Facts of the Case:
The petitioner was a retail service provider of financial services. Druing the period April 2012 to March 2013 the petitioner provided services to Bank of Muscat SAOG and also paid service tax on the amount received.
Later on the petitioner discovered that under the "Place of Provision of Service Rules" no service tax was applicable when the service recipient was located outside the taxable territory. the mistake, the petitioner filed a refund claim dated 23.02.2015 for refund service tax on services provided during April 2012 to March 2013 to Bank of Muscat SAOG and payment received in foreign exchange. This claim was rejected by the tax authorities as time barred in terms of section 11B.
The petitioner has made a grievance that the tax was paid through a mistake and that the tax was not payable at all. In these circumstances, the provisions of time-bar under section 11B will not apply.
Judgement by Hon'ble High Court :
Examining inter alia the provisions of the Place of Provision of Service Rules and the provisions of section 11B, the court held:
In this case, the levy was purely on account of mistake of fact in understanding the law. The petitioner assumed that the transaction for which he has paid tax, is covered under the law. The law does not cover such transaction for payment of service tax. Therefore, it is not on account of any mistake of law but mistake of fact the service tax was paid. In that view of the matter it has no colour of tax for the purpose of levy by the Department. The distinguishing feature for attracting the provisions under Section 11B is that the levy should have the colour of validity when it was paid and only consequent upon interpretation of law or adjudication, the levy is liable to be ordered as refund. When payment was effected, if it has no colour of legality, Section 11B is not attracted. This Court is also of the view that levy is not in accordance with the provisions of the service tax and therefore, such payment cannot be taken as a payment made relatable to Section 11B of the Central Excise Act. (emphasis supplied)
11. In that view of the matter, the writ petition is allowed. There shall be a direction to the second respondent to sanction, refund claimed by the petitioner based on the request made by him within two months from the date of receipt of a copy of this judgment. No costs."