Refund claims for amounts paid under mistaken law must be honored, particularly when tax liability is later recognized as non-existent, overriding strict procedural limitations.

Order :

Amitendra Kishore Prasad, J.

1. The present appeal is being preferred against the order dated 10.01.2025, transmitted on 21.01.2025, passed by the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), bearing Final Order No. 50065/2025. This appeal was admitted for hearing on the following substantial question of law :

“Whether, the Adjudicating Authority as well as the Custom Excise and Service Tax Appellate Tribunal are justified in holding that the application for refund of Rs.14,89,086/- was barred by limitation by virtue of notice contained in Section 102 sub-section (3) of the Finance Act, 1994?

2. Facts of the case, as averred in the appeal, are that the appellant/assessee is duly registered with the Service Tax Department and has been allotted Service Tax Registration No. AFUPP1402JSD001. The dispute in the present matter traces its origin to the issuance of a first summons dated 23.01.2016 under Section 14 of the Central Excise Act, 1944 read with Section 83 of the Finance Act, 1994. Along with the said summons, the Department furnished a calculation sheet alleging service tax liability of Rs. 57,80,852/- (inclusive of cess) for the period from April 2015 to December 2015. The appellant was simultaneously directed to produce year-wise contract receipts, ledgers, R.A. bills for FY 2011-12 to 2015-16 (up to December 2015), all work order agreements pertaining to the said period, and Form 26AS for FY 2011-12 to 2015-16. Prior to issuance of the aforesaid summons, the Assistant Commissioner (Preventive) had sought a clarification from the Raipur Municipal Corporation vide letter dated 27.09.2015 regarding the purpose and usage of the Multi- Level Parking constructed by the appellant. The Commissioner, Raipur Municipal Corporation, subsequently issued a clarification on 22.10.2016 categorically stating that the Multi-Level Parking was meant for public welfare and was not intended for commercial, industrial or business use. Thereafter, on 30.11.2016, a second summons was issued under Section 14 of the Central Excise Act, 1944 read with Section 83 of the Finance Act, 1994 reiterating the earlier requisition for documents. Upon scrutiny of the documents furnished by the appellant, the Department issued a letter dated 15.12.2016 recording closure of the investigation, stating that no discrepancy relating to service tax liability had been found. Before the investigation was formally closed, the appellant had deposited an amount of Rs. 14,89,086/- on 17.02.2016. Consequently, the appellant filed a refund application in Form-R on 09.02.2017 seeking refund of the said amount. However, the Department issued a show-cause notice dated 02.03.2017 alleging deficiencies in the refund application and asserting that the refund claim was barred by limitation under Section 102 of the Finance Act, 2016. The appellant sought thirty days’ time to reply to the notice vide letter dated 17.03.2017 and subsequently filed a detailed reply on 17.04.2017. The Adjudicating Authority passed Order-in-Original dated 09.05.2017 rejecting the refund claim. The refund was denied primarily on the grounds that the appellant had not furnished evidence of payment of stamp duty on the contract/agreement as required under Notification No. 09/2016-ST dated 01.03.2016; that no work- order-wise breakup of taxable value, invoices or ST-3 returns had been filed; that the nature of services could not be verified; and that the refund claim was filed beyond