Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2026 Supreme(Online)(CESTAT) 1533

CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL
Binu Tamta, Judicial Member, P.V. Subba Rao, Technical Member
Principal Commissioner, CGST & Central Excise-Jaipur-I – Appellant
Versus
Shriram General Insurance Co.Ltd. – Respondent
SERVICE TAX APPEAL NO.50149 OF 2020 | SERVICE TAX APPEAL NO.50150 OF 2020 | SERVICE TAX APPEAL NO.50151 OF 2020 | SERVICE TAX APPEAL NO.51683 OF 2021 | SERVICE TAX APPEAL NO.51684 OF 2021

Advocates:
For the Appellants/Petitioners: Mahboob Ur Rehman
For the Respondents: B.L. Narasimhan, Arushi Prabhakar

Refunds of service tax paid on services not rendered due to contractual cancellation are not barred by limitation under Section 11B of the Central Excise Act, nor subject to the doctrine of unjust enrichment, provided the amount has been returned to the service recipient.

Headnote:(A) Central Excise Act, 1944 - Section 11B - Service Tax Rules, 1994 - Rule 6(3) - Central Goods and Services Tax Act, 2017 - Section 142(5) - Insurance service - Refund of service tax paid on cancelled insurance policies - Refund claims held not hit by limitation or unjust enrichment.

(B) Interpretation - Tax is levied on services provided; where the service contract is cancelled and the consideration is returned, no service tax is payable - The department cannot retain deposits as tax in the absence of a taxable service, as such retention violates Article 265 of the Constitution of India. (Paras 12, 13).

Facts of the case:
The assessee, an insurance company, provided insurance services and paid service tax. Upon cancellation of some insurance policies due to various reasons, the assessee refunded the premium amount along with the service tax component to the financers/agents who in turn credited the same to the insured. The assessee subsequently filed refund claims for the service tax paid, which were challenged by the Revenue on grounds of limitation and the principle of unjust enrichment.

Findings of Court:
The Tribunal held that when an insurance policy is cancelled and the premium is refunded, no service is rendered; therefore, the service tax amount deposited becomes a mere deposit. The refund claims are not barred by limitation, and there is no unjust enrichment as the amount was duly returned to the recipients (financers/insured).

Issues: Whether the refund of service tax on cancelled insurance policies is barred by limitation under Section 11B of the Central Excise Act, 1944 and whether the claims are hit by the principle of unjust enrichment.

Ratio Decidendi: Where no service is provided due to cancellation of an insurance contract and the consideration is refunded, the amount deposited as service tax loses its character as tax and is refundable, provided the underlying service tax amount was returned to the person from whom it was received.

Result: Revenue's appeals dismissed; Appellants' (assessee) appeals allowed.

Table of Content
1. introduction to the appeals concerning refund of service tax on cancelled insurance policies under section 142(5) of cgst act. (Para 1 , 2)
2. procedural history of refund claims and conflicting adjudications regarding limitation and unjust enrichment. (Para 3 , 4 , 5 , 6 , 7)
3. interpretation of rule 6(3) of service tax rules, 1994, regarding the return of tax amounts to service recipients. (Para 8 , 9 , 10)
4. verification of refund remittance to the actual service recipient satisfying unjust enrichment provisions. (Para 11 , 12)
5. refund claims under section 142(5) are not barred by limitation under section 11b of the central excise act. (Para 13 , 14)
6. final orders dismissing revenue appeals and allowing assessee appeals. (Para 15 , 16 , 17)

CORAM:

HON'BLE MS. BINU TAMTA, MEMBER (JUDICIAL)

HON'BLE MR. P.V. SUBBA RAO, MEMBER ( TECHNICAL )

FINAL ORDER NOs.50739-50743 /2026

Date of Hearing/Decision:06.04.2026

BINU TAMTA:

1. The present group of appeals have been filed by the Revenue and the assessee challenging the Order-in-Appeal No.¹No.345 to 348(CRM)/ST/JPR/2019 dated 27.09.2019 and Order-in-Appeal No. ²226-227(SM)/ST/JPR/2021 dated 29.06.2021 dated 29.6.2021 with respect to the two refund claims of Rs.2,34,57,490/- and Rs.1,65,38,861/- on the issue whether the refund claims are barred by limitation and are hit by principle of unjust enrichment in terms of Section 11B of Central Excise Act, 1944 ³CEA.

2. Factual matrix of the case is that the assessee is engaged in the business of providing general insurance services. The assessee had issued insurance policies to its clients and paid service tax on the premium amounts under the Finance Act, 1994⁴The Act, however, subsequently they were cancelled during the GST regime on account of various reasons, such as cheque dishonour, cancellation or alteration of policy on clients request, reversal of premium due to risk reduction. As a result, the assessee refunded the proportionate premium amount along with service tax component to the clients as no service has been provided either wholly or partly and filed the refund claim of Rs 2,34,57,490/- on 22.03.2018 for the period of July 2017 and Rs. 1,65,38,861/- on 18.06.2018 for the period August 2017 to March 2018 in terms of Section 142(5) of Central Goods and Services Tax Act, 2017⁵CGST.

Appeal Nos.50149, 50150 & 50151/2020

3. Show cause notice dated 19.06.2018 was issued on the ground that refund of service tax paid before 22.03.2017 amounting to Rs. 10,34,022/- was not admissible as the claim was filed beyond the period of one year from the relevant date as prescribed under Section 11B of CEA. The Deputy Commissioner vide order dated 13.07.2018 rejected the refund claim of Rs.10,34,022/- being time barred. The remaining amount of Rs.2,24,23,468/- was sanctioned in favour of the assessee. The assessee filed the appeal challenging the rejection of the refund claim of Rs.10,34,022 and the Revenue filed the appeal challenging the sanction of refund of Rs.2,24,23,468/- as it was hit by principle of unjust enrichment.

4. In respect of claim of Rs. 1,65,38,861/-, show cause notice dated 27.07.2018 was issued to the appellant on the ground that refund of service tax paid before 19.06.2017 was not eligible in terms of Section 11B of the CEA, read with Section 83A of the Act. The Deputy Commissioner vide Order-in-Original dated 12.09.2018 rejected the refund claim of Rs.85,36,341/- on the ground of time bar under Section 11B of CEA, however, sanctioned the refund claim of Rs.80,02,520. The said order was challenged by the assessee as well as the Revenue.

5. The Commissioner (Appeals) considered all the appeals (relating to refund claim of Rs.2,34,57,490/- and Rs.1,65,38,861/-) which resulted in common order dated 27.09.2019 allowing the assessee’s appeal holding that the refund claim is not barred by limitation and dismissing the Revenue’s appeal challenging the sanction of refund as being barred by t

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