2026-VIL-1473-CESTAT-KOL-ST
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SERVICE TAX CESTAT Cases

Service Tax - Refundability of service tax paid on advance received for project agreement terminated before rendering of services - Appellant entered into contract with NTPC Limited for development and operation of coal project in Jharkhand and received contractual advance secured by bank guarantee; the contract was terminated prior to commencement of services and entire advance was recovered by NTPC through encashment of the bank guarantee - Whether service tax paid on such advance is refundable and whether the refund claim is barred by limitation under Section 11B of Central Excise Act, 1944 - HELD - As the appellant was not liable to pay service tax since no service was actually rendered under the contract and the contract was terminated before any services could be rendered, the amount paid as service tax on advance received by the appellant is in the nature of deposit and not governed by limitation under Section 11B of the Central Excise Act, 1944 - The provisions of Section 11B apply only to duty of excise and refund of duty and not to amounts collected without authority of law. Where service tax is paid on taxable services which are not provided, the same is refundable as the payment does not partake the character of service tax payable in law - The cause of action arose on termination of contract and recovery of the advance through encashment of the bank guarantee. Since the taxable service was never rendered and the underlying consideration itself stood extinguished, the limitation contained in Section 11B, a provision designed for refund of excise duty on completed taxable events, cannot be invoked to defeat the refund claim - The appellant has borne the incidence of service tax paid by them and therefore refund cannot be denied on ground of limitation - The appellant is entitled to refund of service tax – The appeal is allowed
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