Service tax refund under export exemption cannot be denied merely because exports were routed through a merchant exporter.

Refund of service tax under Notification No. 41/2007-ST was treated as admissible where the claimant itself had paid the tax on GTA services and the goods were exported directly from factory to port. The presence of a merchant exporter did not defeat entitlement because the merchant exporter had not paid the tax and could not claim refund of tax not paid by him. Clause 2(b) was read harmoniously with clause 2(a) so that, once the exemption conditions were met, refund operated as the working out of that exemption. The Revenue's challenge failed.

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Issues: Whether refund of service tax under Notification No. 41/2007-ST dated 06.10.2007 was admissible to the respondent when the taxable service was paid by the respondent and the export was undertaken through a merchant exporter.

Analysis: The refund claim was held to be maintainable because the respondent had paid the service tax on GTA services and the goods were transported directly from the factory to the port. The presence of a merchant exporter did not alter entitlement, since the merchant exporter had not paid the service tax and could not claim refund of a tax not paid by him. Clause 2(b) of the notification was read harmoniously with clause 2(a), and once eligibility to the exemption notification was established, sanction of refund was treated as the working out of that exemption. The view was reinforced by the Supreme Court's approach that the refund was payable either to the service recipient or to the merchant exporter, and the revenue could not retain tax to which it had no entitlement.

Conclusion: The respondent was entitled to refund under Notification No. 41/2007-ST dated 06.10.2007, and the Revenue's appeal failed.

Ratio Decidendi: Where the claimant has paid the service tax and satisfies the exemption notification, refund cannot be denied merely because the export was effected through a merchant exporter; the notification must be construed harmoniously so as to give effect to the exemption.

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