Refund of Service Tax under Notification No. 17/2009-ST- Claim of Rs. 500/-

PJ/Case Study/2010-11/43

CASE STUDY

Prepared By:
CA Pradeep Jain,
Megha Jain and
Sukhvinder Kaur, LLB [FYIC]

Introduction: -

The exemption granted on specified services used for export of goods vide Notification No. 41/2007-ST dated 06.10.2007 and later by Notification No. 17/2009-ST dated 07.07.2009 and the litigation arising out of refund claims has gone hand in hand. Although the anomalies existing in the earlier provisions were removed by the Notification No. 17/2009-ST but new issues were also raised. We also wrote a series of articles titled “Johnny and service tax refund” to bring the grievances of the exporters. One such issue raised was that the Department was proposing to deny the refund claim on the ground that the refund claim in respect of services was not to be allowed if the amount of refund claimed was less than Rs. 500/- in terms of Para 2(h) of Notification No. 17/2009-ST per shipping bill. This matter has also been represented through associations also. The Commissioner has responded positively to the same. The issue has been decided in favour of assessee. This issue was also raised in the case under study among other grounds for rejecting the refund claim.

In the matter of M/s Chandni Crafts, Jodhpur
[Order-In-Original no. 12/2011-R(ST-EX) dated: 31.01.2011]

Brief facts of the case: -

Noticee is an exporter and had filed refund claim under Notification No. 17/2009-ST, dated 07.07.2009. They claimed service tax paid on Customs House Agent (CHA) service, Clearing & Forwarding Service and cleaning service utilised for export of their goods.

Department issued show cause notice proposing to reject the refund claim of the Noticee on the following grounds:

Refund is not allowable where service tax paid in respect of service is less than Rs. 500/-.
Original documents of service provider not submitted.
Conditions of specified service of “customs house agent” and “clearing and forwarding agent” – Number and Date of Export Invoice and of Shipping Bill not mentioned in the service provider’s document.
Conditions of specified service of “customs house agent” and “clearing and forwarding agent” - Details of all the charges, whether or not reimbursable, collected by the custom house agent from the exporter in relation to export goods not mentioned in the service provider's document.
Conditions of specified service of “customs house agent” and “clearing and forwarding agent” - Details of other taxable services provided by the said custom house agent and received by the exporter, whether or not relatable to export goods have not been submitted by the exporter.
Only Service Tax, and not Education Cess and Secondary & Higher Education Cess, is granted exemption under the Notification.

Noticee’s Contentions: -

Noticee replied to the Show Cause Notice on the following contentions:

CLAIMS OF REFUND LESS THAN RS. 500/- - Noticee submitted that it is wrongly alleged that their refund claim is below Rs. 500. Reference was made to clause (h) and was submitted that herein the refund claim means a total of all the invoices/shipping bills filed for the refund claim. The clause specifies that when any refund claim for the services utilised in the course of export has to be filed, the total claim should not be below Rs. 500. The assessee has filed the total claim for the services used in the course of export as Rs. 16055/- which is greater than Rs. 500.
Reference was also made to point No. 2 clause (b) of the Notification was submitted that the clause (b) says that service tax exemption will be claimed by the manufacturer- exporter on the services availed during the course of export in Form A-1. It was submitted that starting para of the Form A-1 clarifies the intention of the Government that the refund has to be seen in total. If the same was not the intention of the Government there was no need to start the form like this. If the refund has to be seen per shipping bill or per invoice there was no need to have the total of the refund claim. The format that is prescribed in the Form A-1, annexure to the Notification also give the columns as S. No. Details of the goods exported on which refund of the service tax has to be claimed etc. There are a number of details require in the table.
Referring to the Format prescribed it was submitted that it also specifies that the details of all the shipping bills/ invoices/ services are required. The total of all these together should exceed Rs. 500 for claiming a refund claim. If anywhere the intention was to see the Rs. 500 limit per service/ invoice or shipping bill then there was no requirement to have the details of all the shipping bills / invoices together. As through this Notification the time limit of claiming the refund has also been extended to one year, this also clarifies that the intention behind the Notification is to have refund claim of exports under various shipping bills/ invoices together. Otherwise the Government would have said as and when the export is done under a shipping bill or invoice the refund of the same could be claimed. In this case the Rs. 500/- limit per invoice or shipping bill could be seen. But as this is not the intention of this Notification a refund claim would consist of the total of shipping bills or the invoices. Therefore understanding the aim of the Notification their refund claim exceeds Rs. 500.
It was further submitted that if if the contention of the show cause notice, that the refund should be per service, is accepted for the sake of argument only, then also a refund claim will be meant as all taxable service. As recently in the case of M/s Sri Venkateshwara Precision Components Vs CCE, Chennai (Dated: August 9, 2010) that if the legislature is not clear for the meaning of a term than the term used in a singular form can be used in plural form as according to the General Clause Act. Therefore it is clear that in case where the word used in singular term than it can mean in plural.
ORIGINAL DOCUMENT OF SERVICE PROVIDER NOT SUBMITTED – The Noticee submitted that according to Para 2(i)(D), they have submitted all the original documents and fulfilled all the conditions specified. The original invoices are also authorized and certified as mentioned in the clauses (D), (E) and (F). Further Paragraph (E) and (F) as referred in paragraph (D) requires due certification from specified person on the original documents. As such there should be due certification by exporter or authorized person as specified in the notification in the original documents/invoices to be submitted with refund claim. In their case the Noticee have submitted the original documents/invoices issued by service provider after due certification of authorized signatory who is authorized by the authorized person. They have fulfilled all the other conditions as prescribed in the notification regarding refund claim relating to cleaning services so they were only required to submit the self certified original invoices which have already been submitted along with the refund claim.

SHIPPING BILL NO. AND EXPORTERS INVOICE NO. NOT AVAILABLE: Noticee submitted that the impugned show cause notice is wrongly contending that the shipping bill no. or the invoice no. is not mentioned in the invoice of the CHAs as well as Clearing & Forwarding Agent. These details are there on the invoices of these service providers.

CONDITIONS LAID IN NOTIFICATION IN RESPECT OF CHA SERVICES NOT FULFILLED: The Noticee submitted that in the show cause notice it is alleged that the invoices of the CHA do not contain the details of all the charges incurred by the CHA, whether or not the charges reimbursable. In this regard, it is submitted that no other charges have been collected by the CHA other than those mentioned in the invoice. The CHA has charged only the amount that has been collected; no other amount has to be reimbursed by the Noticee. It was submitted that all the conditions prescribed in Notification no. 17/2009 were fulfilled as the invoices of the CHA contained all the details.
It was submitted that in the last condition of clause (i), it is written that the exporter should declare all the other charges paid to CHA whether or not relating to export goods. Hence, the noticee have enclosed the certificate duly signed by exporter alongwith the refund claim. Thus, all the charges have been collected by CHA in his invoice. No other charges, whether reimbursable or not, collected by CHA from us relating to export goods. It is further submitted that no prudent man will mention the charges which is not incurred as well as collected in his invoice. CHA will always charge the expenses incurred by him and will not give from his pocket. The exporter will pay him only the charges which are billed to him.
It was submitted that it was further alleged in the show cause notice that exporter have not submitted the details of other taxable services provided by the said custom house agent and received by the exporter, whether or not relatable to export goods with their claim of refund. In this respect it is submitted no other taxable services has been provided by CHA and received by us, whether or not relatable to export goods. Noticee have received only the services which are mentioned and specified in the invoice issued by the service provider which has already been submitted with the refund claim. As such no other service has been provided other than for which the bill is raised. While looking to the clause no. 2 of above table for conditions for CHA which requires that Exporter shall produce the details of other taxable services provided by the said custom house agent and received by the exporter, whether or not relatable to export goods. In their case the Noticee cannot produce the details of other taxable services as no other service has been received by them accept those mentioned in the invoice. Therefore, they have fulfilled all the conditions as mentioned in the notification no. 17/2009-ST dt. 07.07.2009 as regard to specified services. Further, it was submitted that if there are other charges then the service tax should have been paid on the same and exporter must have claimed the refund of the same. So, there was no benefit to exporter by hiding this expenses as alleged by the show cause notice.

Only Service Tax, and not Education Cess and Secondary & Higher Education Cess, is granted exemption under the Notification: Further it is alleged that the amount of service tax claimed includes the amount of Education Cess and Secondary & Higher Education Cess. However, the Noti. No. 17/2009-ST exempts the specified services received by the exporter and used for export of goods from the whole of the service tax leviable thereon under section 66 and section 66A of the Finance Act, 1994. In this respect it is submitted that the intention of Central Board is to be seen in introducing the said notification which is that to promote the Export of Goods from India and hence the Govt. has exempted some of the services as specified in the said notification from the whole of levy of Service Tax. In the said notification the service tax has been exempted by way of refund which also includes the Education Cess as well as Secondary and Higher Education Cess as both cesses are imposed on the levied amount of service tax.

Finding of the Adjudicating Authority: -

CLAIMS OF REFUND LESS THAN RS. 500/-: The Adjudicating Authority held that a Letter from the Central Excise Commissionerate Headquarters dated 28.12.2010 was received by them wherein it was stated that “total claims of refund should not be less than Rs. 500/- as per para 2(h) of the said Notification and hence the view that each bill of each service is to be checked if it is more than Rs. 500/- is not correct.”

The Adjudicating Authority relooked the said provision and held that a harmonious reading the said provisions refer to total of the claim in respect of specified services. Thus, total of the refund claim in respect of specified services is admissible if the same is not less than Rs. 500. Impugned SCN in this regard held not sustainable.

ORIGINAL DOCUMENTS OF THE SERVICE PROVIDER NOT SUBMITTED: It was found that the documents referred in the SCN are not original. As such, the contention of the exporter is factually incorrect. Submission of original documents duly certified as per Para 2 (i) & (j) of the Notfn is a condition of the Notification. Hence, the claims in respect of such invoices are not admissible.

SHIPPING BILLS AND EXPORTERS INVOICE NO. NOT AVAILABLE: The number of invoices and shipping bills mentioned in the SCN are not traceable on the relevant invoices. As per the condition of the Notification in respect of the specified services of CHA and C&F agents, the Noticee should produce invoice issued by CHA and C&F agent specifying such numbers. The Adjudicating Authority rejected the submissions of the Noticee in this regard.

CONDITIONS IN RESPECT OF CHA SERVICES: Referring to last condition of clause (i) of the Notification, it was held that the exporter is required to produce invoices issued by the CHA for providing services specified in the Notification specifying details of all the charges collected by CHA from the exporter in relation to export goods. It was held that details of other taxable services provided by the CHA and received by the Noticee exporter, whether or not relatable to export goods with the claim of refund as required vide clause (ii) of relevant conditions are not traceable in the claim of Noticee. It was held that the exporter has not fulfilled the said conditions of Notification in respect of CHA services.

The Adjudicating Authority found the claims relating to Cleaning services to be complete in all respect and that all the documents requiring certification in such respect have been filed after due certification.

The Adjudicating Authority has denied the refund claim pertaining to Education Cess and SHE Cess on the ground that there is no Notification exempting the Education Cess and SHE Cess by way of refund under the respective Finance Acts under which the Ed. Cess and SHE Cess are levied. Notification No. 17/2009-ST exempts the specified services by way of refund. The Ed. Cess and SHE Cess have not been exempted under the same. As such, the amounts representing these cesses in the amount claimed are not admissible on merits.

It was further held that the claim of refund is not hit by the bar of limitation as the application for refund in the instant matter was filed well within one year from the earliest date of export covered under the above said application for refund. The clause of unjust enrichment is not applicable in the present case as the refund is under Notification no. 17/2009-ST, dated 07.07.2009.

Decision of the Adjudicating Authority:-

Refund claim partly allowed.

Conclusion:-

It is submitted that the Adjudicating Authority rightly held that the total refund claim filed by the assessee was to be considered and the refund claim cannot be considered on the consignment/invoice basis for deciding whether the refund claim was less than Rs. 500/- or not. But only one contention of the poor exporters but they are still fighting for the other issues before higher forums and hopeful of getting the favourable decisions. Thank God that at least one of controversies has been settled in favour of exporter.

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PJ/CASE STUDY/2010-11/43
23 February 2011

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PJ/CASE STUDY/2010-11/43
23 February 2011