Non-mention of Commission Amount in Shipping Bills Mere Technical Breach: CESTAT allows Service Tax Refund to Tata Intl [Read Order]

The Chennai Bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) recently set aside the rejection of a service tax refund claim filed by Tata International Limited, holding that non-mention of commission amount in shipping bills constitutes only a venial technical breach and cannot form grounds to deny substantive benefits for which they are eligible.

As part of its export business, Tata International Limited (Tata) had entered into agreements with overseas commission agents for procuring export orders and paid commission to such agents. Tata discharged service tax on the commission paid under the reverse charge mechanism as per Section 66A of the Finance Act, 1994.

Pursuant to the deployment of Notification No. 41/2007-Cus dated 06.10.2007, which provides refund of service tax paid on specified input services used for export of goods, Tata filed three refund claims for the period April 2008 to March 2009.

The claims were partly revised and eventually rejected by the Adjudicating Authority on the ground that the appellant had not fulfilled Condition (ii) of Sl. No. 15 of the Schedule to the refund notification, as the commission amount had not been indicated in all the shipping bills.

Show cause notices (SCN) were issued proposing rejection of the refund claims. One of the SCN stated that part of the claim was filed beyond six months from the end of the relevant quarter as stipulated in the notification, and was therefore barred by limitation.

The Adjudicating Authority later issued an order confirming the proposals in the show cause notices and rejected Tata’s refund claims. The Appellate Authority upheld the rejection, leading to the present appeal before CESTAT.

Counsel appearing for the appellant submitted that the appellant had paid service tax on the commission agent services used in the export of goods and had not availed Cenvat credit, thus satisfying conditions (a) to (e) under paragraph 1 of the Notification.

Further, it was contended that the refund could not be denied merely for non-indication of commission amount in the shipping bills when the service tax had been paid and the services were used for export of goods.

The appellant further argued that the time limit to file refund application has to be calculated from the date of payment of tax under RCM and not the actual quarter of export, placing reliance on the decision in CCE & ST, Kanpur v M/s. Pacific Leather Finishers (2016).

The Revenue counsel reiterated the findings of the lower authorities.

The Bench of Ajayan T.V., Member (Judicial) examined the conditions prescribed under Notification No.41/2007-Cus and noted that the appellant had discharged service tax under reverse charge on the commission paid to foreign agents and that the services were used in relation to export of goods.

Accordingly, it observed that the omission to indicate the commission amount in the shipping bills amounted to only a venial technical breach of the condition prescribed in the notification.

CESTAT held that the refund could not be rejected solely on that ground and set aside the impugned order and allowed the appeal with consequential relief.

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