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of <h1>Tribunal grants refund for export services, emphasizes procedural fairness</h1> <h3>M/s. Ozone Plant Design Service Private Limited Versus The Commissioner of Service Tax (Appeal – II), Delhi</h3> M/s. Ozone Plant Design Service Private Limited Versus The Commissioner of Service Tax (Appeal – II), Delhi - TMI Issues Involved:1. Rejection of refund claim amounting to Rs. 68,02,513/-.2. Requirement of a show cause notice before rejecting refund claims.3. Entitlement to interest on the refund amount.Detailed Analysis:1. Rejection of Refund Claim:The appellant, M/s. Ozone Plant Design Service Private Limited, registered under 'consultancy engineering services,' exported services to various overseas clients, including M/s. Wasco Engineering Technology PTE Limited, Singapore. The appellant filed three refund claims totaling Rs. 72,84,585/- under rule 5 of the CENVAT Credit Rules, 2004. The Assistant Commissioner sanctioned only Rs. 4,82,072/- and rejected the balance Rs. 68,02,513/-. The primary reason for rejection was that services provided to Wasco Engineering were actually rendered to Cairn India, located in India, thus not qualifying as 'export of services' under rule 6A of the Service Tax Rules.The Tribunal found that the appellant had an agreement with Wasco Engineering, a company based in Singapore, and the services were to be provided for Cairn India as per the contract. The Tribunal noted that the place of provision of service is the location of the recipient, which in this case is Wasco Engineering in Singapore. Thus, the services qualify as 'export of services,' refuting the Commissioner (Appeals)'s reliance on the Export of Services Rules, 2005, which were superseded by the Place of Provision of Services Rules, 2012. The Tribunal cited the decisions in Gap International Sourcing (India) Pvt Ltd. and Paul Merchants Ltd., affirming that the services rendered to Wasco Engineering qualify as export of services.2. Requirement of Show Cause Notice:The appellant contended that the Department should have issued a show cause notice before rejecting the refund claims. The Tribunal agreed, stating that a deficiency memo does not suffice as it merely seeks additional information without indicating reasons for potential rejection. The Tribunal referenced the decision in Sidheshwar SSK Ltd., emphasizing that a show cause notice is necessary to ensure procedural fairness and adherence to principles of natural justice.3. Entitlement to Interest:The appellant argued that it is entitled to interest on the refund amount if the appeal is allowed. The Tribunal referenced the Supreme Court's decision in Ranbaxy Laboratories Ltd., which held that interest under Section 11BB of the Central Excise Act, 1944, commences from the date of expiry of three months from the date of receipt of the application for refund. Section 83 of the Finance Act makes sections 11B and 11BB of the Excise Act applicable to service tax, thus entitling the appellant to interest on the refund amount.Conclusion:The Tribunal set aside the impugned order dated 26.08.2016 to the extent it rejected the refund of Rs. 68,02,513/-. The appellant is entitled to this refund amount along with interest as per section 11BB of the Central Excise Act, 1944. The appeal was allowed in favor of the appellant.
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