Appellate Tribunal allows appeal, exempts education cess on service tax for exported goods.

The Appellate Tribunal CESTAT, Bangalore allowed the appeal, setting aside the Commissioner's decision and restoring the original authority's refund of service tax on services used in exporting goods. The Tribunal held that when service tax is exempted, education cess is also deemed exempt, in line with a Board's Circular. The judgment emphasized that when the "whole of service tax" is exempted, education cess should not be recovered, aligning with government policy and relevant Finance Acts. The appeal was allowed with consequential relief granted.

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Issues:
- Claim for refund of service tax on services used in export of goods
- Exemption of education cess in addition to service tax

Analysis:
The appeal before the Appellate Tribunal CESTAT, Bangalore involved a dispute arising from a claim for refund of service tax on services utilized in the export of goods. The assessee, a manufacturer of iron ore pallets also engaged in exporting, had claimed the refund under Notification No. 41/2007-ST dated 6.10.2007. Initially, the refund was sanctioned by the original authority. However, a subsequent show-cause notice was issued proposing the recovery of education cess and higher education cess on the grounds that the exemption granted was only in respect of service tax and did not cover the education cess. The Commissioner upheld the demand as proposed in the show-cause notice.

During the proceedings, the respondent contended that the exemption from service tax covered 'the whole of service tax,' including education cess, as it is considered a part of service tax. The respondent relied on a Board's Circular clarifying that the exemption from service tax extended to the education cess leviable as a percentage of the basic service tax payable. After considering the arguments from both sides and perusing the records, the Tribunal referred to the Board's Circular dated 8.4.2011, which emphasized that education cess is collected as a percentage of service tax and when service tax is exempt, education cess is also deemed exempt. Therefore, the Tribunal held that the Order-in-Revision passed by the Commissioner could not be sustained, setting it aside and restoring the original authority's decision.

In conclusion, the Tribunal allowed the appeal with consequential relief, in accordance with the law. The judgment clarified the principle that where the 'whole of service tax' is exempted under a notification, education cess should not be recovered, aligning with the policy intention of the Government and the provisions of relevant Finance Acts.

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