Service tax refund under export notification denied where drawback was claimed and the exclusion condition remained in force

Refund of service tax under Notification No. 41/2007-ST was unavailable where the exported goods had been claimed under drawback, because proviso (e) required export without availing drawback of service tax paid on the specified services. The deletion of that proviso by Notification No. 33/2008-ST operated only prospectively, as no express or implied retrospective effect was shown. Exemption notifications are to be strictly construed, and any ambiguity operates in favour of the Revenue. Applying that principle, the claimed refund was inadmissible once the drawback condition was breached.

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Issues: Whether refund of service tax under Notification No. 41/2007-ST was admissible when the exported goods had been exported under claim of drawback under the Customs, Central Excise Duties and Service Tax Drawback Rules, 1995.

Analysis: Notification No. 41/2007-ST, during the relevant period, contained proviso (e), which required that the goods be exported without availing drawback of service tax paid on the specified services under the Drawback Rules, 1995. Since the goods in question were admittedly exported under claim of drawback, the condition in the notification was not satisfied and refund could not be granted. The deletion of proviso (e) by Notification No. 33/2008-ST from 07.12.2008 was held to have no express or implied retrospective effect. Exemption notifications are to be strictly construed, and any ambiguity must operate in favour of the Revenue. The earlier tribunal view in Rajasthan Textile Mills was followed as the condition was unambiguously breached.

Conclusion: Refund under Notification No. 41/2007-ST was not admissible where drawback had been claimed, and the issue was decided against the assessee and in favour of the Revenue.

Ratio Decidendi: A refund exemption conditioned on export without availing drawback is unavailable once drawback has been claimed, and subsequent deletion of the condition operates only prospectively unless retrospective effect is expressly or necessarily implied.

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