Ocean Freight Service Tax Refund Claim Filed After One Year Is Time-Barred: CESTAT Delhi

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), New Delhi, has held that a refund claim for service tax paid on ocean freight was subject to the one-year limitation under Section 11B of the Central Excise Act, as applicable to service tax.

Technical Member Hemambika R. Priya ruled that the relevant date for calculating the limitation was the date on which the tax was paid. The subsequent finding by the Gujarat High court that the ocean-freight levy was unconstitutional did not take the refund claim outside the limitation prescribed under Section 11B.

The tribunal observed:

“I find that clause (f) of Explanation (B) of Section 11B of Central Excise Act 1944, as reproduced above, categorically mentions that the relevant date in respect of any amount paid towards duty/tax is the date of payment of duty.”

The dispute concerned service tax paid on ocean freight for goods imported on a cost, insurance and freight (CIF) basis. A departmental audit raised an objection that service tax had not been paid on the ocean freight. Following the objection, the assessee paid ₹18.73 lakh as service tax and ₹3.34 lakh as interest on July 24, 2018.

The Gujarat High court later held in SAL Steel Ltd. v. Union of India that the notifications imposing the levy were ultra vires the Finance Act, 1994. The assessee subsequently filed a refund claim for ₹22.07 lakh on September 23, 2020.

The refund was rejected as time-barred. The adjudicating authority held that the exemption for transportation of goods by vessel from outside India had been withdrawn from January 22, 2017 and that the liability to pay service tax had been placed on the recipient of the service. The Commissioner (Appeals) upheld the rejection.

Before the tribunal, the assessee argued that the payment had been made during the audit under pressure. Since the levy was subsequently held to be ultra vires, it contended that the amount should be treated as a deposit rather than tax.

It also argued that although it had used Section 11B to seek the refund, the one-year limitation under that provision should not apply to an amount that was not legally payable.

The tribunal rejected the contention. It noted that the exemption for ocean freight had been withdrawn with effect from January 22, 2017 and that the person liable to pay the tax had been notified. The amount was paid after the audit objection on July 24, 2018.

“Hence, the said amount is clearly covered by the provisions of Section 11B,” the tribunal observed.

Section 11B is the provision used for seeking refunds of duty and interest under the Central Excise Act.

It generally requires a refund application to be filed within one year from the “relevant date”. Under Explanation (B)(f), the relevant date in cases falling under that clause is the date of payment of duty.

In this case, the payment was made on July 24, 2018, while the refund application was filed on September 23, 2020. The tribunal therefore found that the claim had been filed after the statutory one-year period.

The tribunal also considered the Supreme court's ruling in Mafatlal Industries. It noted that the judgment recognises an exception where the provision under which the levy was imposed is unconstitutional or the levy is wholly without authority of law. Such a claim can be pursued through a constitutional remedy under Articles 226 or 32.

However, the tribunal held that this exception did not alter the outcome of the present case. It found that the refund claim before the statutory authorities was governed by Section 11B and was therefore subject to the limitation prescribed under the provision.

The tribunal also rejected the plea that equitable considerations could overcome the statutory time limit. It observed that adjudicating and appellate authorities created by statute can exercise only the powers conferred by law. They cannot assume additional jurisdiction based on general notions of justice, equity, or inherent powers of civil courts.

The tribunal referred to the Supreme court's decision in Singh Enterprises v. CCE, Jamshedpur, which held that statutory authorities can condone delay only to the extent permitted by the relevant statute.

Finding no infirmity in the rejection of the refund claim, the tribunal upheld the impugned order and dismissed the appeal.

For Appellant: Advocate S.C. Vaidyanathan,

For Respondent: Rohit Issar, Authorised Representative