The Hon’ble CESTAT, Delhi vide its Order dated 28.01.2022 in the matter of M/s Ishwar Metal Industries v. Commissioner, Central Excise and Central Goods and Service Tax in Service Tax Appeal No. 51834 of 2018 (SM) held that if the tax/amount has been deposited under mistake of law, it would merely be considered as ‘deposit’ and unjust enrichment would not be applicable when the prices are firm in all respects and independent of any variation.

Facts – The Appellant is providing the services of laying of cables, installation of street & traffic lights & other electrical and electronic appliances. The services provided by the Appellant are not liable to Service tax in view of Circular No. 123/5/2010 dated 24.05.2010, however, the Appellant mistakenly paid the service tax amounting to Rs. 31,50,587/- for the period 2007-08  to 2009-10 and later on when realized the mistake applied for refund of the same.

The Appellant refund claim was rejected by the Ld. adjudicating authority observed that the Appellant was well aware of its liability and out of the payments received, the service tax was deposited with the Government via ST-3. The Appellant issued invoices inclusive of Service Tax for the services provided by it.

Therefore, basis the above observations, it was held that –

• Time Barred – The amount deposited by the Appellant is ‘tax amount’ and not just ‘any deposit’ with the Government. Thus, it was held that the refund claim has to be passed in pursuance of time limits given under Section 11B of Central Excise Act according to which, refund has been filed after more than one year from the date of deposit of tax.
• Unjust Enrichment – It was further held that the amount collected by the Appellant for the specific service rendered is cum tax amount and thus, principles of unjust enrichment will apply to the refund application of the Appellant.

Appellant’s Plea –

• Since the services provided by it are not taxable as per Circular 123/5/2010 dated 24.05.2010, thus the amount mistakenly paid is a ‘deposit’ and not ‘tax’ on which provisions of Section 11B regarding time limit within which refund application has to be filed, should not be made applicable.
• The Appellant did not recover the Service tax amount from the receiver and the prices were firm as the work was allotted by the government through open bidding and prices were independent of any variation. Government department did not pay any tax, but it was borne by the Appellant. The price fixed as per work order is not affected due to levy of tax. Thus, question of unjust enrichment does nor arise.

Held –

• Service tax was not leviable on the services provided by the Appellants and it was paid by mistake, thus it will be treated as ‘deposit’ and entitled for refund.
• The Hon’ble Tribunal referring to the judgment of Madras High Court in 3 E Infotech, held that the limitation under Section 11B would not apply as the amount deposited is not ‘tax’ and instead is a ‘revenue deposit’.
• After considering the Work orders held that there is no unjust enrichment as the prices are firm in all respect and independent of any variation. Moreover, the fact that the Appellant has not charged any service tax in its invoices is not in dispute.

The Hon’ble Tribunal with above findings allowed the appeal filed by the Appellant and set aside the impugned order with the directions to grant refund in cash with interest as per the Transitional provisions of CGST Act within 45 days of the receipt of the order.