By TIOL News Service

MUMBAI, SEPT 09, 2015: THE appellant entered into contract with the provider of service, namely Maersk Line - for export of goods, which comprised services at Port of Load, place of receipt, port of discharge, place of delivery etc. The port of loading is located in India and port of discharge and place of delivery is located outside India.

In the terms of sale agreement, as their buyers are located in foreign land, the ownership of the goods remained with the appellant till place of delivery and any loss or damage occurring on or before delivery of goods is to be borne by the appellant. In the export invoice, service charges i.e freight documentation, handling charges, inland haulage charges are forming part of cost borne by them. For all these services, the service provider M/s Maersk Line has raised the invoices charging the Service Tax on total service being provided, which has been paid by the appellant.

Subsequently, the appellant applied for refund in terms of Notfn. No. 17/2009-ST r/w 41/2007-ST. The Dy. Commissioner allowed a part of the claim but rejected an amount of Rs. 7,41,617/- on the reasoning that activities performed in foreign port will not attract service tax under 'port service' and the appellant have not discharged burden placed on it while claiming the benefit of exemption. The second issue is that, when the services are provided within and outside India and the recipient has paid the Service Tax, whether the appellant is entitled to refund on the part of services provided outside India by the service provider.

As the Commissioner(A) upheld the rejection order, the appellant is before the CESTAT.

It is inter alia submitted that the deemed place of removal is the premises of the buyer in the foreign country and, therefore, the refund of service tax should be granted; in view of rule 8 of the Place of Provision of Services Rules, 2012 since admittedly both the service provider and service receiver are located in India and as such the whole part of services is deemed to be in India; whatever tax the appellant have paid on the services provided by the service provider in foreign land or destination being not taxable under the FA, 1994 should not be retained by the Government as it is the policy of the Government not to export tax and duty. Reliance is placed on the decision in KVR Construction - 2010-TIOL-68-HC-KAR-ST in support.

The AR relied on the Bombay High Court ruling in the case of Andrew Telecom (I) Pvt. Ltd. - 2014-TIOL-497-HC-MUM-ST to emphasise that limitation will apply in both cases of refund of duty or refund of deposit.

The Bench observed -

"6. …, I find that admittedly the claim of refund is not time barred under the provisions of Finance Act or under Section 11B of the Central Excise Act. Hence, the ruling of the Hon'ble Bombay High Court relied upon by the Revenue in the case of Andrew Telecom (supra) has no application in the facts of this case. Secondly, I hold that under the facts and circumstances, Revenue have received the amounts deposited either as tax or deposit, the Revenue is bound to refund the same when a claim have been made under the provisions of the Act in accordance with law. The amount of Service Tax credited to the exchequer on which admittedly the Service Tax is not leviable under the Act, takes the nature of deposit. The learned Commissioner (Appeals) is in error in refusing the refund of the same. No amount can be collected from the assessee by the Revenue if it is not in accordance with the tax law, as has been provided under Article 265 of the Constitution of India. Accordingly, I allow the appeal and direct the adjudicating authority to refund Rs.7,14,617/-, rejected by the impugned order along with interest as per rules. I further direct that the impugned refund shall be worked out within a period of 45 days on receipt of a copy of this order, and disbursed."

The appeal was allowed.

(See 2015-TIOL-1892-CESTAT-MUM)