2023 (6) TMI 1196 - AT - Service Tax

Tribunal grants refund, recognizes contract evidence for commission payment. Service tax on export transportation refundable. Registration not mandatory for exemption.

M/s Vinayak Textiles Mills Versus CCE & ST- Ludhiana

The Tribunal allowed the appellant's appeal against the rejection of the refund claim of Rs. 1,26,820. The Tribunal held that the confirmation of the ... Refund of the service tax paid - export of goods - agreement/contract or any other documents with Commission Agents located outside India not provided - Services of Inland Transportation. Rejection of refund on the ground that the appellant has not provided any agreement/contract or any other documents with Commission Agents located outside India - exemption under N/N. 41/2007 - HELD THAT:- The appellant has produced the confirmation of the contract which clearly shows the payment of commission at a fixed rate on the FOB Value of the export and this issue has been settled by the Tribunal in the case of MITTAL INTERNATIONAL VERSUS CCE, ROHTAK/GURGAON [2017 (3) TMI 1512 - CESTAT CHANDIGARH], where it was held that if the invoice of the commission agent is on record, in that circumstance, the appellants have complied with condition of the notification and the appellant is entitled for availing the refund - refund allowed. Rejection of refund in relation to the claim for Service Tax paid on Services of Inland Transportation - HELD THAT:- This issue has also been considered by the Tribunal in the case of M/S. CAP & SEAL (INDORE) PVT. LTD. VERSUS CCE, INDORE [2016 (12) TMI 1132 - CESTAT NEW DELHI] wherein the Tribunal has specifically held that the service tax paid on transportation of empty container from port to factory is admissible as refund - refund allowed on this issue. Refund also rejected on the ground that the service providers are not registered for the Services such as CHA/Port Services - HELD THAT:- This issue has also been considered by the Hon’ble Rajasthan High Court in the case of UNION OF INDIA THROUGH THE COMMISSIONER, CENTRAL EXCISE AND SERVICE TAX, UDAIPUR VERSUS M/S. ARIHANT TILES AND MARBLES (P) LTD. [2019 (1) TMI 73 - RAJASTHAN HIGH COURT] wherein it has been held that the Registration under a particular service is not necessary for the purpose of exemption under Notification No. 41/2007 - refund allowed. The impugned order is not sustainable in law - Appeal allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether 'agreement/contract or any other documents' under Notification No. 41/2007 need to be of a particular form to qualify as proof of commission paid to commission agents located outside India for grant of refund of service tax. 2. Whether service tax paid on inland transportation (including transportation of empty containers to/from factory/port) utilized in relation to export of goods is refundable under Notification No. 41/2007 when freight is billed in consolidated form and not separately bifurcated. 3. Whether refund under Notification No. 41/2007 can be denied on the ground that the service provider was not registered under the specific service head (e.g., CHA/Port Service), despite the exporter having availed the service and paid service tax thereon. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Admissibility of 'agreement/contract or any other documents' as proof of commission paid Legal framework: Refund of service tax on services utilized for export of goods is governed by Notification No. 41/2007 dated 06.10.2007, which conditions refund on production of 'agreement or any other document' evidencing payment of service tax on specified services. Precedent Treatment: The Tribunal has interpreted the Notification to accept invoices or other documentary evidence as satisfying the 'any other document' requirement, i.e., the condition is not restricted to a particular form of agreement. Interpretation and reasoning: The Tribunal/Bench construed the phrase 'any other documents' in the Notification broadly - there is no textual limitation prescribing a specific nature or form of documentary proof. A 'Confirmation of the Contract' showing commission at a fixed rate on FOB value and evidencing payment of commission satisfies the Notification's condition. Denial based solely on absence of a formal/particular type of contract is inconsistent with the language and object of the Notification. Ratio vs. Obiter: Ratio - the Notification's 'any other document' language is broad and an invoice/confirmation of contract evidencing commission payment fulfills the condition for refund. Obiter - none material beyond the holding. Conclusions: The objection that no specific form of agreement was produced is not tenable; confirmation of contract/invoice demonstrating commission at a fixed rate on FOB value qualifies as sufficient documentary proof under the Notification and entitles the exporter to refund for the commission-related service tax. Issue 2 - Refundability of service tax on inland transportation (including empty container movement) billed in consolidated form Legal framework: Notification No. 41/2007 allows refund of service tax paid on services utilized for export of goods. Applicable services include transportation services connected with export consignments. Precedent Treatment: The Tribunal has allowed refund where transporter invoices did not separately mention freight components, treating consolidated freight charges as inextricably linked to transportation of export goods; Tribunal decisions have also specifically allowed refund for service tax on movement of empty containers from yard/port to factory where such movement is connected with export. Interpretation and reasoning: The essential inquiry is whether the transported services were utilized for export of goods. When transporters bring empty containers for stuffing and then move export consignments, and the transporter's invoice consolidates charges, the lack of bifurcation does not negate the nexus with export. In absence of any specific prohibition in Notification No. 41/2007 against consolidated billing, such freight charges-being in connection with transportation of export goods-qualify for refund. Ratio vs. Obiter: Ratio - service tax paid on transportation charges (including for empty container movement) that are linked to export consignments is refundable even if invoices consolidate charges without separate freight bifurcation. Obiter - factual nuances on billing practices that do not alter the nexus test. Conclusions: Denial of refund on the ground that freight was consolidated (or referred to as to-and-fro charges) is unsustainable; service tax paid on inland transportation utilized for export, including movement of empty containers, is admissible for refund under the Notification when linked to export consignments. Issue 3 - Effect of service provider's registration under a different service head on exporter's refund claim Legal framework: Refund under Notification No. 41/2007 is available where the exporter has availed the specified services for export of goods and has paid service tax thereon. CBEC Circular No. 112/6/2009-ST (12.03.2009) addresses treatment where service provider's registration details do not exactly match the service rendered. Precedent Treatment: A High Court has held that registration under a particular service is not necessary for the purpose of exemption/benefit under Notification No. 41/2007 when, on facts, services were provided within the port/for export and therefore qualify as port/handling services for refund purposes. Tribunal practice endorses that discrepancies in service provider registration should not defeat the exporter's refund claim and may be addressed with the service provider separately. Interpretation and reasoning: The entitlement to refund hinges on factual satisfaction that the service was availed in relation to export and service tax was paid. Registration classification of the service provider (e.g., not registered specifically as CHA/Port Service) does not, by itself, negate the exporter's compliance with Notification conditions. Administrative/custodial errors or mismatches in the provider's registration are matters between the revenue and the service provider and cannot be a basis to deny exporter's statutory refund entitlement when conditions are otherwise fulfilled. The CBEC circular supports this administrative stance. Ratio vs. Obiter: Ratio - lack of registration of the service provider under a particular service head is not a valid ground to deny refund to the exporter under Notification No. 41/2007 where the service was availed for export and service tax was paid. Obiter - procedural responsibility to pursue the service provider for any registration discrepancies. Conclusions: Refund cannot be denied purely because the service provider was not registered under the claimed service head; exporter's documentary proof of service availed for export and payment of service tax is determinative for refund entitlement, while any deficiency in provider registration is a separate issue to be addressed with the provider. Cross-references and Consolidated Conclusion All three departmental objections (insufficiency/particularity of documentary proof for commission, consolidated billing for inland transportation including empty containers, and non-registration of service providers under specific service heads) were found unsustainable in law by reference to the Notification's language, a CBEC circular, and authoritative precedents of the Tribunal and a High Court. The Tribunal/Bench set aside the impugned order denying refund and allowed the appeal, granting consequential relief as per law.