CESTAT: Refund of Excess Service Tax Paid by Mistake Not Hit by Limitation Under Section 11B

March 20, 2026 : In a significant ruling, the Principal Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), New Delhi has held that refund of excess service tax paid due to inadvertent error cannot be denied on the ground of limitation under Section 11B of the Central Excise Act, 1944. The Tribunal emphasized that amounts not legally payable as tax cannot be retained by the Government.

The appellant, M/s McCann Erickson (India) Pvt. Ltd., engaged in providing advertising agency services, had discharged service tax liability on a monthly basis. However, during the period from December 2016 to May 2017, it inadvertently paid excess service tax due to failure to adjust previously paid amounts and additional cash payments made in March and April 2017. A refund application dated January 9, 2020 was filed seeking ₹2.93 crore, which was rejected by the Department as time-barred under Section 11B. This view was upheld by the Commissioner (Appeals), prompting the appeal before the Tribunal.

Before the Tribunal, the appellant argued that the excess payment was not in the nature of “tax” and therefore the limitation under Section 11B would not apply. It was contended that amounts paid under mistake assume the character of a deposit and must be refunded. The Tribunal examined the statutory framework and clarified that Section 11B governs only those refunds which pertain to duty or tax legally leviable under law.

The Bench held that where an amount is paid without any legal liability, it cannot be treated as service tax. It observed that excess payment arising out of inadvertent error lacks any statutory basis and therefore cannot be retained by the Department. Such retention, the Tribunal noted, would be contrary to Article 265 of the Constitution of India, which mandates that no tax shall be levied or collected except by authority of law.

Relying on settled precedents, including decisions of High Courts and coordinate benches, the Tribunal reiterated that payments made under a mistaken belief are in the nature of deposits and fall outside the ambit of limitation prescribed under Section 11B. In the present case, the excess payment of service tax was an admitted fact and had occurred due to inadvertent error.

In these circumstances, the Tribunal held that denial of refund on the ground of limitation was unsustainable. It concluded that the Department cannot withhold amounts not legally due and that such claims are not governed by the statutory time limit applicable to tax refunds.

Accordingly, the Tribunal set aside the impugned order and allowed the refund claim along with applicable interest.

Case Title: M/s McCann Erickson (India) Pvt. Ltd. v. Commissioner of CGST & CX, Delhi East
Case No.: Service Tax Appeal No. 52352 of 2024
Coram: Dr. Rachna Gupta (Judicial Member), Hemambika R. Priya (Technical Member)
Decision Date: 20.03.2026