Refund claims for service tax paid on ocean freight beyond Section 11B’s one-year limitation are time-barred.

The appellant manufactured automobile tyres, tubes, flaps and pre-cured tread materials and imported inputs on both CIF and FOB terms.

During departmental audit for April–June 2017, the department objected that service tax was payable under reverse charge on ocean freight relating to CIF imports.

The appellant paid ₹18,73,318 as service tax and ₹3,34,211 as interest, totalling ₹22,07,529, on 24 July 2018.

Subsequently, relying principally on SAL Steel Ltd. v. Union of India, which held the ocean-freight levy provisions to be ultra vires, the appellant filed a refund claim on 23 September 2020 under Section 11B of the Central Excise Act, 1944, as applicable to service tax through Section 83 of the Finance Act, 1994.

The refund was rejected as time-barred, and the Commissioner (Appeals) upheld the rejection. The appellant therefore preferred the present appeal.

1. Whether the appellant’s refund claim of ₹22,07,529 was barred by the one-year limitation prescribed under Section 11B of the Central Excise Act, 1944, as applicable to service tax.

2. Whether the limitation under Section 11B was inapplicable on the ground that the ocean-freight levy was unconstitutional or that the amount had been paid under a mistaken assumption of law and during audit proceedings.

3. Whether the appellant was entitled to interest on the claimed refund under Section 11BB of the Central Excise Act, 1944.

Section 83 of the Finance Act, 1994 applies specified provisions of the Central Excise Act, 1944 to service-tax matters, including Section 11B governing claims for refund.

Under Section 11B(1), a refund application must ordinarily be filed within one year from the “relevant date”; under Section 11B Explanation (B)(f), the relevant date in the residuary category is the date of payment of duty or tax.

The Tribunal relied on Mafatlal Industries Ltd. v. Union of India for the principle that Section 11B is the general and complete statutory code for refunds, while a claim arising from a levy declared unconstitutional or wholly without authority of law may be pursued through a constitutional remedy under Articles 226 or 32, subject to restitutionary and unjust-enrichment principles.

It further relied on Singh Enterprises v. Commissioner of Central Excise for the rule that statutory appellate authorities and tribunals possess only the power to condone delay expressly conferred by the governing statute.

Section 11BB, which provides for interest on delayed refunds, becomes relevant only where a refund is otherwise legally payable.

The Tribunal treated the amount paid on 24 July 2018 as service tax paid under the then-operative statutory and notification framework concerning ocean freight.

Since the refund application was filed only on 23 September 2020, it was beyond the one-year period prescribed by Section 11B and was therefore time-barred under Explanation (B)(f).

The Tribunal rejected the argument that payment during audit or under a mistaken understanding of law automatically converted the amount into a non-tax deposit or excluded the statutory limitation.

Although Mafatlal Industries recognises an exception for taxes collected under an unconstitutional provision, the Tribunal held that such a constitutional claim was not one that it could entertain to override Section 11B; the appellant’s remedy, if founded on invalidity of the levy, would lie before the constitutional courts under Articles 226 or 32.

As the refund itself was time-barred, no question of statutory interest under Section 11BB arose.

It further held that the appellant’s challenge based on the alleged unconstitutional nature of the ocean-freight levy could not overcome the statutory limitation before the Tribunal and would, if pursued, require an appropriate constitutional remedy.

The Order-in-Appeal rejecting the refund was upheld, the appeal was dismissed, and no refund or interest was granted.