2018 (2) TMI 1321 - AT - Service Tax

Refunds denied for service tax on export services pre-amendment; allowed post-amendment.

M/s Aztec Shiva Handicrafts & Arts Pvt. Limited M/s Krishna International Exim M/s Arts & Crafts Inc. M/s Lalji Handicrafts M/s Suncity Art Exporters M/s Bharat Art & Crafts M/s Priti International M/s Singhal Exports M/s Marwar Art Exports Versus CCE, Jaipur-II

The Tribunal ruled that refund claims for service tax paid on services used in export, where goods were exported under drawback claim, were not allowable ... Refund of service tax paid on various services used in the export of goods - Denial on the ground that the goods have been exported under drawback claim and hence in terms of the proviso 1(e) of the Notification No. 41/2007, refund is not allowable - Held that: - the refund claims in question cover the period partly prior to 07.12.2008 and part of the claims are for the period subsequent to the date - After the amendment of N/n. 41/2007 by N/n. 33/2008, the condition regarding drawback availment has been deleted and there can be no objection to grant of such refund subsequent to that date if otherwise allowable. For the period prior to such amendment by N/N. 33/2008, the condition under Notification is very clear to the effect that the refund under the Notification cannot be paid if said goods have been exported under claim of drawback of service tax paid. Refund for the period prior to the amendment by N/N. 33/2008 cannot be sanctioned - the cases are remanded to the adjudicating authority for purposes of bifurcating the refund and consider the refund for the period subsequent to the date of such amendment - appeal allowed by way of remand. Issues Involved:Refund claims under Notification No. 41/2007 for service tax paid on services used in export; Disallowance of refunds due to goods exported under drawback claim; Allowability of refunds post-amendment; Interpretation of Notification conditions pre and post-amendment.Analysis:The appeals before the Appellate Tribunal CESTAT NEW DELHI involved identical issues regarding the disallowance of refund claims under Notification No. 41/2007 for service tax paid on various services used in the export of goods, where goods were exported under drawback claim. The appellant argued that refunds should be allowed despite drawback claims, citing the deletion of the drawback condition in Notification No. 33/2008. The appellant also referenced a Tribunal decision allowing refunds even when drawback was claimed. On the other hand, the Revenue contested these submissions, pointing out Division Bench decisions holding that refunds were not allowable post-amendment of Notification No. 41/2007.After hearing both sides and reviewing the records, the Tribunal noted that refund claims covered periods both before and after the amendment by Notification No. 33/2008. Post-amendment, the condition regarding drawback availment was deleted, making refunds allowable if otherwise eligible. However, for the period before the amendment, the Tribunal found the Notification's clear condition stating that refunds cannot be paid if goods were exported under a service tax drawback claim. Citing a Division Bench decision, the Tribunal held that such refund claims could not be sanctioned for the pre-amendment period.The Tribunal followed the Division Bench decision and ruled that refunds for the period before the amendment by Notification No. 33/2008 could not be granted. The cases were remanded to the adjudicating authority for bifurcating the refund and considering refunds for the period post-amendment. Consequently, the impugned orders were modified and disposed of accordingly.