UMBRELLA (INDIA) STAFFING SOLUTIONS vs COMMISSIONER (APPEALS)
- Court
- Gujarat High Court
C/SCA/11299/2018 JUDGMENT DATED: 29/07/2026
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 11299 of 2018
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE A.S. SUPEHIA Sd/-
and
HONOURABLE MS. JUSTICE VAIBHAVI D. NANAVATI Sd/-
=============================================
Approved for Reporting Yes No
=============================================
UMBRELLA (INDIA) STAFFING SOLUTIONS
Versus
COMMISSIONER (APPEALS) & ORS.
=============================================
Appearance:
MR VIJAY PATEL AND MS. SHARON R. FERNANDES FOR
MR MB GOHIL(2702) for the Petitioner(s) No. 1
MR CB GUPTA(1685) for the Respondent(s) No. 1,2
=============================================
CORAM: HONOURABLE MR. JUSTICE A.S. SUPEHIA
and
HONOURABLE MS. JUSTICE VAIBHAVI D. NANAVATI
Date : 29/07/2026
ORAL JUDGMENT
(PER : HONOURABLE MR. JUSTICE A.S. SUPEHIA)
1. The present writ petition has been filed seeking quashing
and setting aside the order dated 13.10.2017 as well as the
order dated 12.02.2018 passed by the respondent Nos.1 and 2.
2. The petitioner is a proprietorship firm engaged in
providing manpower recruitment and supply agency services
to the respondent No.3. The petitioner regularly collected
service tax from respondent No.3 and deposited the same with
the Service Tax Department.
3. On 07.05.2015, the petitioner collected an amount of
Rs.7,15,237/-, inclusive of service tax, education cess, and
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higher education cess, and deposited the same with the
respondent Department on 21.06.2015.
4. Subsequently, the respondent No.3 was subjected to an
audit in May 2017, during which the respondent - Department
raised a query regarding the non-payment of service tax under
the reverse charge mechanism on manpower recruitment and
supply agency services. Consequently, the respondent No.3
paid the tax directly to the respondent - Department on
16.05.2017 and thereafter issued a debit note dated
22.05.2017 to the present petitioner for an amount of
Rs.78,316/-. Thereafter, the petitioner filed a refund claim
under Section 11B of the Central Excise Act, 1944 seeking
refund of Rs.78,679/- on 27.06.2017.
5. The respondent Department issued a show cause notice
to the petitioner on 21.09.2017, to which the petitioner filed a
detailed reply on 09.10.2017.
6. After granting an opportunity of hearing, the respondent
No.2 rejected the petitioner's refund claim on the ground that
the refund application had been filed beyond the prescribed
period of limitation, vide order dated 13.10.2017.
7. Thereafter, the petitioner preferred an appeal before the
respondent No. 1 under Section 85 of the Finance Act, 1994.
However, the appellate authority dismissed the appeal vide
order dated 12.02.2018. Aggrieved thereby, the petitioner has
filed the present writ petition.
8. Learned advocate Mr.Vijay Patel appearing for learned
advocate Mr.M.B.Gohil for the petitioner, at the outset,
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submitted that the refund application ought not to have been
rejected on the ground of limitation since the cause of action
arose only when the respondent No.3 issued the debit note
dated 22.05.2017.
9. While placing reliance upon the Constitution Bench
judgment of the Supreme Court in the case of Mafatlal
Industries Limited and Ors. vs. Union of India and Others,
(1997) 5 SCC 536, learned advocate Mr.Patel has further
submitted that that the amount deposited by the petitioner
was in the nature of a deposit and, hence, a writ petition
seeking its refund is maintainable. It is submitted that the
petitioner ought not to be relegated to the alternative remedy
before the Customs, Excise and Service Tax Appellate Tribunal
(for short, “the Tribunal”). It is urged that the respondents
cannot deny the refund claim.
10. Opposing the writ petition, learned Senior Standing
Counsel Mr.C.B.Gupta has submitted that the writ petition
ought not to be entertained since the refund application has
been filed beyond the period of one year prescribed under the
Central Excise Act, 1944. It is further submitted that the
petitioner had an efficacious alternative remedy of filing an
appeal before the Tribunal. He also submitted that although
the petitioner had deposited the amount, the Department had
committed an illegality by accepting the same.
11. We have heard the learned advocates appearing for the
respective parties.
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12. It is not disputed by the respondent - Department that it
has recovered the service tax twice—first from the petitioner
and subsequently from the respondent No.3.
13. The petitioner, while rendering manpower recruitment
and supply agency services to the respondent No.3, deposited
service tax, education cess, and higher education cess
amounting to Rs.7,15,237/- with the respondent - Department
on 21.06.2015.
14. It is also not in dispute that the respondent No.3 was
audited in May, 2017 and upon being informed that it was
liable to pay service tax under the reverse charge mechanism
on manpower recruitment and supply agency services, the
respondent No.3 paid service tax of Rs.78,679/- along with
interest on 16.05.2017 and thereafter issued a debit note
dated 22.05.2017 to the petitioner for Rs. 78,316/-.
15. At this stage, reference may be made to the final audit
report. The report categorically records that:- "From
01.04.2015, the Supply of manpower services is covered under
the complete reverse charge mechanism." The report further
observes: "Therefore, M/s. Umbrella India Staffing solution i.e.,
the present petitioner, is not liable to collect and pay service
tax to the Government. The service tax credit taken by the
assessee on the invoices issued by M/s. Umbrella is therefore
ineligible. "
16. Despite the audit report conclusively establishing, and
the Revenue admitting, that with effect from 01.04.2015 the
petitioner was not liable to collect or deposit service tax, no
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steps were taken by the Department to refund the amount
deposited by the petitioner when it recovered the same tax
from the respondent No. 3.
17. In our considered opinion, the collection of service tax
from the petitioner itself became unauthorized with effect from
01.04.2015. Therefore, by accepting the tax deposited by the
petitioner on 21.06.2015, the respondent-Department
committed the first illegality.
18. The second illegality was committed when the
respondent - Department recovered the same tax from the
respondent No.3 despite being fully conscious of the fact, as
recorded in the audit report itself, that the petitioner was not
liable to collect or pay service tax and that the input tax credit
availed by the respondent No.3 on the invoices issued by the
petitioner was inadmissible.
19. Having recorded such findings, the Revenue ought to
have immediately initiated appropriate steps either by
informing the petitioner or by passing suitable orders for
refund or re-credit of the amount deposited by the petitioner.
However, no such action was taken. The petitioner became
aware of the position only when the respondent No.3 issued
the debit note dated 22.05.2017 for Rs.78,316/-. Consequently,
the petitioner was constrained to file a refund application
under Section 11B of the Central Excise Act, 1944, which
ultimately came to be rejected solely on the ground that it had
been filed beyond the prescribed period of limitation.
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20. In these peculiar and exceptional circumstances, the
respondent-authorities cannot reject the claim of the petitioner
on the ground of limitation, when the respondent - Department
itself has become the beneficiary of unjust enrichment. The
respondent - Department collected service tax twice, first from
the petitioner on 21.06.2015, despite having no authority in
law to collect the same after 01.04.2015, and thereafter from
the respondent No.3 on 16.05.2017, while retaining the
amount earlier deposited by the petitioner.
21. This Court cannot remain a mute spectator to such
manifest illegality. The facts of the present case warrant the
exercise of extraordinary jurisdiction under Article 226 of the
Constitution of India. Accordingly, present writ petition
succeeds . The impugned orders dated 13.10.2017 as well as
dated 12.02.2018 are hereby quashed and set aside. In the
peculiar facts of the case, the petitioner cannot be relegated to
the alternative remedy of filing an appeal before the Tribunal.
22. Accordingly, the respondents are directed to refund the
aforesaid amount to the petitioner within a period of six weeks
from the date of receipt of this order, failing which the amount
shall carry interest at the rate of 9% per annum until the date
of actual payment.
Sd/-
(A. S. SUPEHIA, J)
Sd/-
(VAIBHAVI D. NANAVATI,J)
MAHESH/22
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