2026-VIL-857-GUJ-ST
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SERVICE TAX High Court Cases

Service Tax – Refund of service tax collected and deposited by petitioner and subsequently recovered from service recipient – Rejection of refund claim on ground of limitation – Petitioner engaged in providing manpower recruitment and supply agency services, collected service tax during the period when such services were subject to reverse charge mechanism from 01.04.2015 onwards - subsequently the service recipient was audited and found liable to pay the same service tax under reverse charge mechanism and accordingly paid service tax to the Department and issued a debit note to the petitioner - Petitioner filed a refund application under Section 11B of the Central Excise Act, 1944 which was rejected by the Department on the ground that it had been filed beyond the prescribed period of limitation and the appeal preferred by petitioner before the appellate authority was also dismissed – Whether refund claim of petitioner can be rejected solely on the ground of limitation when the Department itself recovered the service tax twice, first from the petitioner and thereafter from the service recipient while retaining the amount earlier deposited by petitioner – HELD – The refund claim cannot be rejected solely on the ground of limitation in these peculiar and exceptional circumstances where the Department has become the beneficiary of unjust enrichment by collecting service tax twice, first from the petitioner despite having no authority in law to do so after 01.04.2015 and thereafter from the service recipient, while the petitioner became aware of such position only when the service recipient issued the debit note thereby constrained to file the refund application. In such exceptional circumstances when the Department itself committed illegality by accepting tax deposited without authority in law and subsequently collecting the same tax again from the service recipient, the respondent authorities cannot reject the claim of the petitioner on the ground of limitation – The impugned orders are quashed and set aside and the respondents are directed to refund the amount to the petitioner within six weeks, failing which the amount shall carry interest at the prescribed rate per annum until the date of actual payment – The petition is allowed
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