Limitation period of one year is not applicable for claiming refund of taxes paid under protest

We are sharing with you an important judgment of the Hon'ble High Court of Punjab and Haryana in the case of Commissioner of Central Excise Commissionerate, Chandigarh-1 Vs. Ind. Swift Lands Ltd. [(2017) 78 taxmann.com 209 (Punjab & Haryana)] on the following issue:

Issue:

Whether limitation period of one year provided under Section 11B(1) of the Central Excise Act, 1944 ("the Excise Act"), applicable to Service tax provisions also vide Section 83 of the Finance Act, 1994 ("the Finance Act"), would be applicable where Service tax has been paid under protest?

Facts & Background:

M/s Ind. Swift Lands Ltd. ("the Respondent") carries on business as a developer, wherein it constructs premises and sells the same. The Respondent entered into agreements with purchasers and these agreements of sale/conveyances were executed only after the occupation certificates in respect of the premises were issued by the authority concerned ("the transactions").

Between June, 2006 and July 2008, the Respondent despite the fact that Service tax was not payable on the transactions, made the payment of Service tax under the pressure of the Department. The Respondent, vide letter dated June 7, 2006, also informed the Assistant Commissioner that he is not liable to pay Service tax but depositing the same "under the pressure of the Department". Afterwards, the Appellant filed an application for claiming refund of Service tax.

The Adjudicating Authority rejected the claim for refund on the premise that it was filed beyond the period of one year from the date on which the amounts were paid i.e. the claim for refund was barred by limitation under Section 11B of the Excise Act. However, the appeal was allowed by the Hon'ble CESTAT.

Being aggrieved, the Department preferred an appeal before the Hon'ble High Court of Punjab & Haryana.

Held:

The Hon'ble High Court of Punjab & Haryana, held that as per second proviso to Section 11B(1) of the Excise Act, limitation period of one year shall not apply where any duty and interest, if any, paid on such duty, has been paid under protest. In this case, the application would not be barred by limitation as the Service tax was paid under protest.

Further, the Hon'ble High Court also clarified that for the act to be under protest, it is not necessary that it be accompanied by the very words "Under Protest". Whether an act is performed under protest or not must be determined on the basis on which it is performed. If the conduct indicates that it is not voluntary and is done out of compulsion, it is under protest.

In view of the aforesaid, it was held that the application of the Respondent for refund of Service tax was not barred by limitation and accordingly, the appeal filed by the Department was rejected.

Our Comments: Corresponding relevant provisions in the Model GST Law

Section 48 of the Model CGST/SGST Act, 2016 deals with the provisions of refund under GST. The Revised Model GST Law, put on public domain on November 26, 2016, does not incorporate similar provisions of non-applicability of limitation period in case of refunds where taxes/interest amount has been paid under protest, as contained in existing Section 11B of the Excise Act.

However, it is worthwhile here to note that the First Model GST Law, which came on June 14, 2016, did contain the similar provisions by way of proviso to Section 38 which has now been removed in Revised Model GST Law.

It is imperative that such provisions must be restored in the GST Law so as not to sow the seeds of any fresh ground for litigation in GST regime, which is being envisaged as an epic reform of indirect taxation post-independence.