Denial of Refund of ST on Technical Testing & Analysis for export of Goods-no written agreement- whether justifiable?

PJ/Case Laws/2012-13/1049

Case: TEXPORT INDUSTRIES P. LTD. versus COMMISSIONER OF SERVICE TAX,

Citation: 2011 (24) S.T.R. (Tri-Mum) 553

Issue:- Refund of Service Tax utilized for export of goods – whether can be denied only on ground that there is no written agreement between exporter and his buyer? Even when Letter of credit categorically provided for original inspection certificate issued by Associated Merchandise Corporation?

Brief Fact:- Appellant filed a refund claim for the input services used in export of goods under Notification No. 41/2007-ST as amended. The Adjudicating Authority rejected the refund claim for the service tax paid on technical testing and analysis service on the ground that the condition of the Notification that there should be a written agreement between exporter and buyer requiring testing and analysis for the said goods, was not fulfilled. In appeal, the Commissioner (Appeals) upheld the lower Adjudicating Authority's order.

Hence, appellant filed appeal before the Tribunal.

Appellant’s Contention:- Appellant contended that the Notification provides for refund of service tax paid on technical testing and analysis agency service to the condition that expert furnished a copy of written agreement entered with the buyer of the said goods requiring testing and analysis of the said goods. Appellant submitted that the letter of credit opened between their buyer PIL SRL and the designated bank dated 14-5-2008 which provide for the original inspection certificate. The letter of credit is opened by the bank only on the instructions of the customers.

In the rejoinder, appellant submitted that the case law submitted by the Revenue related to Central Excise duty and not to export. For export, a liberal view is to be taken and they relied on Tribunal's decision in the case of CST, Delhi v. Convergys India P. Ltd. - 2009 (16) S.T.R. 198 (T).

Respondent’s Contention:- Revenue submitted that for claiming the benefit of exemption Notification the condition prescribed have to be strictly followed. The appellant have failed to produce any written agreement therefore they are not eligible for the Notification. In support of their contention, Revenue placed reliance on the Supreme Court's decision in the case of Eagle Flask Industries Ltd. v. C.C.E. - 2004 (171) E.L.T. 296 (S.C.) wherein it was held that non-observance of the condition of the Notification the benefit of exemption is to be denied and also on the Supreme Court's decision in the case of C.C.E. v. Mahaan Dairies - 2004 (166) E.L.T. 23 (S.C.) and Hotel Leela Venture Ltd. v. C.C.E., Mumbai - 2009 (234) E.L.T. 389 (S.C.) wherein similar view was held.

Reasoning of Judgment:- The Tribunal noted that it is undisputed fact that appellant have paid the service tax on technical testing and analysis and they have exported the goods. They also provided Sr. No. 46A of the letter of credit which categorically provide for the original inspection certificate issued by the Associated Merchandise Corporation. The lower Authorities have denied refund only on the ground that there is no written agreement between the exporter and his buyers. The Commissioner (Appeals) did not accept it on the ground that this cannot be treated as agreement since it is between banks and not between concerned parties. The contention of Appellant that the letter of credit is opened by the bank only on the instructions of customers agreed with & also agreed with the contention of the appellant that a liberal view has to be taken for the interpretation to reduce the cost of goods exported. The Tribunal agreed that the case laws cited by the Revenue does not relate to export.

It was noted that the Tribunal in the case of Convergys India had held that "The document based verification can be at a latter point of time. In this case, we are concerned only about rebate of credit on input services. The non-observation of procedural condition in this case is of a technical nature and cannot be used to deny the substantive concession. Further, in respect of export, liberal view requires to be taken. The non-fulfilment of the procedure cannot lead to denial of the benefit under the beneficial legislation providing for export benefits. Further, it is also a settled principle that taxes cannot be exported. In view of the above, the Tribunal set aside the Commissioner (Appeals)'s order.

Decision:- Appeals allowed.

Comment:- This is a very important decision as the department is not giving refund on technical testing on this ground only. But the later notification has deleted this condition. But the earlier notification has provided this condition. The logic behind this condition is not understandable. No exporter will incur extra cost of testing unless and until it is required by buyer. Even though the department is refunding the service tax but the exporter has to pay the amount along with service tax to service provider. Hence, there was no logic in this condition and it is rightly deleted from the Notification.

Comments

PJ/Case Laws/2012-13/1049

Post a Comment

Query