Service Tax Refund claim for courier services availed for export of documents do not require proof for realization of export proceeds.

PJ/Case Law/2013-14/1952

Case:-IN RE : SUNDARAM CLAYTON LIMITED

Citation:-2013 (29) S.T.R. 648 (Commr. Appl.)

Brief facts:-The appeal was filed by M/s. Sundaram Clayton Limited, Chennai against the Order-in-Original No. 49/2009(refund), dated 3-8-2009 passed by the Assistant Commissioner of Service Tax, III Division, S. Tax Commissionerate, Chennai.
Briefly stated facts of the case were that the appellant were engaged in the manufacture of Air and Air assisted brake actuation equipment for vehicles and aluminium castings and they supplied their goods to their local and foreign markets. The appellant had filed a refund claim for Rs. 1,57,563/- for the period October, 2008 and November, 2008 under the provisions of Notification No. 41/2007, dated 6-10-2007 as amended, the amount being service tax paid by them for taxable service received by them in relation to export of goods and the service claimed to have been so utilized by them for making exports was “Courier agency service”. On scrutiny of the grounds stated by the appellant for claiming refund, it was observed that the appellant in order to meet the time schedule of their foreign client had to utilize the services of M/s. Federal Express, a leading courier agency to export their goods by way of air. The appellant had exported samples, documents, etc., along with their goods. A show cause notice was issued to the appellant with a proposal to reject the refund amount on the grounds that the appellant did not produce proof for realization of export proceeds for goods and for the samples and documents on the grounds that they would not fetch any export proceeds. After due process of law, the Lower Adjudicating Authority sanctioned Rs. 1,33,318/- as Refund and rejected an amount of Rs. 24,245/- vide impugned Order-in-Original.

Appellant’s contentions:-Aggrieved, the appellant had filed this appeal mainly on the following grounds :
(i) that the intention of Notification No. 41/2007 was to provide relief to exporters on tax on services rendered in India and utilized by the exporters in relation to export of goods. It is the intention of the Government to fully neutralize all taxes and duties borne by the exporter in order to promote exports in the competitive international market.
(ii) that the notification specifically provides relief in relation to transportation of time sensitive documents, goods or articles relating to export. The condition for realization of foreign currency would be applicable for export of goods only. As regards time sensitive documents and articles, it had to be seen whether the said export was in relation to export of goods or not and in the instant case all their exports were fully satisfying the above condition.
(iii) that the intention of the Legislature was to provide maximum fiscal benefits for promoting exports as evident from the recent notifications granting refund of service tax paid by the exporters. The service tax paid by them on courier charges was a direct consequence of their exporting the goods and hence to deny the service tax refund would not be in line with the thrust on exports.

During the hearing, the appellant had submitted that this was a case where the Lower Adjudicating Authority had denied refund on the ground that sale proceeds for the export of service were not produced and in this regard, he had submitted that the Notification No. 41/2007-S.T., dated 19-2-2008 as amended did not specify any such condition and hence denial of refund was not correct in the eyes of law.

Respondent’s contentions:-The respondent contended thatit was observed that the appellant in order to meet the time schedule of their foreign client had to utilize the services of M/s. Federal Express, a leading courier agency to export their goods by way of air. The appellant had exported samples, documents, etc., along with their goods. A show cause notice was issued to the appellant with a proposal to reject the refund amount on the grounds that the appellant did not produce proof for realization of export proceeds for goods and for the samples and documents on the grounds that they would not fetch any export proceeds. Thus, the respondent pleaded that the appeal be disallowed.

Reasoning of judgment:-Hon’ble judge after carefully going through the case records and the oral as well as written submissions, held that the issue to be decided was whether the appellant is entitled for the refund amount rejected by the Lower Adjudicating Authority or not.
Hon’ble judge found from the records that the Lower Adjudicating Authority had rejected an amount of Rs. 24,245/- paid towards export of documents and samples by Courier Service on the grounds that the appellant did not produce proof for realization of export proceeds and that they would not fetch any export proceeds. He found from the records that the appellant had filed the refund claim under the Notification No. 41/2007-S.T. as amended. It was an undisputed fact that the claim was filed on time and there was no unjust enrichment with regard to this refund claim and no drawback was availed on service tax paid by them. He found from the records that the appellant’s unit is “One star Export house” and they had 360 days to complete the realization process as per the Foreign Trade Policy. Hence, the appellant had voluntarily committed themselves to produce Bank realization certificate as proof of foreign exchange realization. As per their commitment, they submitted the Bank realization certificate before the Lower Adjudicating Authority during adjudication proceedings with regard to this claim except two invoices through which documents and samples had been exported as they do not fetch export proceeds. The Lower Adjudicating Authority rejected the amount involved in these two invoices on the ground that there would be any realization as they did not fetch export proceeds. He found that the Notification No. 41/2007-S.T. as amended (vide Notification No. 17/2009, dated 7-7-2009) exempted the courier service received by exporter of goods and used for export of goods as follows :

S. No.	Taxable Service	Conditions
10	Service provided by a courier agency to an exporter in relation to transportation of time-sensitive documents, goods or articles relating to export, to a destination outside India.	(i) The receipt issued by the Courier agency shall specify the Importer-Exporter Code (IEC) number of the exporter, export invoice number, nature of courier, destination of the courier including name and address of the recipient of the courier; and (ii) exporter produces documents relating to the use of courier service to export goods.

From the above conditions of the notification it was clear that the transportation of documents and samples by courier service were admitted as taxable service to claim refund but the condition of realisation of export proceeds for claiming the refund was laid only in respect of transportation of goods and not in respect of documents or samples as they did not fetch any export proceeds. It was also evident from the notification that documentary proof to the extent that courier service had been used to export such documents and samples alone was sufficient to claim refund. In the instant case, the appellant had already produced Shipping bill and Airway bill to prove that courier service had been utilized to export goods, documents and samples which was an admitted fact by the Lower Adjudicating Authority. Thus, Hon’ble judge held that the appellant was entitled for the amount of refund rejected in the subject claim in respect of transportation of documents and samples and he directed the Lower Adjudicating Authority to sanction the same as per law.
In view of the above discussions, Hon’ble judge set aside the impugned Order-in-Original of the Lower Adjudicating Authority to the extent of rejection of refund amount of Rs. 24,245/-.

Decision:- Appeal was allowed.

Comment:- The analogy drawn from the case is that that the transportation of documents and samples by courier service were admitted as taxable service to claim refund of service tax but the condition of realisation of export proceeds for claiming the refund was laid only in respect of transportation of goods and not in respect of documents or samples as they did not fetch any export proceeds. Accordingly, refund would be admissible for courier services availed for transportation of documents with respect to exported goods as far as there is evidence of courier receipt and use of said courier service for export purposes.

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PJ/Case Law/2013-14/1952

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