the Act and the Rules.
Xxxxxx
22. There is as yet a third and an equally important category. It is this : a manufacturer (let us call him "X") pays duty either without protest or after registering his protest. It may also be a case where he disputes the levy and fights it out up to first Appellate or second Appellate/Revisional level and gives up the fight, being unsuccessful therein. It may also be a case where he approaches the High Court too, remains unsuccessful and gives up the fight. He pays the duty demanded or it is recovered from him, as the case may be. In other words, so far as `X' in concerned, the levy of duty becomes final and his claim that the duty is not leviable is 28 finally rejected. But it so happens that sometime later - may be one year, five years, ten years, twenty years or even fifty years - the Supreme Court holds, in the case of some other manufacturer that the levy of that kind is not exigible in law. (We must reiterate - we are not speaking of a case where a provision of the Act whereunder the duty is struck down as unconstitutional. We are speaking of a case involving interpretation of the provisions of the Act, Rules and Notification.) The question is whether `X' can claim refund of the duty paid by him on the ground that he has discovered the mistake of law when the Supreme Court has declared the law in the case of another manufacturer and whether he can say that he will be entitled to file a suit or a writ petition for refund of the duty paid by him within three years of such discovery of mistake? Instances of this nature can be multiplied. It may not be a decision of the Supreme Court that lead `X' to discover his mistake; it may be a decision of the High Court. It may also be a case where `X' fights up to first appellate or second appellate stage, gives up the fight, pays the tax and then pleads that he has discovered the mistake of law when the High Court has declared the law."
44 Furthermore, B.P. Jeevan Reddy, J., per majority, after stating that the discussions in the Judgement yields the following propositions, have laid them down in para 99, as under:
(i) Where a refund of tax/duty is claimed on the ground that it has been collected from the petitioner/plaintiff - whether before the commencement of the Central Excises and Customs Laws (Amendment) Act, 1991 or thereafter - by mis-interpreting or mis-
applying the provisions of the Central Excises and Salt Act, 1944 read with Central Excise Tariff Act, 1985 or Customs Act, 1962 read with Customs Tariff Act or by mis-interpreting or mis-applying any of the rules, regulations or notifications issued under the said enactments, such 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. No suit is maintainable in that behalf. While the jurisdiction of the High Courts under Article 226
- and of this Court under Article 32 - cannot be circumscribed by the provisions of the said enactments, they will certainly have due regard to the legislative intent evidenced by the provisions of the said Acts and would exercise their jurisdiction consistent with the provisions of the Act. The writ petition will be considered and disposed of in the light of and in accordance with the provisions of Section 11B. This is for the reason that the power under Article 226 has to be exercised to effectuate the rule of law and not for abrogating it.
The said enactments including Section 11B of Central Excises and Salt Act and Section 27 of the Customs Act do constitute "law" within the meaning of Article 265 of the Constitution of India and hence, any tax collected, retained or not refunded in accordance with the said provisions must be held to be collected, retained or not refunded, as the case may be, under the authority of law. Both the enactments are self-contained enactments providing for levy, assessment, recovery and refund of duties, imposed thereunder . Section 11B of the Central Excises and Salt Act and Section 27 of the Customs Act, both before and after the 1991 (Amendment) Act are constitutionally valid and have to be followed and given effect to. Section 72 of the Contract Act has no application to such a claim of refund and cannot form a basis for maintaining a suit or a writ petition. All refund claims except those mentioned under Proposition (ii) below have to be and must be filed and adjudicated under the provisions of the Central Excises and Salt Act or the 29 Customs Act, as the case may be. It is necessary to emphasize in this behalf that Act provides a complete mechanism for correcting any errors whether of fact or law and that not only an appeal is provided to a Tribunal
- which is not a departmental organ - but to this Court, which is a civil court.
(ii) Where, however, a refund is claimed on the ground that the provision of the Act under which it was levied is or has been held to be unconstitutional, such a claim, being a claim outside the purview of the enactment, can be made either by way of a suit or by way of a writ petition. This principle is, however, subject to an exception: where a person approaches the High Court or Supreme Court challenging the constitutional validity of a provision but fails, he cannot take advantage of the declaration of unconstitutionality obtained by another person on another ground; this is for the reason that so far as he is concerned, the decision has become final and cannot be re-opened on the basis of a decision on another person's case; this is the ratio of the opinion of Hidayatullah, CJ. in Tilokchand Motichand and we respectfully agree with it.
Such a claim is maintainable both by virtue of the declaration contained in Article 265 of the Constitution of India and also by virtue of Section 72 of the Contract Act. In such cases, period of limitation would naturally be calculated taking into account the principle underlying Clause (c) of sub- section (1) of Section 17 of the Limitation Act, 1963. A refund claim in such a situation cannot be governed by the provisions of the Central Excises and Salt Act or the Customs Act, as the case may be, since the enactments do not contemplate any of their provisions being struck down and a refund claim arising on that account. In other words, a claim of this nature is not contemplated by the said enactments and is outside their purview.
(iii) A claim for refund, whether made under the provisions of the Act as contemplated in Proposition (i) above or in a suit or writ petition in the situations contemplated by Proposition (ii) above, can succeed only if the petitioner/plaintiff alleges and establishes that he has not passed on the burden of duty to another person/other persons. His refund claim shall be allowed/decreed only when he establishes that he has not passed on the burden of the duty or to the extent he has not so passed on, as the case may be. Whether the claim for restitution is treated as a constitutional imperative or as a statutory requirement, it is neither an absolute right nor an unconditional obligation but is subject to the above requirement, as explained in the body of the judgment. Where the burden of the duty has been passed on, the claimant cannot say that he has suffered any real loss or prejudice. The real loss or prejudice is suffered in such a case by the person who has ultimately borne the burden and it is only that person who can legitimately claim its refund. But where such person does not come forward or where it is not possible to refund the amount to him for one or the other reason, it is just and appropriate that that amount is retained by the State, i.e., by the people. There is no immorality or impropriety involved in such a proposition.
The doctrine of unjust enrichment is a just and salutary doctrine. No person can seek to collect the duty from both ends. In other words, he cannot collect the duty from his purchaser at one end and also collect the same duty from the State on the ground that it has been collected from him contrary to law. The power of the Court is not meant to be exercised for unjustly enriching a person. The doctrine of unjust enrichment is, however, inapplicable to the State. State represents the people of the country. No one can speak of the people being unjustly enriched.
(iv) 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 proceedings. Once the assessment 30 of levy has become final in his case, he cannot seek to reopen it nor can he claim refund without re-opening 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. Section 72 of the Contract Act, or for that matter Section 17(1)(c) of the Limitation Act, 1963, has no application to such a claim for refund.
(v) Article 265 of the Constitution has to be construed in the light of the goal and the ideals set out in the Preamble to the Constitution and in Articles 38 and 39 thereof. The concept of economic justice demands that in the case of indirect taxes Central Excises duties and Customs duties, the tax collected without the authority of law shall not be refunded to the petitioner-plaintiff unless he alleges and establishes that he has not passed on the burden of duty to a third party and that he has himself borne the burden of the said duty.
(vi) Section 72 of the Contract Act is based upon and incorporates a rule of equity. In such a situation, equitable considerations cannot be ruled out while applying the said provision.
(vii) While examining the claims for refund, the financial chaos which would result in the administration of the State by allowing such claims is not an irrelevant consideration. Where the petitioner-plaintiff has suffered no real loss or prejudice, having passed on the burden of tax or duty to another person, it would be unjust to allow or decree his claim since it is bound to prejudicially affect the public exchequer. In case of large claims, it may well result in financial chaos in the administration of the affairs of the State.
(viii) The decision of this Court in Sales Tax Officer, Benaras v. Kanhaiyalal Mukundlal Saraf [1959 S.C.R. 1350] must be held to have been wrongly decided insofar as it lays down or is understood to have laid down propositions contrary to the propositions enunciated in (i) to (vii) above. It must equally be held that the subsequent decisions of this Court following and applying the said propositions in Kanhaiyalal have also been wrongly decided to the above extent. This declaration - or the law laid down in propositions (i) to (vii) above - shall not however entitle the State to recover the taxes/duties already refunded and in respect whereof no proceedings are pending before any Authority/Tribunal or Court as on this date. All pending matters shall, however, be governed by the law declared herein notwithstanding that the tax or duty has been refunded pending those proceedings, whether under the orders of an Authority, Tribunal or Court or otherwise.
(ix) The amendments made and the provisions inserted by the Central Excises and Customs Law (Amendment) Act, 1991 in the Central Excises and Salt Act and Customs Act are constitutionally valid and are unexceptionable.
(x) By virtue of sub-section (3) to Section 11B of the Central Excises and Salt Act, as amended by the aforesaid Amendment Act, and by virtue of the provisions contained in sub-section (3) of Section 27 of the Customs Act, 1962, as amended by the said Amendment Act, all claims for refund (excepting those which arise as a result of declaration of unconstitutionality of a provision whereunder the levy was created) have to be preferred and adjudicated only under the provisions of the respective enactment. No suit for refund of duty is maintainable in that behalf. So far as the jurisdiction of the High Courts under Article 226 of the Constitution or of this Court under Article 32 - is concerned, it remains unaffected by the provisions of the Act. Even so, the Court would, while exercising the jurisdiction under the said articles, have due regard to the legislative intent manifested by the provisions of the Act. The writ petition would naturally be considered and disposed of in the light of and in accordance with the provisions of Section 11B. This is for the reason that the power under Article 226 has to be exercised to effectuate the regime of law and not for abrogating it. Even while acting in exercise of the 31 said constitutional power, the High Court cannot ignore the law nor can it over-ride it. The power under Article 226 is conceived to serve the ends of law and not to transgress them.
(xi) Section 11B applies to all pending proceedings notwithstanding the fact that the duty may have been refunded to the petitioner/plaintiff pending the proceedings or under the orders of the Court/Tribunal/Authority or otherwise. It must be held that Union of India v. Jain Spinners [1992 (61) E.L.T. 321 (SC) = 1992 (4) S.C.C. 389] and Union of India v. I.T.C. [1993 (67) E.L.T. 3 (SC) = 1993 Suppl. (4) S.C.C. 326] have been correctly decided. It is, of course, obvious that where the refund proceedings have finally terminated - in the sense that the appeal period has also expired - before the commencement of the 1991 (Amendment) Act [September 19, 1991], they cannot be re-opened and/or governed by Section 11B(3) [as amended by the 1991 (Amendment) Act]. This, however, does not mean that the power of the Appellate Authorities to condone delay in appropriate cases is affected in any manner by this clarification made by us.
(xii) Section 11B does provide for the purchaser making the claim for refund provided he is able to establish that he has not passed on the burden to another person. It, therefore, cannot be said that Section 11B is a device to retain the illegally collected taxes by the State. This is equally true of Section 27 of the Customs Act, 1962." (emphasis supplied) 45 In fact, while laying down the aforesaid propositions, the Honourable Apex Court has also stated that these propositions are set out merely for the sake of convenient reference and are not supposed to be exhaustive and in case of any doubt or ambiguity in these propositions, reference must be had to the discussion and propositions in the body of the judgment. Therefore, even if one were to look at the main body of the Judgement, it is seen that the application of Section 11B to the exclusion of Section 72 of the Contract Act has been expressly stated in paragraphs 67 and 68 of the aforesaid decision. In fact, the entire discussion on whether Kanhaiyalal was correctly decided and if not in what respects, makes profitable reading and since it merits reproduction, is therefore reproduced as under:
"PART - II WAS KANHAIYALAL CORRECTLY DECIDED AND IF NOT, IN WHAT RESPECTS ?
67. The first question that has to be answered herein is whether Kanhaiyalal has been rightly decided insofar as it says (1) that where the taxes are paid under a mistake of law, the person paying it is entitled to recover the same from the State on establishing a mistake and that this consequence flows from Section 72 of the Contract Act; (2) that it is open to an assessee to claim refund of tax paid by him under orders which have become final - or to reopen the orders which have become final in his own case - on the basis of discovery of a mistake of law based upon the decision of a court in the case of another assessee, regardless of the time-lapse involved and regardless of the fact that the relevant enactment does not provide for such refund or reopening; (3) whether equitable considerations have no place in situations where Section 72 of the Contract Act is applicable; and (4) whether the spending away of the taxes 32 collected by the State is not a good defence to a claim for refund of taxes collected contrary to law.
68. Re. : (I) : Hereinbefore, we have referred to the provisions relating to refund obtaining from time to time under the Central Excises and Salt Act. Whether it is Rule 11 (as it stood from time to time) or Section 11B (as it obtained before 1991 or subsequent thereto), they invariably purported to be exhaustive on the question of refund. Rule 11, as in force prior to August 6, 1977, stated that "no duties and charges which have been paid or have been adjusted....shall be refunded unless the claimant makes an application for such refund under his signature and lodges it to the proper officers within three months from the date of such payment or adjustment, as the case may be". Rule 11, as in force between August 6, 1977 and November 17, 1980 contained sub-rule (4) which expressly declared: "(4) Save as otherwise provided by or under this rule, no claim of refund of any duty shall be entertained". Section 11B, as in force prior to April, 1991 contained sub-section (4) in identical words. It said : "(4) Save as otherwise provided by or under this Act, no claim for refund of any duty of excise shall be entertained". Sub-section (5) was more specific and emphatic. It said : "Notwithstanding anything contained in any other law, the provisions of this section shall also apply to a claim for refund of any amount collected as duty of excise made on the ground that the goods in respect of which such amount was collected were not excisable or were entitled to exemption from duty and no court shall have any jurisdiction in respect of such claim." It started with a non- obstante clause; it took in every kind of refund and every claim for refund and it expressly barred the jurisdiction of courts in respect of such claim. Sub-section (3) of Section 11B, as it now stands, is to the same effect - indeed, more comprehensive and all-encompassing. It says, "(3) Notwithstanding anything to the contrary contained in any judgment, decree, order or direction of the Appellate Tribunal or any court or in any other provision of this Act or the rules made thereunder or in any law for the time being in force, no refund shall be made except as provided in sub- section".
The language could not have been more specific and emphatic. The exclusivity of the provision relating to refund is not only express and unambiguous but is in addition to the general bar arising from the fact that the Act creates new rights and liabilities and also provides forums and procedures for ascertaining and adjudicating those rights and liabilities and all other incidental and ancillary matters, as will be pointed out presently. This is a bar upon a bar - an aspect emphasised in Para 14, and has to be respected so long as it stands. The validity of these provisions has never been seriously doubted. Even though in certain writ petitions now before us, validity of the 1991 (Amendment) Act including the amended Section 11B is questioned, no specific reasons have been assigned why a provision of the nature of sub-section (3) of Section 11B (amended) is unconstitutional. Applying the propositions enunciated by a seven-Judge Bench of this Court in Kamala Mills, it must be held that Section 11B [both before and after amendment] is valid and constitutional. In Kamala Mills, this Court upheld 33 the constitutional validity of Section 20 of the Bombay Sales Tax Act (set out hereinbefore) on the ground that the Bombay Act contained adequate provisions for refund, for appeal, revision, rectification of mistake and for condonation of delay in filing appeal/revision. The Court pointed out that had the Bombay Act not provided these remedies and yet barred the resort to civil court, the constitutionality of Section 20 may have been in serious doubt, but since it does provide such remedies, its validity was beyond challenge. To repeat - and it is necessary to do so - so long as Section 11B is constitutionally valid, it has to be followed and given effect to. We can see no reason on which the constitutionality of the said provision - or a similar provision - can be doubted. It must also be remembered that Central Excises and Salt Act is a special enactment creating new and special obligations and rights, which at the same time prescribes the procedure for levy, assessment, collection, refund and all other incidental and ancillary provisions. As pointed out in the Statement of Objects and Reasons appended to the Bill which became the Act, the Act along with the Rules was intended to "form a complete central excise code". The idea was "to consolidate in a single enactment all the laws relating to central duties of excise". The Act is a self-contained enactment. It contains provisions for collecting the taxes which are due according to law but have not been collected and also for refunding the taxes which have been collected contrary to law, viz., Sections 11A and 11B and its allied provisions. Both provisions contain a uniform rule of limitation, viz., six months, with an exception in each case. Sections 11 and 11B are complimentary to each other. To such a situation, Proposition No. 3 enunciated in Kamala Mills becomes applicable, viz., where a statute creates a special right or a liability and also provides the procedure for the determination of the right or liability by the Tribunals constituted in that behalf and provides further that all questions about the said right and liability shall be determined by the Tribunals so constituted, the resort to civil court is not available - except to the limited extent pointed out therein. Central Excise Act specifically provides for refund. It expressly declares that no refund shall be made except in accordance therewith. The Jurisdiction of a civil court is expressly barred - vide sub-section (5) of Section 11B, prior to its amendment in 1991, and sub-section (3) of Section 11B, as amended in 1991. It is relevant to notice that the Act provides for more than one appeal against the orders made under Section 11B/Rule 11. Since 1981, an appeal is provided to this Court also from the orders of the Tribunal. While Tribunal is not a departmental organ, this court is a civil court. In this view of the matter and the express and additional bar and exclusivity contained in Rule 11/Section 11B, at all points of time, it must be held that any and every ground including the violation of the principles of natural justice and infraction of fundamental principles of judicial procedure can be urged in these appeals, obviating the necessity of a suit or a writ petition in matters relating to refund. Once the constitutionality of the provisions of the Act including the provisions relating to refund is beyond question, they constitute "law" within the meaning of Article 265 of the Constitution. lt follows that any action taken under 34 and in accordance with the said provisions would be an action taken under the "authority of law", within the meaning of Article 265.
In the face of the express provision which expressly declares that no claim for refund of any duty shall be entertained except in accordance with the said provision, it is not permissible to resort to Section 72 of the Contract Act to do precisely that which is expressly prohibited by the said provisions. In other words, it is not permissible to claim refund by invoking Section 72 as a separate and independent remedy when such a course is expressly barred by the provisions in the Act, viz., Rule 11 and Section 11B. For this reason, a suit for refund would also not lie. Taking any other view would amount to nullifying the provisions in Rule 11/Section 11B, which, it needs no emphasis, cannot be done. It, therefore, follows that any and every claim for refund of excise duty can be made only under and in accordance with Rule 11 or Section 11B, as the case may be, in the forums provided by the Act. No suit can be filed for refund of duty invoking Section 72 of the Contract Act. So far as the jurisdiction of the High Court under Article 226 - or for that matter, the jurisdiction of this court under Article 32 - is concerned, it is obvious that the provisions of the Act cannot bar and curtail these remedies. It is, however, equally obvious that while exercising the power under Article 226/Article 32, the Court would certainly take note of the legislative intent manifested in the provisions of the Act and would exercise their jurisdiction consistent with the provisions of the enactment. (emphasis supplied)
69. There is, however, one exception to the above proposition, i.e., where a provision of the Act whereunder the duty has been levied is found to be unconstitutional for violation of any of the constitutional limitations. This is a situation not contemplated by the Act. The Act does not contemplate any of its provisions being declared unconstitutional and therefore it does not provide for its consequences. Rule 11/Section 11B are premised upon the supposition that the provisions of the Act are good and valid. But where any provision under which duty is levied is found to be unconstitutional, Article 265 steps in. In other words, the person who paid the tax is entitled to claim refund and such a claim cannot be governed by the provisions in Rule 11/Section 11B. The very collection and/or retention of tax without the authority of law entitles the person, from whom it is collected, to claim its refund. A corresponding obligation upon the State to refund it can also be said to flow from it. This can be called the right to refund arising under and by virtue of the Constitutional provisions, viz., Article 265. But, it does not follow from this that refund follows automatically. Article 265 cannot be read in isolation. It must be read in the light of the concepts of economic and social justice envisaged in the Preamble and the guiding principles of State Policy adumbrated in Articles 38 and 39 - an aspect dealt with at some length at a later stage. The very concept of economic justice means and demands that unless the claimant (for refund) establishes that he has not passed on the burden of the duty/tax to others, he has no just claim for refund. It would be a parody of economic justice to refund the duty to a claimant who has already collected the said amount from his buyers. The refund should really be made to the persons who have actually borne its burden - that would be economic justice. Conferring an unwarranted and unmerited monetary benefit upon an individual is 35 the very anti-thesis of the concept of economic justice and the principles underlying Articles 38 and 39. Now, the right to refund arising as a result of declaration of unconstitutionality of a provision of the enactment can also be looked at as a statutory right of restitution. It can be said in such a case that the tax paid has been paid under a mistake of law which mistake of law was discovered by the manufacturer/assessee on the declaration of invalidity of the provision by the court. Section 72 of the Contract Act may be attracted to such a case and a claim for refund of tax on this score can be maintained with reference to Section 72. This too, however, does not mean that the taxes paid under an unconstitutional provision of law are automatically refundable under Section 72. Section 72 contains a rule of equity and once it is a rule of equity, it necessarily follows that equitable considerations are relevant in applying the said rule - an aspect which we shall deal with a little later. Thus, whether the right to refund of taxes paid under an unconstitutional provision of law is treated as a constitutional right flowing from Article 265 or as a statutory right/equitable right affirmed by Section 72 of the Contract Act, the result is the same - there is no automatic or unconditional right to refund.
70. Re : (II) : 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 quiet. It may also be a case where he files an appeal, the appeal goes against him and he keeps quiet. It may 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 is 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 mis-construction, mis-application 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 ease 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? Can he invoke Section 72 of the Contract Act in such a case and claim refund and whether in such a case, it can be held that reading Section 72 of the Contract Act along with Section 17(1)(c) of the Limitation Act, 1963, the period of limitation for making such a claim for refund, whether by way of a suit or by way of a writ petition, is three years from the date of discovery of such mistake of law? Kanhaiyalal is understood as saying that such a course is permissible. Later decisions commencing from Bhailal Bhai have held that the period of limitation in such cases is three years from the date of discovery of the mistake of law. With the greatest respect to the learned Judges who said so, we find ourselves unable to agree with the said proposition. Acceptance of the said proposition would do violence to several well-accepted concepts of law. One of the important principles of law, based upon public policy, is the sanctity attaching to the finality of any proceeding, be it a suit or any other proceeding. Where a duty has been collected under a particular order which has become final, the refund of that duty cannot be 36 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 as that order stands, the duty cannot be recovered back nor can any claim for its refund be entertained. But what is happening now is that the duty which has been paid under a proceeding which has become final long ago - may be an year back, ten years back or even twenty or more years back - is sought to be recovered on the ground of alleged discovery of mistake of law on the basis of a decision of a High Court or the Supreme Court. It is necessary to point out in this behalf that for filing an appeal or for adopting a remedy provided by the Act, the limitation generally prescribed is about three months (little more or less does not matter). But according to the present practice, writs and suits are being filed after lapse of a long number of years and the rule of limitation applicable in that behalf is said to be three years from the date of discovery of mistake of law : The incongruity of the situation needs no emphasis. And all this because another manufacturer or assessee has obtained a decision favourable to him. What has indeed been happening all these years is that just because one or a few of the assessees succeed in having their interpretation or contention accepted by a High Court or the Supreme Court, all the manufacturers/Assessees all over the country are filing refund claims within three years of such decision, irrespective of the fact that they may have paid the duty, say thirty years back, under similar provisions - and their claims are being allowed by courts. All this is said to be flowing from Article 265 which basis, as we have explained hereinbefore, is totally unsustainable for the reason that the Central Excise Act and the Rules made thereunder including Section 11B/Rule 11 too constitute "law" within the meaning of Article 265 and that in the face of the said provisions - which are exclusive in their nature - no claim for refund is maintainable except under and in accordance therewith. The second basic concept of law which is violated by permitting the above situation is the sanctity of the provisions of the Central Excises and Salt Act itself. The Act provides for levy, assessment, recovery, refund, appeals and all incidental/ancillary matters. Rule 11 and Section 11B, in particular, provide for refund of taxes which have been collected contrary to law, i.e., on account of a mis- interpretation or mis-construction of a provision of law, rule, notification or regulation. The Act provides for both the situations represented by Sections 11A and 11B. As held by a seven - Judge Bench in Kamala Mills, following the principles enunciated in Firm & Illuri Subbaiya Chetty, the words "any assessment made under this Act" are wide enough to cover all assessments made by the appropriate authorities under the Act whether the assessments are correct or not and that the words "an assessment made"
cannot mean an assessment properly and correctly made. It was also pointed out in the said decision that the provisions of the Bombay Sales Tax Act clearly indicate that all questions pertaining to the liability of the dealer to pay assessment in respect of their transactions are expressly left to be decided by the appropriate authorities under the Act as matters falling within their jurisdiction. Whether or not a return is correct and whether a transaction is exigible to tax or not are all matters to be determined by the authorities under the Act. The argument that the finding 37 of the authority that a particular transaction is taxable under the Act is a finding on a collateral fact and, therefore, resort to civil court is open, was expressly rejected and it was affirmed that the whole activity of assessment beginning with the filing of the return and ending with the order of assessment falls within the jurisdiction of the authorities under the Act and no part of it can be said to constitute a collateral activity not specifically or expressly included in the jurisdiction of the authorities under the Act. It was clarified that even if the authority under the Act holds erroneously, while exercising its jurisdiction and powers under the Act that a transaction is taxable, it cannot be said that the decision of the authority is without jurisdiction. We respectfully agree with the above propositions and hold that the said principles apply with equal force in the case of both the Central Excises and Salt Act and the Customs Act. Once this is so, it is un-understandable how an assessment/adjudication made under the Act levying or affirming the duty can be ignored because some years later another view of law is taken by another court in another person's case. Nor is there any provision in the Act for re-opening the concluded proceedings on the aforesaid basis. We must reiterate that the provisions of the Central Excise Act also constitute "law" within the meaning of Article 265 and any collection or retention of tax in accordance or pursuant to the said provisions is collection or retention under "the authority of law" within the meaning of the said article.
In short, no claim for refund is permissible except under and in accordance with Rule 11 and Section 11B. An order or decree of a court does not become ineffective or unenforceable simply because at a later point of time, a different view of law is taken. If this theory is applied universally, it will lead to unimaginable chaos. It is, however, suggested that this result follows only in tax matters because of Article 265. The explanation offered is untenable as demonstrated hereinbefore. As a matter of fact, the situation today is chaotic because of the principles supposedly emerging from Kanhaiyalal and other decisions following it. Every decision of this Court and of the High Courts on a question of law in favour of the assessee is giving rise to a wave of refund claims all over the country in respect of matters which have become final and are closed long number of years ago. We are not shown that such a thing is happening anywhere else in the world. Article 265 surely could not have been meant to provide for this. We are, therefore, of the clear and considered opinion that the theory of mistake of law and the consequent period of limitation of three years from the date of discovery of such mistake of law cannot be invoked by an assessee taking advantage of the decision in another assessee's case. All claims for refund ought to be, and ought to have been, filed only under and in accordance with Rule 11/Section 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. (See the pertinent observations of Hidayatullah, CJ. in Tilokchand Motichand extracted in Para 37). The decisions of this Court saying to the contrary must be held to have been decided wrongly and are accordingly overruled herewith. (emphasis supplied) 38
71. Re. : (III) : For the purpose of this discussion, we take the situation arising from the declaration of invalidity of a provision of the Act under which duty has been paid or collected, as the basis, inasmuch as that is the only situation surviving in view of our holding on (I) and (II). In such cases, the claim for refund is maintainable by virtue of the declaration contained in Article 265 as also under Section 72 of the Contract Act as explained hereinbefore, subject to one exception: where a person approaches the High Court or Supreme Court challenging the constitutional validity of a provision but fails, he cannot take advantage of the declaration of unconstitutionality obtained by another person on another ground; this is for the reason that so far as he is concerned, the decision has become final and cannot be re-opened on the basis of a decision on another person's case; this is the ratio of the opinion of Hidayatullah, CJ. in Tilokchand Motichand and we respectfully agree with it. In such cases, the plaintiff may also invoke Section 17(1)(c) of the Limitation Act for the purpose of determining the period of limitation for filing a suit. It may also be permissible to adopt a similar rule of limitation in the case of writ petitions seeking refund in such cases. But whether the right to refund or restitution, as it is called, is treated as a constitutional right flowing from Article 265 or a statutory right arising from Section 72 of the Contract Act, it is neither automatic nor unconditional. The position arising under Article 265 is dealt with later in Paras 75 to 77. Here we shall deal with the position under Section 72. Section 72 is a rule of equity. This is not disputed by Sri F.S. Nariman or any of the other counsel appearing for the appellants-petitioners. Once it is a rule of equity, it is un-understandable how can it be said that equitable considerations have no place where a claim is made under the said provision. What those equitable considerations should be is not a matter of law. That depends upon the facts of each case. But to say that equitable considerations have no place where a claim is founded upon Section 72 is, in our respectful opinion, a contradiction in terms. Indeed, in Kanhaiyalal, the Court accepts that the right to recover the taxes - or the obligation of the State to refund such taxes - under Section 72 of the Contract Act is subject to "questions of estoppel, waiver, limitation or the like", but at the same time, the decision holds that equitable considerations cannot be imported because of the clear and unambiguous language of Section 72. With great respect, we think that a certain amount of inconsistency is involved in the aforesaid two propositions. "Estoppel, waiver....or the like", though rules of evidence, are yet based upon rules of equity and good conscience. So is Section 72. We are, therefore, of the opinion that equitable considerations cannot be held to be irrelevant where a claim for refund is made under Section 72. Now, one of the equitable considerations may be the fact that the person claiming the refund has passed on the burden of duty to another. In other words, the person claiming the refund has not really suffered any prejudice or loss. If so, there is no question of reimbursing him. He cannot be recompensated for what he has not lost. The loser, if any, is the person who has really borne the burden of duty; the manufacturer who is the claimant has certainly net borne the duty notwithstanding the fact that it is he who has paid the duty. Where such a claim is made, it would be wholly permissible for the court to call upon the petitioner/plaintiff to establish that he has not passed on the burden of duty to a third party and to deny the relief of refund if he is not able to establish the same, as has been done by this Court in I.T C. In this connection, it is necessary to remember that whether the burden of the duty has been passed on to a third 39 party is a matter within the exclusive knowledge of the manufacturer. He has the relevant evidence - best evidence - in his possession. Nobody else can be reasonably called upon to prove that fact. Since the manufacturer is claiming the refund and also because the fact of passing on the burden of duty is within his special and exclusive knowledge, it is for him to allege and establish that he has not passed on the duty to a third party. This is the requirement which flows from the fact that Section 72 is an equitable provision and that it incorporates a rule of equity. This requirement flows not only because Section 72 incorporates a rule of equity but also because both the Central Excise duties and the Customs duties are indirect taxes which are supposed to be and are permitted to be passed on to the buyer. That these duties are indirect taxes, meant to be passed on, is statutorily recognised by Section 64A of the Sale of Goods Act, 1930 [which was introduced by Indian Sale of Goods (Amendment) Act, 1940 and substituted later by Act 33 of 1963]. As originally introduced, Section 64A read :
"64A. In the event of any duty of customs or excise on any goods being imposed, increased, decreased or remitted after the making of any contract for the sale of such goods without stipulation as to the payment of duty where duty was not chargeable at the time of the making of the contract, or for the sale of such goods duty-paid where duty was chargeable at that time -
(a) if such imposition or increase so takes effect that the duty or increased duty, as the case may be, or any part thereof, is paid, the seller may add so much to the contract price as will be equivalent to the amount paid in respect of such duty or increase of duty, and he shall be entitled to be paid and to sue for and recover such addition; and
(b) if such decrease or remission so takes effect that the decreased duty only or no duty, as the case may be, is paid, the buyer may deduct so much from the contract price as will be equivalent to the decrease of duty or remitted duty, and he shall not be liable to pay, or be sued for or in respect of, such deduction."
72. As substituted in 1963, and as it stands today, Section 64A reads thus :
"64A. In contracts of sale, amount of increased or decreased taxes to be added or deducted. -- (1) Unless different intention appears from the terms of the contract in the event of any tax of the nature described in sub-section (2) being imposed, increased, decreased or remitted in respect of any goods after the making of any contract for the sale or purchase of such goods without stipulation as to the payment of tax where tax was not chargeable at the time of the making of the contract, or for the sale or purchase of such goods tax paid where tax was chargeable at that time, --
(a) if such imposition or increase so takes effect that the decreased tax or increased tax, as the case may be, or any part of such tax is paid or is payable, the seller may add so much to the contract price as will be equivalent to the amount paid or payable in respect of such tax or increase of tax, and he shall be entitled to be paid and sue for and recover such addition, and
(b) if such decrease or remission so takes effect that the decreased tax only, or no tax, as the case may be, is paid or is payable, the buyer may deduct so much from the contract price as will be equivalent to the decrease of tax or remitted tax, and he shall not be liable to pay, or be sued for, or in respect of, such deduction. (2) The provisions of sub-section (1) apply to the following taxes, namely :40
(a) any duty of customs or excise on goods;
(b) any tax on the sale or purchase of goods."
73. Sub-section (2), it may be noted, expressly makes the said provision applicable to duty of customs and duties of excise on goods. This fact was also recognised by the Federal Court in The Province of Madras v. M/s. Boddu Paidanna & Sons [1942 F.C.R. 90] and by this Court in R.C. Jall v. Union of India [1962 Suppl. S.C.R. 436]. In such a situation, it would be legitimate for the court to presume, until the contrary is established, that a duty of excise or a customs duty has been passed on. It is a presumption of fact which a court is entitled to draw under Section 114 of the Indian Evidence Act. It is undoubtedly a rebuttable presumption but the burden of rebutting it lies upon the person who claims the refund (plaintiff/petitioner) and it is for him to allege and establish that as a fact he has not passed on the duty and, therefore, equity demands that his claim for refund be allowed. This is the position de hors 1991 (Amendment) Act - and as we shall point out later, the said Amendment Act has done no more than to give statutory recognition to the above concepts. This is the position whether the refund is claimed by way of a suit or by way of a writ petition. It needs to be stated and stated in clear terms that the claim for refund by a person who has passed on the burden of tax to another has nothing to commend itself; not law, not equity and certainly not a shred of justice or morality. In the case of a writ petition under Article 226, it may be noted, there is an additional factor : the power under Article 226 is a discretionary one and will be exercised only in furtherance of interests of justice. This factor too obliges the High Court to enquire and find out whether the petitioner has in fact suffered any loss or prejudice or whether he has passed on the burden. In the latter event, the court will be perfectly justified in refusing to grant relief. The power cannot be exercised to unjustly enrich a person.
74. Re : (IV) : We are also of the respectful opinion that Kanhaiyalal is not right in saying that the defence of spending away the amount of tax collected under an unconstitutional law is not a good defence to a claim for refund. We think it is, subject to this rider : where the petitioner-plaintiff alleges and establishes that he has not passed on the burden of the duty to others, his claim for refund may not be refused. In other words, if he is not able to allege and establish that he has not passed on the burden to others, his claim for refund will be rejected whether such a claim is made in a suit or a writ petition. It is a case of balancing public interest vis-a- vis private interest. Where the petitioner-plaintiff has not himself suffered any loss or prejudice (having passed on the burden of the duty to others), there is no justice or equity in refunding the tax (collected without the authority of law) to him merely because he paid it to the State. It would be a windfall to him. As against it, by refusing refund, the monies would continue to be with the State and available for public purposes. The money really belongs to a third party - neither to the petitioner/plaintiff nor to the State - and to such third party it must go. But where it cannot be so done, it is better that it is retained by the State. By any standard of reasonableness, it is difficult to prefer the petitioner-plaintiff over the State. Taxes are necessary for running the State and for various public purposes and this is the view taken in all jurisdictions. It has also been emphasised by this Court In D. Cawasji wherein Mathew, J. not only pointed out the irrational and unjust consequences flowing from the holding in Bhailal Bhai and Aluminium Industries but also pointed out the adverse impact on public interest resulting 41 from the holding that expending the taxes collected by the State is not a valid defence. (see Paras 39 and 40). This would not be a case of unjust enrichment of the State, as suggested by the petitioners- appellants. The very idea of "unjust enrichment" is inappropriate in the case of the State, which is in position of parens patrea, as held in Charan Lal Sahu v. Union of India [1990 (1) S.C.C. 613 at 649]. And even if such a concept is tenable, even then, it should be noticed that the State is not being enriched at the expense of the petitioner- plaintiff but at someone else's expense who is not the petitioner- plaintiff. As rightly explained by Saikia, J. in Mahabir Kishore & Ors. v. State of Madhya Pradesh [1989 (43) E.L.T. 205 (SC) = 1989 (3) S.C.R. 596], "the principle of unjust enrichment requires - first that the defendant has been `enriched' by the receipt of a `benefit'; secondly, that this enrichment is `at the expense of the plaintiff'; and thirdly, that the retention of the enrichment be just. This justifies restitution." We agree with the holding in Air Canada (quoting Professor George C. Palmer) that in such a case, "it seems preferable to leave the enrichment with the tax authority instead of putting the judicial machinery in motion for the propose of shifting the same enrichment to the tax-payer". The Canadian Supreme Court has further emphasised - and, in our opinion, rightly - the "fiscal chaos that would result if the general rule favoured recovery, particularly where the long standing taxation measure is involved". In this connection, the majority decision refers to what happened in United States. In United States v. Butler [(1936) 80 L. Ed. 477] the Agricultural Adjustment Act was held unconstitutional, the result of which was refund of almost one billion dollars collected under the said statute. In such a situation, it is pointed out, the Congress passed an Act which provided that no refunds shall be allowed unless the claimant establishes that he himself bore the burden of tax. Similar provision was also made in another enactment, viz., Section 424 of the Revenue Act, 1928, the validity of which has been upheld by the United States Supreme Court in Jefferson (supra).
75. In this connection, Sri K. Parasaran has rightly emphasised the distinction between the constitutional values obtaining in countries like United States of America, Canada and Australia - or for that matter, United Kingdom - and the values obtaining under our Constitution. Unlike the economically neutral - if not pro-capitalist - Constitutions governing those countries, the Indian Constitution has set before itself the goal of "Justice, Social, Economic and Political"
- a total re-structuring of our society - the goal being what is set out in Part IV of the Constitution and, in particular, in Articles 38 and
39. Indeed, the aforesaid words in the preamble constitute the motto of our Constitution, if we can call it one. Article 38 enjoins upon the State to "strive to promote the welfare of the people by securing and protecting as effectively as it may a social order in which justice, social, economic and political shall inform all the institutions of the national life". Article 39 lays down the principles of policy to be followed by the State. It says that the State shall, in particular, direct its policy towards securing "(b) that the ownership and control of the material resources of the community are so distributed as best to subserve the common good; and (c) that the operation of the economic system does not result in the concentration of wealth and means of production to the common detriment". Refunding the duty paid by a manufacturer/assessee in situations where he himself has not suffered any loss or prejudice (i.e., where he has passed on the burden to others) is no economic justice; it is the very negation of economic justice. By doing so, the State would be conferring an unearned and unjustifiable windfall 42 upon the manufacturing community thereby contributing to concentration of wealth in a small class of persons which may not be consistent with the common good. The preamble and the aforesaid articles do demand that where a duty cannot be refunded to the real persons who have bore the burden, for one or the other reason, it is but appropriate that the said amounts are retained by the State for being used for public good (See Amar Nath Om Prakash). Indeed, even in an economically neutral Constitution, like that of United States of America, such a course has been adapted by the State and upheld by the Courts. It would be rather curious - nay, ridiculous - if such a course were held to be bad under our Constitution which speaks of economic and distributive justice, opposes concentration of wealth in a few hands and when the Forty- Second (Amendment) Act describes our Republic as a Socialist Republic.
76. It is true that some of the concepts now affirmed by us, e.g., effect of passing on and the relevance of our Constitutional values in the matter of judging the legitimacy of a claim for refund were not presented to the Bench which decided Kanhaiyalal but that can be no ground for not entertaining or accepting those concepts. As observed by Thomas Jefferson, as far back as 1816, "laws and institutions must go hand-in-hand with the progress of the human mind.... as new discoveries are made, new truths are discovered and manners and opinions change with the change of circumstances, institutions must advance also and keep pace with the time......". The very same thought was expressed by Krishna Iyer, J. in State of Karnataka v. Ranganath Reddy [1978 (1) S.C.R. 641] with particular reference to our Constitutional philosophy and values :
"Constitutional problems cannot be studied in a socio-economic vacuum, since socio-cultural changes are the source of the new values, and sloughing off old legal thought is part of the process of the new equity-loaded legality.... It is right that the rule of law enshrined in our Constitution must and does reckon with the roaring current of change which shifts our social values and shrivels of feudal roots, invades our lives and fashions our destiny."
The learned Judge quoted Granville Austin, saying :
"The Judiciary was to be the arm of the social revolution upholding the quality that Indians had longed for in colonial days.... the courts were also idealised because, as guardians of the Constitution, they would be the expression of a new law created by Indians for Indians,"
77. That "the material resources of the community" are not confined to public resources but include all resources, natural and man-made, public and private owned" is repeatedly affirmed by this Court. [See Ranganatha Reddy, Sanjeev Coke Manufacturing Co. v. Bharat Coking Coal [1983 (1) S.C.R. 1000] and State of Tamil Nadu etc. etc. v. L. Abu Kavur Bai & Ors. etc. [1984 (1) S.C.R. 725]. We are of the considered opinion that Sri Parasaran is right in saying that the philosophy and the core values of our Constitution must be kept in mind while understanding and applying the provisions of Article 265 of the Constitution of India and Section 72 of the Contract Act (containing as it does an equitable principle) - for that matter, in construing any other provision of the Constitution and the laws. Accordingly, we hold that even looked at from the constitutional angle, the right to refund of tax paid under an unconstitutional provision of law is not an absolute or an unconditional right. Similar is the position even if Article 265 can be invoked - we have held, it cannot be - for claiming 43 refund of taxes collected by misinterpretation or misapplication of a provision of law, rules, notifications or regulation." (emphasis supplied) 46 To our mind, with the deliberations in the aforesaid paragraphs being the guiding factors, the answers to the four questions posed by the Apex Court in paragraph 67, as given by the Honourable Supreme Court in the subsequent paragraphs, can be distilled as under:
1) In answer to the first question, whether where the taxes are paid under a mistake of law, the person paying it is entitled to recover the same from the State on establishing a mistake and that this consequence flows from Section 72 of the Contract Act, the Hon'ble Apex Court has emphatically answered that the Act is a self-contained enactment. It contains provisions for collecting the taxes which are due according to law but have not been collected and also for refunding the taxes which have been collected contrary to law, and it, therefore, follows that any and every claim for refund of excise duty can be made only under and in accordance with Rule 11 or Section 11B, as the case may be, in the forums provided by the Act. No suit can be filed for refund of duty invoking Section 72 of the Contract Act. It was also held that while exercising the power under Article 226/Article 32, the Court would certainly take note of the legislative intent manifested in the provisions of the Act and would exercise their jurisdiction consistent with the provisions of the enactment. The Apex Court has also gone ahead to state that one exception to the above proposition is where a provision of the Act whereunder the duty has been levied is found to be unconstitutional for violation of any of the constitutional limitations. But where any provision under which duty is levied is found to be unconstitutional, the person who paid the tax is entitled to claim refund and such a claim cannot be governed by the provisions in Rule 11/Section 11B. It is in this context of the duty levied being found to be unconstitutional that it is stated that the very collection and/or retention of tax without the authority of law entitles the person, from whom it is collected, to claim its refund.
The Apex Court then goes on to hold that the right to refund arising as a result of declaration of unconstitutionality of a provision of the enactment can also be looked at as a statutory right of restitution. It can be said in such a case that the tax paid has been paid under 44 a mistake of law which mistake of law was discovered by the manufacturer/assessee on the declaration of invalidity of the provision by the court. Section 72 of the Contract Act may be attracted to such a case and a claim for refund of tax on this score can be maintained with reference to Section 72. This too, however, does not mean that the taxes paid under an unconstitutional provision of law are automatically refundable under Section 72. The Apex Court further cautions that the very concept of economic justice means and demands that unless the claimant (for refund) establishes that he has not passed on the burden of the duty/tax to others, he has no just claim for refund. It would be a parody of economic justice to refund the duty to a claimant who has already collected the said amount from his buyers. The refund should really be made to the persons who have actually borne its burden - that would be economic justice. Conferring an unwarranted and unmerited monetary benefit upon an individual is the very anti-thesis of the concept of economic justice and the principles underlying Articles 38 and 39.
2) To the second query, whether it is open to an assessee to claim refund of tax paid by him under orders which have become final - or to reopen the orders which have become final in his own case - on the basis of discovery of a mistake of law based upon the decision of a court in the case of another assessee, regardless of the time-lapse involved and regardless of the fact that the relevant enactment does not provide for such refund or reopening, the Apex Court after reiterating and emphasising that while dealing with this situation the Apex Court is keeping out the situation where the provision under which the duty is levied is declared unconstitutional by a court and further stating that the Court was dealing with a case where the duty was paid on account of mis-construction, mis-application or wrong interpretation of a provision of law, rule, notification or regulation, as the case may be, goes on to hold that where a duty has been collected under a particular order which has become final, the 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 as that order stands, the duty cannot be recovered back nor can any claim for its refund be entertained. The Apex Court goes on to lament that it is un-understandable how an assessment/adjudication made under the 45 Act levying or affirming the duty can be ignored because some years later another view of law is taken by another court in another person's case. Nor is there any provision in the Act for re-opening the concluded proceedings on the aforesaid basis. The Apex Court then reiterates that the provisions of the Central Excise Act also constitute "law" within the meaning of Article 265 and any collection or retention of tax in accordance or pursuant to the said provisions is collection or retention under "the authority of law" within the meaning of the said article. The Apex Court then holds that in short, no claim for refund is permissible except under and in accordance with Rule 11 and Section 11B and that an order or decree of a court does not become ineffective or unenforceable simply because at a later point of time, a different view of law is taken. The Apex Court further goes on to hold that the Court therefore, is of the clear and considered opinion that the theory of mistake of law and the consequent period of limitation of three years from the date of discovery of such mistake of law cannot be invoked by an assessee taking advantage of the decision in another assessee's case. All claims for refund ought to be, and ought to have been, filed only under and in accordance with Rule 11/Section 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. (See the pertinent observations of Hidayatullah, CJ. in Tilokchand Motichand extracted in Para 37). The Apex Court then states that the decisions of the Apex Court saying to the contrary must be held to have been decided wrongly and are accordingly overruled herewith.
3) To the third question formulated by the Apex Court whether equitable considerations have no place in situations where Section 72 of the Contract Act is applicable; the Apex Court itself emphatically states that in view of what has been held by the Apex Court with respect to the questions posed at (1) and (2) ( which is at paragraph 67 of its decision), the only situation surviving is the situation arising from the declaration of invalidity of a provision of the Act under which duty has been paid or collected, and is taken as the basis for its discussion with regard to the third question. The 46 Apex Court then stating that the Court is of the opinion that equitable considerations cannot be held to be irrelevant where a claim for refund is made under Section 72 goes on to observe that one of the equitable considerations may be the fact that the person claiming the refund has passed on the burden of duty to another. In other words, the person claiming the refund has not really suffered any prejudice or loss. If so, there is no question of reimbursing him. He cannot be recompensated for what he has not lost. The loser, if any, is the person who has really borne the burden of duty; the manufacturer who is the claimant has certainly not borne the duty notwithstanding the fact that it is he who has paid the duty. The Court then holds that where such a claim is made, it would be wholly permissible for the court to call upon the petitioner/plaintiff to establish that he has not passed on the burden of duty to a third party and to deny the relief of refund if he is not able to establish the same. The Court also states that in this connection, it is necessary to remember that whether the burden of the duty has been passed on to a third party is a matter within the exclusive knowledge of the manufacturer. He has the relevant evidence - best evidence - in his possession. Nobody else can be reasonably called upon to prove that fact. Since the manufacturer is claiming the refund and also because the fact of passing on the burden of duty is within his special and exclusive knowledge, it is for him to allege and establish that he has not passed on the duty to a third party. The Apex Court goes on to hold that this is the requirement which flows from the fact that Section 72 is an equitable provision and that it incorporates a rule of equity. It is also held that this requirement flows not only because Section 72 incorporates a rule of equity but also because both the Central Excise duties and the Customs duties are indirect taxes which are supposed to be and are permitted to be passed on to the buyer. The Apex Court then goes on to hold that it would be legitimate for the court to presume, until the contrary is established, that a duty of excise or a customs duty has been passed on. It is a presumption of fact which a court is entitled to draw under Section 114 of the Indian Evidence Act. It is undoubtedly a rebuttable presumption but the burden of rebutting it lies upon the person who claims the refund (plaintiff/petitioner) and it is for him to allege and establish that as a fact he has not passed on the duty and, therefore, equity demands that his claim for refund be allowed.
47This is the position de hors 1991 (Amendment) Act - and as the Apex Court point out later, the said Amendment Act has done no more than to give statutory recognition to the above concepts. The Apex Court emphasizes that this is the position whether the refund is claimed by way of a suit or by way of a writ petition and further observes "It needs to be stated and stated in clear terms that the claim for refund by a person who has passed on the burden of tax to another has nothing to commend itself; not law, not equity and certainly not a shred of justice or morality. In the case of a writ petition under Article 226, it may be noted, there is an additional factor : the power under Article 226 is a discretionary one and will be exercised only in furtherance of interests of justice. This factor too obliges the High Court to enquire and find out whether the petitioner has in fact suffered any loss or prejudice or whether he has passed on the burden. In the latter event, the court will be perfectly justified in refusing to grant relief. The power cannot be exercised to unjustly enrich a person." Thus, to our mind, the Apex Court has in unequivocal terms, confined the applicability of equitable consideration as flowing from Section 72 only to the context of the declaration of invalidity of a provision of the Act under which duty has been paid or collected, and that too only in the case of an assessee who has succeeded in such a challenge in his own case, and furthermore, only when he demonstrates that has passed it on to no other and has himself borne the burden of tax.
4) To the fourth and last query, whether the spending away of the taxes collected by the State is not a good defence to a claim for refund of taxes collected contrary to law, the Apex Court has held that Kanhaiyalal is not right in saying that the defence of spending away the amount of tax collected under an unconstitutional law is not a good defence to a claim for refund. The Apex Court held that it thought it is a good defence, subject to the rider that where the petitioner-plaintiff alleges and establishes that he has not passed on the burden of the duty to others, his claim for refund may not be refused. The Apex Court then went on to state that if he is not able to allege and establish that he has not passed on the burden to others, his claim for refund will be rejected whether such a claim is made in a suit or a writ petition. The Apex Court went on to hold that it is a case of balancing public interest vis-a-vis private interest and where the petitioner-plaintiff has not himself suffered any loss or 48 prejudice (having passed on the burden of the duty to others), there is no justice or equity in refunding the tax (collected without the authority of law) to him merely because he paid it to the State, as it would be a windfall to him. The Apex Court observed that as against it, by refusing refund, the monies would continue to be with the State and available for public purposes; the money really belongs to a third party - neither to the petitioner/plaintiff nor to the State - and to such third party it must go. The Apex Court held that but where it cannot be so done, it is better that it is retained by the State. The Supreme Court held that by any standard of reasonableness, it is difficult to prefer the petitioner-plaintiff over the State; Taxes are necessary for running the State and for various public purposes and this is the view taken in all jurisdictions. The Apex Court therefore went on to hold that even looked at from the constitutional angle, the right to refund of tax paid under an unconstitutional provision of law is not an absolute or an unconditional right. The Apex Court also held that similar is the position even if Article 265 can be invoked for claiming refund of taxes collected by misinterpretation or misapplication of a provision of law, rules, notifications or regulation and hastened to add that they have held that Article 265 cannot be invoked for claiming refund of taxes collected by misinterpretation or misapplication of a provision of law, rules, notifications or regulation.
47 In the instant case, the appellant has self-assessed the duty and paid the service tax during the relevant period. Later on, being of the view that the appellant is entitled to the benefit of Sl.No.12(a) of the exemption notification 25/2012-ST ibid, the appellant has preferred the claim for refund contending that the service tax has been paid mistakenly and is therefore a payment made by mistake of law. In light of the aforesaid decision of the Apex Court, we are of the considered view that even if the appellant feels that it was entitled to the benefit of notification and had not claimed it while assessing its tax liability, that at best is a payment made out of non-applying the notification that was perceived as available and is squarely covered by the Apex Court decision, particularly as dealt with in para 67 and 68 of the Mafatlal Judgement reproduced supra.
4948 We also cannot subscribe to the appellant's contention that the levy was unauthorised. Entitlement to exemption notification that hinges on certain parameters being met, such as the service recipient being a "governmental authority" as in the appellant's case, if not satisfied by the appellant, cannot be contended to be an unauthorised levy. The characterisation of a levy as "unauthorised levy" or "illegal levy," is attracted when the tax is collected by the tax authorities under a statute by erroneous interpretation or misconstruing the provisions of the statute or rules or notifications issued thereunder or even by incorrect appreciation of the relevant facts. In any event, the Apex Court has in its judgement in Mafatlal cited supra, held that refund claim even in the case of illegal levy, would also necessarily have to be made under the provisions of the Central Excise Act and would thus attract the limitation prescribed under Section 11B.
49 In Sum, when the Apex Court, sitting in a combination of nine, has categorically held that in the case of mis-interpreting or mis-applying any of the rules, regulations or notifications issued under the Central Excise or Customs Enactments, such 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, we are of the view that even a case of payment of service tax, made without knowledge of an exemption notification, or failing to apply an exemption notification to which the appellant purportedly is entitled, it would still have to be dealt with under the refund provisions as provided for in the Finance Act 1994, namely Section 11B as made applicable vide Section 83 of the Finance Act, 1994. When the Apex Court has categorically held that the Central Excise and Customs Enactments are self-contained enactments providing for levy, assessment, recovery and refund of duties, imposed thereunder and that Section 11B of the Central Excises and Salt Act and Section 27 of the Customs Act, both before and after the 1991 (Amendment) Act are constitutionally valid and have to be followed and given effect to, no assessee under these enactments, or any other lower judicial forum, can tenably contend to the contrary. It is also pertinent that the Apex Court has in no uncertain terms held that Section 72 of the Contract Act has no application to such a claim of refund as elucidated supra. In light of the categorical finding of the Honourable Supreme Court in the aforesaid judgement in Mafatlal Industries case 50 that all claims for refund (excepting those which arise as a result of declaration of unconstitutionality of a provision whereunder the levy was created) have to be preferred and adjudicated only under the provisions of the respective enactment, this Tribunal, as a creature of statute is well aware of its jurisdiction. Thus, we have no hesitation to hold that the appellant's contentions to the contrary as to the inapplicability of the time limit prescribed under Section 11B, are wholly untenable and cannot be countenanced. We also notice that the larger bench of this Tribunal in two decisions, Veer Overseas Ltd v. CCE, Panchkula, 2018 (15) GSTL 59 (Tri-LB) and M/s. Oil and Natural Gas Corporation Limited v The Commissioner of GST & Central Excise, Tiruchirappalli, 2024(6) TMI 1417-CESTAT CHENNAI (LB) have held that claims for refund under the Central Excise and Service Tax enactments are governed by the provisions of Section 11B for period of limitation. The decision of the Jurisdictional High Court in Enmaz Andritz Pvt Ltd v CESTAT, Chennai, 2017 (6) GSTL 12 (Mad) is also noticed as apposite in this context.
50 The contention of the Ld. Counsel stated in the synopsis that "the period of six months adopted by the lower authority for holding the claim for the period 01.04.2015 to 31.03.2016 to be barred by limitation only shows that the authority has otherwise admitted to the collection of tax by mistake of law in which the limitation period of 3 years from the date of knowledge should only apply"; is wholly misconceived. The said contention has been made completely ignoring the findings rendered by the lower adjudicating authority on the applicability of Section 102 inserted into the Finance Act 1994, which cannot in any way be taken to be an admission to the collection of tax by mistake of law.
51 We find that in the instant case Section 102 of the Finance Act 1994 was specifically inserted by the Finance Act 2016, to grant exemption for the payment of service tax retrospectively for a specified time frame, that is from 01-04-2015 to 29-03-2016. Moreover, the section itself prescribed the time limit of six months from the date the Finance Bill 2016 received the assent of the President. The Finance Act, 2016, received the assent of the President on 14th May, 2016. So, in any event, the refund claim preferred for the aforesaid period was preferred by the appellant beyond the six months specified in Section 102. When the Section 102 inserted for a specified purpose has itself stipulated the 51 time limit for preferring a refund application, we are of the view that the legislature has consciously circumscribed the period that is available to prefer a refund claim to the stated window of six months from the date the Finance Bill received the assent of the President and hence the time limit stipulated therein cannot be ignored in preference to the time limit of one year specified under Section 11B. In other words, for the refund claim, if any, for the service tax paid between 01-04-2015 and 29-03-2016 with respect to the benefit extended under Section 102, the same would necessarily have to be filed within the time period stipulated therein, which would post the enactment of Finance Act, 2016, be six months from 14-05-2016. Therefore, the contentions of the appellant on this count too is devoid of merits. In this regard, we find the reliance placed by the Ld. A.R on the decision in MDP Infra (India) Ltd v. CC, C.Ex & CGST, 2019 (29) GSTL 296 (M.P) to support her contention as to the application of time limit for preferring refund claim as prescribed under Section 102 of the Finance Act, to be apposite.
52 The contention of the appellant in the grounds of appeal that refund claim has to be disposed off in terms of sub-section 6 of Section 73A of the Finance Act, 1994 and the period of limitation would apply from the date of public notice to be issued by the Central Excise Officer for the refund of such surplus amount and in asmuch as the public notice is yet to be issued, the claim is not hit by limitation; is fallacious. We are of the view that such a ground has been raised based upon an incorrect appreciation of Section 73A of the Finance Act, 1994 as a plain reading of the said Section would itself indicate. Section 73A deals with the situation where a person who is liable to pay service tax under the provisions of the Finance Act and rules made thereunder, goes on to collect service tax in excess of the service tax so assessed or determined or paid on any taxable service; and such a person who has collected any such amount that is not so required to be collected, and who has not deposited such collected amount with the Government; is called upon to show cause why the said amount as specified in the show cause notice should not be paid to the credit of the Government. The section further provides for consequent actions post such determination proceedings, in sub-sections (4), (5) and (6) of the same. We are therefore of the view that the provisions of section 73(6) has no application in the instant case of the appellant.
5253 Apart from the reasons already stated above as to why the case laws cited by the appellant are inapplicable it is also seen that in the case laws relied upon by the Appellant, the aforesaid binding decision of the majority as laid down in paragraph 99 of the decision of the Honourable Supreme Court in Mafatlal Industries Ltd v. Union of India, 1996 INSC 1514 : (1997) 5 SCC 536: 1997 (89) E.L.T. 247 (S.C.), were not brought to the notice of the Honourable Courts and Tribunals resulting in them being rendered without having the benefit of the Judgement itself in its entirety, and especially paragraphs 67 and 68 as well as the aforesaid principles as crystallised in the said paragraph 99 of the Binding Judgement of an ennead Judge constellation of the Supreme Court, in particular. In as much as the Apex Court decision is binding on this Tribunal, the decisions relied upon by the appellant, which are different from the facts and circumstances of the appellant's case herein, are distinguishable and thus inapplicable on this count too.
54 We hold that, given our finding on merits already elucidated above, and in light of our discussions supra addressing the contentions raised by the appellant on inapplicability of time limit under Section 11B of the Central Excise Act, 1944 as made applicable to Finance Act by virtue of Section 83 of the Finance Act, 1994 as well as the contentions raised on inapplicability of time limit under Section 102 of the Finance Act, the outcome of our analysis is that the appellant's refund claims are not only found to be unsustainable on merits, but also, even otherwise, are found to be barred by limitation.
55 In light of our discussions above, we find no good reason to interfere with the Orders in Appeal passed by the Appellate Authority. The Appeals fail and are dismissed.
(Order pronounced in open court on 23.07.2025)
(AJAYAN T.V.) (VASA SESHAGIRI RAO)
Member (Judicial) Member (Technical)
psd