2016 (11) TMI 1003 - AT - Service Tax

Tribunal Grants Refund for Handling Charges: Compliance with Notification Conditions Essential

C.C.E. Jaipur-II Versus M/s Arihant Tiles & Marbles Pvt. Ltd. And Vice-Versa

The Tribunal granted a refund of Rs. 17,87,445 to the assessee for Terminal Handling Charges and transportation services. The Revenue's claim for a refund ... Recovery of refund granted - N/N. 41/07-ST dated 6.10.2007 - the taxable service namely, Terminal Handling Charges is not confirming to the port service and GTA Service availed for movement of export cargo from place of removal to the port of export prior to 19.02.2008 is not available for refund in terms of the above referred Notification - Held that: - the services towards terminal and other handling services were availed b the assessee within the port area, in connection with export of the goods. Thus, irrespective of classification of service, since the same are provided within the port for export of goods, the benefit of refund should be available under the head Port Service in terms of notification dated 06.10.2007. In this context, the Tribunal in the case of SRF Ltd., [2015 (9) TMI 1281 - CESTAT NEW DELHI] have held that irrespective of the classification of service, if the services are provided within the port, the same should qualify as port service for the purpose of benefit of refund. Thus, I am of the view that the assessee is eligible for refund of ₹ 16,72,923/- With regard to GTA service availed for transportation of goods from the place of removal to the port of export, I find that the refund claim was filed after issuance of the Notification No. 3/2008 dated 19.02.2008. I also find that in an identical situation, this Tribunal in the case of East India Minerals Ltd. [2012 (8) TMI 22 - CESTAT, KOLKATA] has allowed the refund claim to the appellant. As regards testing and analysis service, I find from the available records that the appellant had entered into the agreement with the overseas buyer for providing such service. Since, the agreement was in existence exist before exportation of goods, I am of the view that the requirement of Notification dated 06.10.2007 has been duly complied with by the assessee, for which refund claim cannot be denied There is correlation between the movement of goods from the place of removal to the port of export. However, I find that the assessee has not produced the copies of the agreements entered into between it and the overseas buyers. Since the contents of the agreements have to be verified by the Original authority, I am of the view that the matter should go back to the original authority for verification of the agreements - appeal allowed by way of remand. ISSUES PRESENTED AND CONSIDERED 1. Whether terminal and other handling charges provided within the port area in connection with export of goods qualify as 'Port Service' for grant of refund under Notification dated 06.10.2007 irrespective of the services' classification. 2. Whether service tax paid on Goods Transport Agency (GTA) services used for transportation of export goods from place of removal to the port of export is refundable where the refund claim was filed after amendment by Notification dated 19.02.2008. 3. Whether testing and analysis services qualify for refund under Notification dated 06.10.2007 where there exists an agreement with overseas buyers entered into prior to exportation. 4. What is the evidentiary standard and the proper forum for verification of contractual documents and transport evidences relied upon to establish entitlement to refund under the Notification. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Port-area terminal/handling charges as Port Service Legal framework: Refund entitlement under Notification dated 06.10.2007 extends to service tax on specified services provided in connection with export of goods, including port service as defined by the relevant statute and notifications; entitlement turns on whether the service qualifies as port service for refund purposes. Precedent Treatment: The Tribunal has previously held that services provided within the port, though classified differently, qualify as port service for refund purposes (referenced Tribunal decisions applied). Interpretation and reasoning: The Court treats the location and nexus to export activity as determinative - since terminal and handling services were availed within the port area and in connection with export, they fall within the scope of port service for Notification benefit regardless of formal service classification. Reliance is placed on earlier Tribunal decisions that applied the same location/nexus approach. Ratio vs. Obiter: Ratio - the entitlement to refund is determined by the service being provided within the port in connection with export; classification alone is not decisive. This principle is applied to allow refund of the quantified amount. Conclusion: The assessee is entitled to refund of service tax paid on terminal and other handling charges amounting to the specified figure, and the impugned order is set aside to that extent. Issue 2 - Refundability of GTA services for movement from place of removal to port where claim filed after Notification dated 19.02.2008 Legal framework: Notification No. 41/2007 as amended by Notification No. 3/2008 (19.02.2008) altered refund conditions for GTA services; entitlement depends on satisfaction of the notification's conditions on the date of filing the refund claim. Precedent Treatment: The Tribunal in an identical factual posture (East India Minerals Ltd.) allowed such refunds where the claims were filed after the amending notification and the statutory conditions were then satisfied. The Court follows that precedent. Interpretation and reasoning: Applying the ratio of the cited decision and the stated objective of export-promotion (avoiding domestic tax burden on exports), the Court finds that when the requirement of the notification is satisfied on the date of filing the claim, service tax paid on GTA services used to transport goods from place of removal to the port becomes refundable. Ratio vs. Obiter: Ratio - refund is allowable where the statutory requirement is satisfied at the time of filing the claim (post-amendment). This is directly applied to allow the specified refund amount for transportation charges. Conclusion: The assessee is entitled to refund of the service tax paid on GTA services for movement from place of removal to the port in the quantified amount. Issue 3 - Testing and analysis services where agreement with overseas buyer exists before export Legal framework: Notification dated 06.10.2007 requires a specified contractual relationship/condition (agreement with overseas buyer) to qualify certain services for refund when they are in connection with export. Precedent Treatment: The Court treats existence and timing of contractual arrangements as material to satisfying the notification's conditions; past treatment recognizes that pre-export agreements with overseas buyers satisfy the conditionality for refund. Interpretation and reasoning: Where there is an agreement in existence prior to export between the taxpayer and the overseas buyer for provision of testing/analysis, the statutory condition is met. Verification of the agreement's contents and its timing is necessary to establish entitlement. Ratio vs. Obiter: Ratio - testing and analysis services qualify for refund when an appropriate agreement with the overseas buyer existed prior to exportation; this is applied to allow the claimed amount. Conclusion: The assessee satisfied the notification's requirement for testing and analysis services by producing the agreement; refund for such services cannot be denied on that ground. Issue 4 - Evidentiary standard and remand for verification of agreements and transport documents Legal framework: Entitlement to refund under the Notification is fact-sensitive and depends on documentary proof (contracts, shipping bills, lorry receipts) proving the services were in connection with bona fide exports; original authority bears responsibility for primary verification of original documents. Precedent Treatment: The Court recognizes the need to verify originals and cross-check contents and correlation of movement documents, following administrative practice and prior Tribunal directions requiring document verification at the original authority level. Interpretation and reasoning: Although there exists correlation between movement of goods and export shipping bills, absence of production of original agreements before the adjudicating authority precludes final adjudication on part of the claim. The contents of the agreements must be verified by the original authority to determine genuineness and compliance with the Notification; similarly lorry receipts should evidence transportation from place of removal to port. Ratio vs. Obiter: Ratio - where documentary proof is not produced for verification, the matter should be remanded to the original authority for examination of original agreements and transport evidences; if documents are in order, refund must be granted. This remand direction is an operative part of the decision. Conclusion: The portion of the refund claim contested by Revenue for lack of documentary proof is remanded to the original authority for verification of original agreements and lorry receipts; if verified, the refund shall be allowed (quantum specified in the operative directions). Cross-references and operative outcome 1. Issues 1-3 are interlinked by the central principle that the substance of a service (connection to export and location within port) and the existence/timing of export agreements determine refund entitlement under Notification 06.10.2007 (as amended), rather than mere tax classification. 2. Precedents relied upon are followed insofar as they establish that port-provided services qualify as port service for refund, and that post-amendment filing satisfying the Notification enables refund of GTA charges; these form the binding reasoning applied. 3. Relief granted: refund allowed in the specified amounts where documentary prerequisites are satisfied; one contested amount remanded for verification of original agreements and transport documents, with direction to grant refund if documents are in order.