2021 (11) TMI 71 - AT - Service Tax

Tribunal allows refund claims, broad interpretation of 'denied', sets aside impugned order

M/s. V.V. Mineral (100% EOU) Versus Commissioner of Central Excise, Tirunelveli

The Tribunal held that the rejection of refund claims based on the limitation period was not justified. The retrospective amendment aimed to correct the ... 100% EOU - refund of service tax - Clearing and Forwarding Agency Service - Port Service - Customs House Agent Service - claim filed within a period of one year from the date of export or not - applicability of N/N. 41/2012-S.T. dated 29.06.2012 - Scope of 'beyond the place of removal' - HELD THAT:- In Notification No. 41/2012 which was issued on 29.06.2012, the word used was ‘beyond the place of removal’. When the definition of ‘place of removal’ as given in the Central Excise Act, 1944 is applied, the place where the goods are sold becomes the place of removal. The Department was of the view that only when the goods are loaded into the vessel for export, the transfer of property in goods takes place. So, the place where the sale takes place being the port, the place of removal is the port. That as per the pre-amended Notification No. 41/2012, the services used ‘beyond the place of removal’ are only eligible for refund. This anomaly was corrected by issuing the Notification No. 01/2016 dated 03.02.2016 by amending Notification No. 41/2012.The amendment was made to have retrospective application with effect from 01.07.2012. It is clear that there was a mistake in Notification No. 41/2012, which stated that the taxable services that have been used ‘beyond the place of removal’ for the export of goods would be eligible for refund. When the definition of input service includes services which have been used ‘up to the place of removal’, the same ought to have been incorporated in Notification No. 41/2012. After realizing the mistake and the ineligibility of credit / refund/ rebate on input services used for the export of goods, the amendment has been introduced by the Government by the Finance Act, 2016. It is not necessary that there should be an order of rejection of refund. If a litigation is at the stage of Show Cause Notice and there is a proposal for rejection, the Show Cause Notice has to be adjudicated after considering the amendment brought forth vide the Finance Act, 2016. It cannot be then said that the Adjudicating Authority has to first reject the claim and thereafter assessee has to file a fresh claim under the amended Notification of 2016 - The intention of the Government is very much clear from the Notification which is to grant refund retrospectively with effect from 01.07.2012. This cannot be frustrated by clinging on to technical formalities. In the present case, the appellant had requested to return the refund claims only to see if other alternate remedies were available to them. Meanwhile, the Notification corrected the situation. Therefore, the appellant has filed the refund claims pursuant to the amended Notification. The rejection of refund claim then, on the ground of limitation, denying the benefit intended by the amendment is not legal and proper - the rejection of refund cannot sustain and requires to be set aside - Appeal allowed - decided in favor of appellant. Issues Involved:1. Eligibility for refund of Service Tax on input services used up to the port.2. Interpretation of the term 'denied' in the context of refund claims.3. Applicability of retrospective amendments to refund claims.4. Limitation period for filing refund claims post-amendment.Issue-wise Detailed Analysis:1. Eligibility for refund of Service Tax on input services used up to the port:The appellants, a 100% Export Oriented Unit (EOU), filed refund claims for Service Tax paid on Clearing and Forwarding Agency Service, Port Service, and Customs House Agent Service used for exporting goods. The refund claims were based on Notification No. 41/2012-S.T. dated 29.06.2012, which allowed rebate of Service Tax on taxable services used beyond the place of removal. The Department contended that the place of removal is the port, and only services used beyond the port are eligible for refund. The appellants claimed refunds for services used up to the port, leading to the issuance of Show Cause Notices proposing to reject the refund claims.2. Interpretation of the term 'denied' in the context of refund claims:Notification No. 01/2016 dated 03.02.2016 amended Notification No. 41/2012-S.T. to enable refunds for services used up to the place of removal. The Finance Act, 2016, provided for retrospective application of this amendment from 01.07.2012. The term 'denied' in Section 160 of the Finance Act, 2016, became contentious, with the Department interpreting it as 'rejected.' The appellant argued that the term 'denied' should encompass situations where refund claims were returned or not adjudicated due to the pre-amendment notification.3. Applicability of retrospective amendments to refund claims:The Finance Act, 2016, intended to rectify the anomaly in Notification No. 41/2012-S.T. by allowing refunds for input services used up to the place of removal with retrospective effect from 01.07.2012. The appellant refiled the refund claims in 2016, which were initially returned, based on this retrospective amendment. The Department rejected these claims as time-barred, arguing that the claims were not 'denied' but voluntarily withdrawn by the appellant.4. Limitation period for filing refund claims post-amendment:The appellant contended that the initial refund claims were filed within the prescribed time limit and were only returned due to the pre-amendment notification's interpretation. The refiled claims, submitted within the one-month period specified in the Finance Act, 2016, should be considered timely. The Department's rejection of these claims on the ground of limitation was challenged as contrary to the intent of the retrospective amendment.Conclusion:The Tribunal held that the rejection of refund claims based on the limitation period was not justified. The retrospective amendment aimed to correct the anomaly in Notification No. 41/2012-S.T. and grant refunds for services used up to the place of removal. The term 'denied' should be interpreted broadly to include situations where claims were returned or not adjudicated. The Tribunal set aside the impugned order, allowing the appeals with consequential reliefs as per law.(Order pronounced in the open court on 29.10.2021)