Refund Claims Are Time-Barred Despite Non-Obstante Clause U/S 142(5) CGST Act: CESTAT Rejects Mahindra Holidays' Appeal

Ajayan T.V. (Judicial Member) and M. Ajit Kumar (Technical Member) stated that section 142(5) does not refer to overriding any particular provision, and hence the non obstante clause has to be examined and given a restricted meaning limited to the context in which it is used.

The Tribunal agreed with the revenue that the reference to compliance of Section 11B(2) of CEA in Section 142(5) of the CGST Act was made as a matter of abundant caution to emphasize that the aspect of Unjust Enrichment should not get overlooked when payments from Credit Ledger were being processed for a refund in cash, which was not permitted in the earlier regime.

The Assessee/appellant (Mahindra Holidays and Resorts India Ltd.) provides holiday and leisure services in resorts to their club members by collecting one-time membership fees (Time share fees), and the service tax on membership fees is stated to be paid on a collection basis.

The subscriber is also required to pay an Annual Subscription Fee (ASF) every year. However, when any member defaults in their payment of ASF or the EMI towards the membership fees for two or more years, MHR, in terms of the Agreement with the subscriber, cancels the subscription contract.

Thus, the assessee claims that they are eligible for a refund of the service tax that was paid on an accrual basis on the cancelled ASF invoices/membership contracts for which service was not rendered, but tax was paid.

The assessee therefore filed the refund claims under Section 11B(2) of the Central Excise Act, 1944, read with Section 142(5) of the CGST Act, 2017.

However, the said claims were rejected as being hit by the limitation of time in terms of the provisions of section 11B of the Central Excise Act, 1944, since all the claims were filed beyond the prescribed period of one year from the payment of service tax.

The assessee filed an appeal before the Commissioner (Appeals), which was rejected.

The assessee is of the view that because of the non-obstante clause in section 142(5) of the CGST Act, no time limit will apply. The assessee argued that the refund claim under Section 142(5) of the CGST Act cannot be rejected as time-barred. There is no unjust enrichment by the assessee. The Tax paid on services which were not rendered shall be treated as a “Deposit”.

The revenue opined that the time limit prescribed under Section 11B will be applicable to any refund claim filed under the Service Tax law. The phrase “shall be disposed of in accordance with the provisions of existing law” appearing in Section 142(5) means that the refund claim must comply with all provisions of the existing law, which includes the Central Excise Act, 1944.

The bench found that the issue of the time bar revolves around the interpretation of section 142(5) of the CGST Act. The section contains a non-obstante clause “notwithstanding anything to the contrary”, appearing in the middle of a section, whose interpretation has become a bone of contention between the parties.

The clause has to be given a restricted meaning. There should be a clear inconsistency between the two provisions before giving an overriding effect to one provision over the other in the light of the non obstante clause. Hence, there is no automatic repeal or a complete superseding of all the other provisions of law, opined the Tribunal.

The bench rejected the contention of the assessee that their refund claim under Section 142(5) of the CGST Act cannot be rejected as time-barred.

In view of the above, the Tribunal rejected the appeal.

Case Title: Mahindra Holidays and Resorts India Ltd. v. Commissioner of GST & Central Excise

Case Number: Service Tax Appeal Nos. 40011 to 40014 of 2021

Counsel for Appellant/ Assessee: Harish Bindumadhavan and Vijayalakshmi R

Counsel for Respondent/ Department: Sanjay Kakkar