CESTAT Allows Refund of Service Tax on Head Office Services Used for Export, Orders Limited Remand [Read Order]

The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that input services used beyond the factory premises, including those availed at the head office or corporate office qualify as “specified services” for the purpose of refund under Notification No. 41/2012-ST.

The Tribunal observed that the retrospective amendment brought in by Notification No. 1/2016-ST is clarificatory in nature and applicable to the period in dispute.

M/s eShakti.com Pvt. Ltd., engaged in the manufacture and export of ready-made garments, appealed against the Orders-in-Appeal passed by the Commissioner of GST and Central Excise, Chennai, wherein departmental appeals were allowed and refund claims sanctioned by the original authority were set aside.

The dispute related to refund of service tax paid on input services used for export of goods for the period January 2014-March 2015.

The appellant had initially filed refund claims under Notification No. 27/2012-CE instead of Notification No. 41/2012-ST due to a clerical error. Although the claims were initially rejected, the matter had reached the Tribunal, which remanded the case for fresh consideration. Upon remand, the Assistant Commissioner partly sanctioned the refunds and rejected the balance. However, the Commissioner (Appeals), while hearing departmental appeals, set aside the sanction orders and upheld the rejections.

The rejections were primarily on the ground that certain services such as renting of immovable property, telephony, security, professional and IT services, repair and maintenance and clearing and forwarding services were not used beyond the place of removal. Therefore, they did not qualify as “specified services”.

Before the Tribunal, the appellant contended that Notification No. 1/2016-ST had retrospectively expanded the definition of “specified services,” covering head office and corporate office services used in connection with exports. It was also argued that Notification No. 41/2012-ST permits filing of refund claims within one year from the date of export and does not impose any quarter-wise restriction.

The Tribunal examined the amended definition of “specified services” and noted that the amendment was given retrospective effect from July 1, 2012. It held that the rejection of refund claims based on the pre-amendment expression “beyond the place of removal” was legally untenable.

Relying on the decision of the Principal Bench in Bharat Mines & Minerals v. CCE, Dehradun, the Tribunal observed that there is no concept of pre-export or post-export services under the notification. The only test is whether the services were used beyond the place of manufacture and in relation to export.

Accepting the appellant’s submissions, the Tribunal held that services such as renting of premises, telecommunication, security, professional and IT consultancy, repair and maintenance and clearing and forwarding services, when used at the head office for export-related activities, qualify as specified services under Notification No. 41/2012-ST.

Noting that detailed invoice-wise verification had not been carried out, the Tribunal remanded the matter to the lower adjudicating authority for limited verification of the authenticity of invoices. The Tribunal directed that upon such verification, the refund shall be sanctioned along with interest.

Accordingly, the impugned orders were set aside to the extent they rejected refund claims, and the appeals were allowed by way of remand. The order was pronounced by a Bench comprising P. Dinesha (Judicial Member) and Vasa Seshagiri Rao (Technical Member).

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