While refusing any relief over refund of service tax claimed by the Mahindra Holidays and Resorts, the Chennai Customs, Excise and Service Tax Appellate Tribunal (CESTAT) ruled that the refund claims under Section 11B(2) of the Central Excise Act, 1944, filed beyond one year from the date of payment of service tax are barred by limitation, notwithstanding the transitional provision contained in Section 142(5) of the CGST Act.
Essentially, the Tribunal clarified that the non-obstante clause in Section 142(5) of the CGST Act cannot override the limitation period prescribed under Section 11B of the Central Excise Act.
The Division Bench comprising Ajayan T.V. (Judicial Member) and Ajit Kumar (Technical Member) considered the clash between the time limit prescribed under Section 11B of the Central Excise Act, 1944, vis-à-vis the non-obstante clause in Section 142(5) of the CGST Act, to decide the applicability of the limitation period over refund claims.
The Bench explained that the non-obstante clause is a legislative device mainly seeking to confer an overriding effect upon a particular provision/ enactment over other conflicting provisions/enactments. It helps remove obstructions that may arise out of the provisions of any other law and is not a repealing clause. Accordingly, Section 142(5) does not refer to overriding any particular provision and, hence, the non obstante clause has to be given a restricted meaning.
Therefore, the Bench acceded to the contention of the Revenue Department that the reference to compliance of Section 11B(2) of Central Excise Act in Section 142(5) of the CGST Act was made as a matter of abundant caution to emphasize that the aspect of ‘Unjust Enrichment’ should not get overlooked when payments from Credit Ledger were being processed for a refund in cash, which was not permitted in the earlier regime.
Finally, the Bench concluded that Section 11B of the Central Excise Act remains applicable to all refund claims filed under the earlier tax laws, as the phrase “shall be disposed of in accordance with the provisions of the existing law” clearly mandates adherence to the procedural requirements, including the time limit for filing such claims. Thus, the rejection of the refund claim under Section 142(5) of the CGST Act as time-barred was upheld.
Briefly, the appellant, engaged in the timeshare business, used to provide holiday and leisure services under the flagship brand ‘Club Mahindra Holidays’ in resorts to their club members by collecting one-time membership fees (time-share fees). The subscriber is also required to pay an Annual Subscription Fee (ASF) every year, and the applicable service tax is paid by the company on an accrual basis, irrespective of whether the amount is collected from members or not. However, when any member defaults in their payment of ASF or the EMI towards the membership fees for two or more years, the appellant cancels the subscription contract.
Thus, the appellant claimed that they are eligible for a refund of the service tax that was paid on an accrual basis on the cancelled ASF invoices/membership contracts for which service was not rendered, but tax was paid. Accordingly, they filed refund claims under Section 11B(2) of the Central Excise Act, 1944, read with Section 142(5) of the CGST Act, 2017. However, the said claims were rejected on the grounds of limitation.
Appearances:
Advocates Harish Bindumadhavan and Vijayalakshmi R, for the Appellant/ Taxpayer
Sanjay Kakkar, for the Respondent/ Revenue
