Six Month Limitation For Service Tax Refund Starts From SIPCOT Certificate Date: Madras High Court

The Madras High Court on 14 July held that the six-month limitation period for claiming service tax refund under Section 104 of the Finance Act, 2017 must be calculated from the date on which the taxpayer receives the mandatory certificate from the State Industries Promotion Corporation of Tamil Nadu (SIPCOT), and not from the date on which the Finance Act received Presidential assent.

A Division Bench comprising Justices Dr. G. Jayachandran and N. Mala allowed the taxpayer's appeal, set aside the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) order rejecting the refund claim as time-barred and directed the department to consider the claim on merits. The judges held:

“The refund request made by the appellant on 26.02.2018 was considered barred by limitation, reckoning the period from the date of assent of the amendment Act. However, if the date of certificate from service provider is taken as the date of commencement of limitation, the refund request is within six months.”

The appeal arose from the rejection of the taxpayer's claim for refund of service tax paid on the upfront premium for a long-term lease of an industrial plot allotted by SIPCOT. The dispute related to Notification No. 41/2016-Service Tax dated 22 September 2016, which exempted taxable services provided by State Government industrial development corporations to industrial units through the grant of long-term leases of industrial plots.

The exemption was later given retrospective effect through Section 104 of the Finance Act, 2017, which also provided for refund of service tax collected between 1 June 2007 and 21 September 2016. Section 104 required refund applications to be filed within six months from the date on which the Finance Bill, 2017 received Presidential assent.

The Finance Act, 2017 received Presidential assent on 31 March 2017. The taxpayer filed its refund application on 26 February 2018, but the department rejected the claim as being beyond the prescribed six-month period. The Tribunal upheld the rejection by calculating the limitation period from 31 March 2017.

Before the High Court, the taxpayer argued that a refund application could not have been filed without a certificate from SIPCOT confirming payment of service tax. It submitted that although SIPCOT informed it on 14 September 2017 that it was eligible for refund, the required certificate was issued only on 19 December 2017.

The Court accepted the contention and observed that the certificate issued by SIPCOT was a necessary document for filing the refund claim. Since the certificate was issued only on 19 December 2017, the taxpayer could not have filed a complete refund application before that date.

It relied on the Bombay High Court's decision in JSW Dharmatar Port Pvt. Ltd. v. Union of India, which held that the limitation period for claiming refund under Section 104 of the Finance Act, 2017 would commence from the date of the certificate issued by the service provider and not from the date of Presidential assent to the Finance Act.

Following the Bombay High Court's ruling, the Division Bench held that the Tribunal had incorrectly computed the limitation period from 31 March 2017. It observed that limitation could commence only after SIPCOT issued the certificate required for maintaining the refund claim.

Accordingly, the High Court held that the refund application was filed within the prescribed period, allowed the appeal, set aside the Tribunal's order and directed the department to consider the refund application on merits and pass appropriate orders in accordance with law within two months.

For the Appellant: Mr. N. Murali

For the Respondent: Mr. S. Gurumoorthy, Senior Standing Counsel, assisted by Mr. G. Meganathan, Junior Standing Counsel.