CESTAT Chennai Denies Royal Enfield's Refund Plea: Holds Limitation Act Inapplicable to Service Tax Refunds Under Finance Act, 1994
Pranav B Prem
In a significant setback to Royal Enfield, the Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that refund of service tax is governed strictly by the statutory time limits prescribed under the Finance Act, 1994, and that the Limitation Act, 1963 has no applicability in such cases. The Tribunal, comprising Shri M. Ajit Kumar (Technical Member) and Shri Ajayan T.V. (Judicial Member), dismissed the appeal filed by Royal Enfield Motors, affirming that delays in filing for refunds cannot be condoned in the absence of express statutory provisions.
The case arose from a refund claim filed by Royal Enfield Motors (a unit of Eicher Motors Ltd.) for an amount of ₹1,79,46,788, which they claimed was erroneously collected by SIPCOT as service tax on developmental charges. The tax pertained to the period from June 1, 2007, to September 21, 2016. This period was later retrospectively exempted from service tax liability by Section 104 of the Finance Act, 2017. However, the refund application filed by Royal Enfield on October 31, 2017, was beyond the six-month statutory time limit, which ended on September 30, 2017.
The Original Authority rejected the refund claim solely on the ground of limitation. This decision was upheld by the Commissioner (Appeals), prompting the present appeal before CESTAT, along with a miscellaneous application seeking to add grounds on the taxability of the development charges.
Royal Enfield argued that they were initially under a bona fide belief that SIPCOT, having deposited the tax, would claim the refund. It was only upon receiving a letter from SIPCOT on September 15, 2017, that the appellant became aware that it was required to file the refund claim themselves. They contended that the period until September 15, 2017, should be excluded and hence the claim filed on October 31, 2017, should be treated as timely. Additionally, the appellant invoked Section 17(1)(c) of the Limitation Act, stating that the limitation should commence only upon discovery of the mistake.
They further contended that the amounts collected as service tax on development charges were collected without authority of law and hence should be refunded without imposing statutory limitations. A number of decisions were cited in support, including JSW Dharmatar Port Pvt. Ltd [2019 (20) GSTL 721 (Bom)], which held that delay caused by third-party certification could be excluded while computing the limitation period.
Rejecting these arguments, the Tribunal held that the refund was governed strictly by Section 104(3) of the Finance Act, 1994, which explicitly provides a six-month time frame from the date of assent to the Finance Bill, 2017, and that no discretion is vested with the Tribunal to condone delays. The Bench observed: "We had earlier noted that in this case there is no dispute that the claim has been filed with a delay of 31 days. Hence in terms of the Section 104 it is time barred. As stated in the Safari judgment the said provision must be read as it is, with no additions and no subtractions on the grounds of legislative intendment or otherwise."
The Tribunal also distinguished the reliance placed by the appellant on JSW Dharmatar Port Pvt. Ltd., noting that unlike Section 103, Section 104 does not involve a condition precedent like obtaining a Ministry certificate and thus the facts were distinguishable.
As for the applicability of the Limitation Act, 1963, the Tribunal ruled that the Finance Act, 1994 is a self-contained code and that provisions of the Limitation Act do not apply to proceedings under it. It relied on the Supreme Court's ruling in Hongo India to reiterate that limitation provisions under special statutes are absolute and cannot be extended by importing general law: "The Limitation Act is not applicable to the Finance Act 1994 and hence the appellant's plea on this account fails."
The Tribunal also dismissed the miscellaneous application which raised the issue of the taxability of development charges, stating that such a question was beyond the scope of the Show Cause Notice and was not raised before lower authorities. The Bench made it clear that: "No fresh issue, filed by way of a miscellaneous petition, which is beyond the scope of the Show Cause Notice and would allow a totally new proceeding to be started can be entertained by the Tribunal."
In conclusion, the Tribunal reaffirmed the well-settled principle that a taxing statute must be interpreted strictly and any claim for refund must be made strictly in accordance with the provisions of the law. In the absence of statutory authority to condone delay, the Tribunal refused to entertain the refund claim filed by Royal Enfield beyond the prescribed time. Thus, the appeal and the miscellaneous application filed by Royal Enfield were rejected, sealing the fate of their refund claim.
Appearance
Shri Raghavan Ramabhadran, Advocate for the Appellant
Smt. O.M. Reena, Authorized Representative for the Respondent
Cause Title: Royal Enfield Motors V. Commissioner of GST & Central Excise
Case No: Service Tax Miscellaneous Application No. 40070 of 2024 and Service Tax Appeal No. 40679 of 2019
Coram: Hon’ble Shri M. Ajit Kumar [Member (Technical)], Hon’ble Shri Ajayan T.V [Member (Judicial)]
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