Refund of education cess on refundable service tax for export-related services upheld under later circular and Tribunal view.

Education cess paid on service tax charged for port-related services and technical testing services was treated as refundable where the underlying service tax refund was otherwise admissible for exports. The earlier rejection rested on the view that the refund notification covered service tax only, but the later Board circular clarified that education cess refunded along with service tax to exporters need not be recovered. Relying on that clarification and subsequent Tribunal decisions, the Tribunal concluded that denial of refund of education cess on the refundable service tax was not justified, and the appellants were entitled to the refund.

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Issues: Whether the appellants were eligible for refund of education cess paid on the service tax charged by service providers in respect of port related services and technical testing and analysing services.

Analysis: The refund claim was rejected below on the footing that the relevant notification contemplated refund of service tax and not education cess. The Tribunal noted that the later Board circular, issued after considering the earlier contrary view, stated that where education cess had been refunded along with service tax to exporters, the same need not be recovered. It also relied on later Tribunal decisions taking the view that once the export of goods is not in dispute and the service tax component is refundable, denial of refund of education cess paid on that tax is not justified.

Conclusion: The appellants were held entitled to refund of the education cess paid on the service tax charged by the service providers.

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