In the recent case, the Mumbai bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that refund claims for exported goods from April to June 2009 were not impacted by the conditions of the new notification issued on July 7, 2009.
Zodiac Clothing Company Limited,the appellant-assessee,engaged in the export of goods, periodically filed refund claims for input services like ‘Banking/Courier/TTA Commission’ and ‘Commission paid to the Foreign Agent’ under Business Auxiliary Service (BAS), claiming refunds under Notification No. 41/2007-S.T.
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The refund claim for April 2008 to December 2008, filed on 31.03.2009, was rejected by the original authority in Order No. RK/R-61/2010 dated 25.03.2010. Another claim of Rs. 17,17,480 filed on 31.03.2010 was partially allowed for Rs. 91,275 but rejected for Rs. 16,26,205, as per Order No. KCK/R-197/2010 dated 22.01.2010. The Commissioner (Appeals),upheld these decisions and rejected the appeal in Order No. 173/174 dated 21.05.2013.
In the first round of litigation, it was found that the lower authorities had failed to carefully verify crucial facts, leading to incorrect rejection of refund claims of Rs. 9,81,612 and Rs. 16,17,016. The issues included the outdated drawback condition, improper application of the time bar, and incorrect assessment of the nexus between commission services and exports. It was determined that the claims had been correctly filed under the applicable notification and should have been approved. As a result, the matter was remanded to the original authority for a fresh review, considering these observations.
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In the re-adjudication proceedings, the original authority granted a refund of Rs. 9,81,612 for the claim filed on 31.03.2009 for October to December 2008 but rejected the Rs. 16,17,016 claim filed on 31.03.2010 for the period 01.04.2009 to 30.06.2009. The appellants appealed the rejection to the Principal Additional Director General, DGPM, who upheld the original decision and rejected the appeal in Order-in-Appeal dated 18.05.2018.
The issues to address were whether the refund claim filed on 31.03.2010 for service tax on services from a foreign commission agency for April to June 2009 was admissible under the relevant Notifications and legal provisions, and whether the claim was time-barred.
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The tribunal established that taxes and duties should not be exported to ensure a level playing field in international markets. Refunds for indirect taxes on inputs and input services used in exports were to be provided. The Ministry of Finance had issued instructions on 17.04.2008 to refund service tax paid on taxable services used by exporters, even if not considered input services.
The appellate tribunal noted that the refund included service tax on 16 specific taxable services related to exports, even if those services were not used directly as input services. Notification No. 41/2007-S.T. (October 6, 2007) and its successors, Notifications No. 17/2009-S.T. and No. 18/2009-S.T. (both July 7, 2009), had expanded the list of refundable services and had allowed claims to be filed up to one year after the export date.
The bench observed that the appellants refund claim was rejected because it did not meet conditions 2, 3, and 4 of Notification No. 18/2009-S.T. (July 7, 2009), which pertain to refund limits, half-yearly return submissions, and canalized items. However, the goods were not claimed as canalized items, and the refund amount was not disputed. Since the exports were completed before the new notification was issued, the conditions related to return submissions were not relevant for denying the exemption.
A single member bench of M.M Parthiban (Technical Member) overturned the order dated May 18, 2018, and approved a refund of Rs.16,17,016 to the appellant.
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