Export-linked service tax refund cannot be denied on alleged State-law mining violations absent breach of the refund notification.

Refund of service tax on input services used for export of goods could not be denied merely because the exported goods were alleged to have been mined unlawfully under State law, since the refund claim was otherwise in compliance with Notification No. 41/2012-ST and the Finance Act, 1994. Questions of unlawful mining and excess extraction were matters for the State mining authorities, not a basis to reject an export-linked service tax refund in the absence of any proven breach of the notification or the service tax statute. The refund rejection was unsustainable and was set aside.

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Issues: Whether refund of service tax paid on input services used for export of goods could be denied on the basis of alleged unlawful mining of the exported goods under State law, when the conditions of Notification No. 41/2012-ST dated 29.06.2012 were otherwise satisfied.

Analysis: The refund claim arose from service tax paid on taxable services used for export of goods and was filed under Notification No. 41/2012-ST dated 29.06.2012. The rejection was founded not on any breach of the notification or of the Finance Act, 1994, but on allegations of unlawful mining and excess extraction of beach sand, which were matters for examination under the relevant State mining law and by the State authorities constituted for that purpose. The denial of refund could not be sustained on considerations outside the Customs Act or the Finance Act where no violation of the refund notification or the service tax law was established.

Conclusion: The refund could not be denied on the ground of alleged unlawful mining under State law, and the rejection was unsustainable.

Final Conclusion: The impugned order rejecting the refund was set aside and the appeal was allowed with consequential relief.

Ratio Decidendi: A refund claim under an export-linked service tax notification cannot be rejected for alleged illegality under an unrelated State law unless there is a proven violation of the notification or the governing service tax statute.

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