Exporters Lose Appeal as CESTAT bars Refund for Service Tax Paid u/s 68(2) [Read Order]

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Ahmedabad, has dismissed appeals filed by Amrut Cold Storage Pvt. Ltd., Silver Sea Food, and Silver Star Exports, all based in Porbandar, Gujarat, in a case involving refund claims of service tax paid on Goods Transport Agency (GTA) services used for the export of goods. The appeals were against a common order dated 25.04.2017 passed by the Commissioner (Appeals), Rajkot, which upheld the orders of the adjudicating authority dated 15.03.2016 confirming the recovery of erroneously sanctioned refunds.

The appellants had sought refund under Notification No. 41/2012-ST dated 29.06.2012, arguing that they had paid service tax on input services related to export and were thus entitled to a rebate. Their counsel contended that under Clause 3(a) of the notification, rebate could be claimed on service tax actually paid based on certified documents, and Clause 3(b) did not bar recipients of services from claiming the rebate. He further submitted that the condition should not apply when the service tax was borne by exporters in connection with services used for export.

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Refuting these arguments, the Department, represented by Shri P. Ganesan, maintained that as per the plain reading of Clause 3(b) of Notification No. 41/2012-ST, persons liable to pay service tax under Section 68 of the Finance Act, 1994, could not claim rebate under this notification. The Revenue relied on the decision in M/s. Nahar Industrial Enterprises Ltd. v. CCE & ST, Chandigarh [2015 (38) STR 256 (Tri-Delhi)], which held that where the exporter is the service recipient and liable to pay tax under Section 68(2), refund cannot be granted.

After hearing both sides, the Tribunal held that the impugned order of the Commissioner (Appeals) was based on a correct interpretation of Notification No. 41/2012-ST and the binding precedent of the Tribunal in Nahar Industrial Enterprises Ltd. The Tribunal noted that Section 68(2) explicitly casts the liability on the service recipient for certain services like GTA, and Clause 3(b) of the notification specifically denies refund to such persons.

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Dr. Ajaya Krishna Vishvesha, Member (Judicial), concluded that there was no legal infirmity in the order and dismissed all three appeals by the exporters.

To Read the full text of the Order CLICK HERE

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