Goods Already Exported Before New Notification; Conditions Mentioned Are Not Relevant For Denying Refund: CESTAT
The Mumbai Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has stated that since the refund claim is for exports which had already taken place before the new notification, the requirement to submit returns (as mentioned in the new notification) does not apply and cannot be used as a reason to deny the refund.
The Bench of M.M. Parthiban (Technical Member) has observed that “taxes and duties should not be exported, to enable a level playing field in the international market for exports. Hence, indirect taxes on inputs and input services are to be refunded or rebated/reimbursed. As a number of input services are used in export of goods, the Government had provided a mechanism for such refund/remission of service tax involved in such exports.”
Notification No. 41/2007-S.T. dated 06.10.2007 was issued by the Central Board of Excise and Customs (CBEC) in India to provide a mechanism for exporters to claim a refund of service tax paid on certain input services used directly in the export of goods. To be eligible for a refund, exporters had to meet specific conditions, including proving that the service tax was paid on the specified services, that the goods were exported within a stipulated period, and that the refund claim was filed within a prescribed time frame, typically six months from the date of export.
The assessees/appellants, who are engaged in the export of goods, filed refund claims under Notification No. 41/2007-S.T. dated 06.10.2007 for input services, such as 'Banking/Courier/TTA Commission' and 'Commission paid to the Foreign Agent,' under Business Auxiliary Service which are used in export of goods for the respective period, by claiming refund under Notification No.41/2007-S.T. dated 06.10.2007, as amended.
Two significant claims were in dispute:
Refund Claim Filed on 31.03.2009: This claim covered the period from October 2008 to December 2008. The original authority rejected the claim by its order dated 25.03.2010. Aggrieved, the assessees filed an appeal before the Commissioner (Appeals) which was rejected. The assessees filed an appeal before the Tribunal. The Tribunal remanded the matter for fresh adjudication. Upon re-adjudication, the original authority approved a refund of Rs. 9,81,612/- on 06.01.2016.
Refund Claim Filed on 31.03.2010: This claim for Rs. 17,17,480/- covered the period from April 2009 to July 2009. A portion of the claim, Rs. 91,275 (for July 2009), was allowed, while Rs. 16,26,205 (for April to June 2009) was rejected by the original authority on dated 22.01.2010. Aggrieved, the assessees filed an appeal before the Commissioner (Appeals) which was rejected. The assessees filed an appeal before the Principal Additional Director General which was also rejected on 18.05.2018.
The assessees have challenged the order dated 18.05.2018 passed by the Principal Additional Director General, DGPM, Customs & Central Excise, Western Regional Unit, Mumbai, before the Tribunal.
The Tribunal pointed out that taxes and duties should not be exported, to enable a level playing field in the international market for exports. Hence, indirect taxes on inputs and input services are to be refunded or rebated/reimbursed. As a number of input services are used in export of goods, the Government had provided a mechanism for such refund/remission of service tax involved in such exports.
The Tribunal looked into the instructions issued by the Ministry of finance dated 17.04.2008 and observed that instructions of the Ministry of Finance transpire that service tax paid on input services used in exports are required to be refunded by a mechanism provided therein.
The bench noted that in order to avoid frivolous objections in sanction of refund claim, such instructions have gone to the extent of stating that '16 taxable services have been notified and the service tax paid on these taxable services, which are attributable to exports even if they are not used as input services, shall be refunded to exporters.' Notification No.41/2007-S.T. dated 06.10.2007 is one such notification extending the exemption to certain specified services, which was superseded by Notification No.17/2009- S.T. dated 07.07.2009 and further notification No.18/2009-S.T. dated 07.07.2009 were also issued.
The Tribunal opined that “the refund claim of the assessees was rejected on account of their claim not fulfilling the conditions 2, 3 & 4 of Notification No.18/2009-S.T. dated 07.07.2009 which relate to ceiling limit of refund, submission of half yearly returns and is application in respect of export of canalized items. Further, as the refund claim relate to exports of the period relating to April, 2009 to June, 2009, which have already been exported at the time of issue of the notification dated 07.07.2009, the conditions relating to submission of returns as specified therein are not relevant for denying the exemption.”
In view of the above, the Tribunal allowed the appeal.
Counsel for Appellant/ Assessee: R.V. Shetty a/w S.R. Shetty
Counsel for Respondent/ Department: A.K. Shrivastava
Case Title: Zodiac Clothing Company Limited v. Commissioner of CGST & Central Excise Mumbai Central
Case Number: Service Tax Appeal No. 85566 of 2019