Whether the late filing of the EXP-2 return as prescribed in Notification No. 18/2009-ST dt. 07.07.2009 causes denial of the benefit of exemption from service tax

PJ/CASE STUDY/2012-13/13

07 July 2012

PJ/Case Study/2012-13/13

CASE STUDY

Prepared By:
CA. Pradeep Jain
CA. Nishith Shah
Kavita Thanvi

Introduction:-

As per Notification no. 18/2009-S.T. dated 7.09.2009 exemption from payment of Service tax is granted in case of services utilised in export of goods. In this case M/s Adarsh Guar Gum has availed exemption from payment of Service tax for services utilized in Export of goods on services of GTA and Foreign Commission Agent. For availing exemption there are certain conditions mentioned in the said Notification which must be satisfied as well as EXP2 return must be filed on half-yearly basis on or before 15^th of next month (i.e. 15^th of April and 15^th of Oct.) otherwise exemption will not be allowed. In the below case M/s Adarsh Guar Gum did not file EXP2 return by the due date (in this case it is 15.04.2011) rather they filed the same after the due date (i.e. 12.05.2011). Therefore, SCN is issued to the assessee (AGG) rejecting service tax exemption and requiring paying the same alongwith Interest and Penalty. Is the assessee liable to pay service tax on the ground that they have not filed EXP2 return by the due date.

M/s Adarsh Guar Gum v/s Assistant Commissioner, Central Excise, Jodhpur
[Order-In-Original no. 10/ST/2012, dated: 28.06.2012]

Brief Facts:-

- Appellant-assessee is having Service tax registration issued under Section 69 of Chapter V of the Finance Act, 1994. The assessee has availed exemption from paying Service tax as per Notification no. 18/2009-S.T. dated 07.09.2011 for services used in Export of goods on services of GTA and Foreign Commission Agent. They have complied with all the required conditions except that they delayed in filing of EXP2 return. They have to file EXP2 return for the half-yearly period Oct.2010 to March, 2011 on or before 15^th April, 2011 but they filed the same on 12.05.2011.

- The Assistant Commissioner is of view that late filing of EXP2 return causes denial of exemption under Notification no. 18/2009-S.T. and consequently issued Show cause notice to the assessee rejecting exemption and demanding service tax of Rs. 20,335/- alongwith Interest and Penalty under Section 75 and Section 76 of the Finance Act, 1994 respectively.

- After Personal Hearing, the Deputy Commissioner has found that delay In filing of EXP2 return is only a procedural lapse and the same can not be held as substantial ground for denial of benefit of exemption and passed order in favour of assessee.

Assessee’s Contentions:-

Assessee made following submissions before the Commissioner (Appeal):

-Assessee submitted that a perusal of the opening para of the Notification No. 18/2009-ST dt 07.07.2009 clearly provides that the exemption will be available on the specified services if the conditions prescribed in column no. (4) of the table given in the Notification are fulfilled. Thus, it is clear that the conditions prescribed in Column no. (4) are of the substantive nature. And if one of the conditions given therein are not fulfilled then exemption will not be available to the claimant.

-Further it was submitted that they are fulfilling all the conditions prescribed in Column (4) of the Table contained in Notification No. 18/2009-ST which are substantive in nature and therefore, we are eligible for exemption granted under the Notification and we have availed the exemption.

- In continuation to above it was submitted that it is not the case of the Department that they have not fulfilled any of the conditions enumerated in Column (4) of the Table in the Notification. It is not a case against them that they are not eligible to avail the benefit. Therefore, when the substantial conditions are fulfilled then the refund cannot be denied to them.

-The assessee further submit that filing of half yearly return is a procedural condition and not a substantive requirement for availing exemption from service tax under Notification No. 18/2009-ST. There is delay in filing the half yearly return EXP-2 as prescribed in the Notification. Therefore, the substantive benefit of exemption cannot be denied to the appellant for violation of a procedural condition.

- It was submitted that there are various judgments wherein it has been held that mere procedural infraction does not lead to denial of substantive benefit to the assessee. In this regard, reliance is placed on Modern Process Printers [2006 (204) E.L.T. 632 (G.O.I.)]

- It is submitted that in the case of M/s Ashima Dyecott Ltdv/s CCE, Ahmedabad [2011-TIOL-1905-CESTAT-AHM] it has been held that technical reasons cannot defeat legislative intent.

-Further it was submitted that in the impugned show cause notice it is alleged that interest is recoverable from the appellant on the exemption availed under Section 75 of the Finance Act, 1994. In this regard, they submit that when the demand itself is not sustainable then interest cannot be recovered from the assessee. It is submitted that the exemption availed by appellant was admissible as they were eligible to avail the same. The only issue is that the return EXP-2 was filed belatedly by 27 days (approximately). And the benefit of exemption cannot be denied for this procedural mistake. Therefore, the show cause notice demanding interest under Section 75 of the Finance Act, 1994 is not sustainable and is liable to be set aside.

-The assessee further submit that Penalty under Section 76 would arise only where there is failure to pay service tax. However, in present case there is no failure to pay service tax. The exemption claimed by the assessee was available to them as they have fulfilled all the substantive conditions of the Notification. It is submitted that the condition of filing return every half yearly cannot be said to be a substantial condition, the violation of which will result in denial of exemption. Therefore, the exemption benefit cannot be denied on this ground. Therefore, when no liability arises on their part to pay the service tax, no penalty can be imposed. Therefore, the impugned show cause notice proposing to impose penalty on the assessee is required to be set aside.

Issue: - Whether the late filing of the EXP-2 return as prescribed in Notification No. 18/2009-ST dt. 07.07.2009 causes denial of the benefit of said Notification along with interest and liable for penalty under section 76 of the Act?

Reasoning of the Commissioner (Deputy):- The Commissioner (Appeal) found that there is delay of 27 days in filing the EXP-2 return, which is procedural lapse and the same can not be held as substantial ground for denial of benefit of exemption granted and availed under Notification No. 18/2009 S.T. dated 07.07.2009.Therefore he don't find any reason to confirm demand of Service Tax amounting to Rupees 20,335/- as benefit availed. Accordingly interest also can not be demanded. In view of above as demand is not sustainable, penalty under section 76 of Finance Act,1994 is also not imposable.

Decision of the Adjudicating Authority:-

Impugned order was set aside. Appeal of the assessee was allowed and Department’s appeal was rejected.

Conclusion:-

In many cases, assesses has to face unnecessary hurdles to get the refund of his amount from the department , however in the current case above Commissioner (A) has rightly given the judgment that procedural lapse cannot be a substantial ground for denial of benefit of exemption granted.

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PJ/CASE STUDY/2012-13/13
07 July 2012

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