Delhi High Court allowed Service Tax Refund on the Clearing and Forwarding Services availed for the period 16.10.1998 to 01.09.1999.
In Ambuja Cements Ltd v. Commissioner, Service Tax, the division bench of the Delhi High Court allowed Service Tax Refund to the assessee on the clearing and forwarding services availed by them for the period 16.10.1998 to 01.09.1999.
The appellant-assessee received “Clearing and Forwarding Agent Service‟ from various services providers for which they paid service tax of Rs.35,42,021 for the period 16th July, 1997 to 30th September, 1999.
The Supreme Court in the case of Laghu Udyog Bharti v. Union of India 1999 held that the person who is receiving services cannot be made responsible for filing returns and paying tax. To overcome the said judgment, on 23rd August, 1999 Notification No.7/1999-ST was issued with effect from 1st September, 1999 whereby sub-clause (iii) in Rule 2(1)(d) of the Service Tax Rules, 1994 was omitted. Consequently, the petitioners applied for refund of service tax paid by them. However, the Officer rejected the same. The appellants could not secure relief from the appellate authorities including the CESTAT.
In the meanwhile, the government made a retrospective amendment to the Finance Act, 1994 to overcome the effect of the decision of the Supreme Court in Laghu Udyog Bharti. Aggrieved by the same, assessee, with other tax payers approached the Supreme Court, wherein the Apex Court upheld the constitutional validity of the amendment. However, the Court held that there could be no service tax liability on user of the services of clearing and forwarding agents beyond 16th September, 1999.
In Birla Corporation Limited v. Union of India, the Apex Court suggested an amendment to its earlier judgment and held that the exemption is available till 16th October 1998.
Relying on the decision in Birla Corporation Limited v. Union of India, the Department contended that the intention was not to exempt from payment of tax the users of services of clearing and forwarding agents beyond 16th October, 1998.
Rejecting the above contention of the department, Justice S. Maralidhar pointed out that “the fact remains that the Union of India did not challenge the order dated 3rd February, 2006 passed by the Supreme Court making a minor but significant change to its judgment dated 17th March, 2005. The Supreme Court was clear that the exemption from payment of service tax on services provided by clearing and forwarding agents stood exempted from 16th October, 1998 itself.”
In view of the above findings, the bench allowed the appeal and set aside the CESTAT decision and held that refund must be allowed to the assessee with interest for the said period.
Read the full text of the Order below.
