Expansive interpretation of "food stuff" and wrong accounting head cannot defeat refund of tax paid on an exempt rail service

Transportation of spices and masala products by rail was treated as transport of "food stuff" under Notification No. 25/2012-ST because the exemption entry used the enlarging term "including", giving the phrase an expansive meaning. On that construction, the exemption applied to the service. Refund of service tax could not be denied merely because the tax had been paid under the wrong accounting head, since incorrect classification did not change the character of tax paid on an exempt service. The result was that the tax paid on the exempt rail transportation remained refundable.

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Issues: (i) Whether transportation of spices and masala products by rail was covered by the exemption for transportation of food stuff under Notification No. 25/2012-ST dated 20.06.2012; (ii) Whether refund could be denied merely because the tax was paid under a wrong accounting head.

Issue (i): Whether transportation of spices and masala products by rail was covered by the exemption for transportation of food stuff under Notification No. 25/2012-ST dated 20.06.2012.

Analysis: Serial No. 20(i) of the notification exempts transportation by rail of food stuff from one place in India to another. The expression "food stuff" is not exhaustively defined in the Finance Act, 1994. The term "including" used in the exemption entry is enlarging in nature and indicates that the scope of the expression is not restricted to the listed items alone. On that understanding, spices and masala products, being substances used as food or in the preparation of food, fall within the ordinary and extended meaning of "food stuff".

Conclusion: The exemption applied to the rail transportation of the appellant's spices and masala products.

Issue (ii): Whether refund could be denied merely because the tax was paid under a wrong accounting head.

Analysis: The amount was paid towards service tax on rail transportation even though the service was exempt. Payment under an incorrect accounting code does not alter the nature of the payment or extinguish the entitlement to refund of tax paid by mistake.

Conclusion: Refund could not be refused solely on the ground of wrong accounting head.

Final Conclusion: The appellant established entitlement to refund of the service tax paid on exempt rail transportation, and the denial of refund was unsustainable.

Ratio Decidendi: An exemption entry using the word "including" must receive an expansive construction, and tax paid on an exempt service does not lose its refundable character merely because it was deposited under a wrong accounting head.

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