2025 (8) TMI 932 - AT - Service Tax

Rebate restored for export input services where pre-export declaration omission condoned after invoices, FIRCs, tax payment shown

M/s. Mobis India Limited Versus Commissioner of GST and Central Excise Chennai LTU Commissionerate

CESTAT CHENNAI - AT allowed the appeal, set aside the Commissioner (Appeals), LTU Chennai order and restored the rebate sanctioning authority's order ... Rebate / refund of service tax paid on various input services utilized in export of services - substantial compliance in the absence of filing of declarations by the Appellant as mandated in terms of N/N. 39/2012-ST dated 20.06.2012 for exporting Consulting Engineer Services - HELD THAT:- A perusal of the rebate sanctioning order of the Original Authority indicates that the appellant has furnished copies of invoices and has also furnished copies of Certificate of Foreign Inward Remittance. The appellant has filed the invoices issued by the service providers as evidence of payment of service tax and cess on the services utilised by them towards providing the above service exported and they have also declared that they have not availed CENVAT credit of the service tax claimed as rebate and it is specifically recorded by the rebate sanctioning authority that the appellant has fulfilled the conditions imposed by the Notification. It was also recorded in the OIO that that the appellant has not filed the declaration before export of service intimating the service intended to be exported with the description, quantity, value, rate of duty and the amount of duty payable on inputs actually required to be used in providing service to be exported and the description, value and the amount of service tax and cess payable on input services actually required to be used in providing service to be exported. However, the rebate claims were accompanied by invoices of input services issued under Service Tax Rules, 1994 and that it is condonable placing reliance upon a case Law decided by the Supreme Court. Whereas the Commissioner (Appeals) in Par 5.9 of his impugned order has held that Non-filing of the requisite declaration as mandated in the Notification is a substantive violation and hence cannot be construed and to be condoned as a mere procedural infraction for sanctioning of Rebate. The Lower Appellate Authority has however found the appellant not being eligible for the rebate holding a view that the rebate sanctioning authority has to verify the correctness of the declaration filed prior to export of service and by foregoing such verification by the Original Authority before processing the rebate claim is held to be not in accordance with the law. The Lower Appellate Authority's finding is erroneous in holding the view that non-verification by the rebate sanctioning authority of the declaration required to be filed prior to the export of service would disentitle the appellant to claim rebate of the service taxes paid on input services which were utilized in the export of service declared - The FIRCs have been produced evidencing proof of export of the Services. As such, the impugned order 14/2016 passed by the Commissioner of Central Excise & Service Tax (Appeals), LTU, Chennai dated 30.05.2016 cannot be sustained and ordered to be set aside and restore the order passed by the Refund Sanctioning Authority in sanctioning the Rebate claims which is in order. The impugned order is set aside - appeal allowed. 1. ISSUES PRESENTED AND CONSIDERED 1. Whether rebate of service tax under the notification issued under Rule 6A of the Service Tax Rules is sanctionable where the exporter did not file the prescribed pre-export declaration setting out inputs, values and tax details. 2. Whether non-filing (and non-verification) of the declaration prescribed by the Notification is a mere procedural infraction that can be condoned when substantive compliance (payment of duty, non-availment of CENVAT credit, evidence of export and input invoices) is otherwise established. 3. Whether the requirement of verification of the declaration by the sanctioning authority is a substantive condition precedent to allowance of rebate, such that lack of verification disentitles the claimant to rebate. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Legal framework 1.1 The Notification (under Rule 6A of the Service Tax Rules) prescribes conditions for rebate: export of service, payment of duty on inputs and service tax on input services, minimum admissible amount, and non-availment of CENVAT credit. Paragraph 3 prescribes a procedural regime requiring the provider, prior to export, to file a declaration specifying inputs (description, quantity, value, rate of duty and duty payable) and input services (description, value, amount of service tax and cess), and authorises the Assistant/Deputy Commissioner to verify the declaration and accept it only if satisfied there is no likelihood of evasion. 1.2 Precedent treatment: Tribunal and higher court authority(s) have recognized that where practical impossibility or the nature of export activity makes prior precise declaration impracticable, procedural strictness should not defeat substantive export benefits; document-based verification at a later stage may suffice; non-observance of procedural conditions has been characterized as technical in certain export rebate contexts. 1.3 Interpretation and reasoning: The Court examined the Notification's substantive conditions (export, payment, non-availment of credit) and the procedural requirement of prior declaration. It found claimants produced invoices for input services, evidence of payment of service tax and cess, declarations of non-availing CENVAT credit, and foreign inward remittance certificates proving export. Given such documentary proof of substantive compliance, the Tribunal viewed the declared procedural default (non-filing of the prescribed pre-export declaration) as not defeating entitlement where there is no dispute that exports occurred and input services were used in the export. The Tribunal reasoned that the purpose of the procedural requirement is verification to prevent misuse, but where the necessary evidentiary materials exist and no evasion is shown, strict adherence to procedure should not be allowed to nullify the substantive concession granted by the Notification and the policy of promoting exports. 1.4 Ratio vs. Obiter: Ratio - where substantive conditions of the Notification are satisfied and documentary evidence establishes export and payment of tax on inputs, failure to file the prescribed pre-export declaration may be condoned and does not automatically disentitle the claimant to rebate. Obiter - observations on the theoretical scope of verification powers and administrative practice not necessary to decide the appeals. 1.5 Conclusion: The Tribunal concluded that the rebate sanctioning authority's allowance was permissible despite non-filing of the pre-export declaration because documental proof evidenced substantive compliance; the lower appellate authority's reliance on non-filing as a substantive disqualification was erroneous and set aside. Issue 2 - Verification requirement and its effect 2.1 Legal framework: Paragraph 3.2 of the Notification empowers the Assistant/Deputy Commissioner to verify the correctness of the declaration prior to export and to accept it only if satisfied there is no likelihood of evasion. The procedure contemplates both filing and verification as safeguards. 2.2 Precedent treatment: Authorities have held that the verification may be documentary and, in export rebate contexts, verification can be undertaken subsequently; non-verification does not ipso facto amount to proof of misuse if substantive proof of export and tax payment is available. 2.3 Interpretation and reasoning: The Tribunal distinguished between the objective of the verification requirement (to guard against evasion) and the practical effect of its non-exercise where evidence demonstrates no likelihood of evasion. The Tribunal emphasized the governmental policy to promote exports and the need for trade facilitation; where invoices and foreign remittance certificates are produced and there is no dispute on export or utilization of inputs, the absence of a prior on-file verified declaration cannot be invoked to deny the substantive benefit. The Tribunal found that the sanctioning authority had recorded fulfillment of the substantive conditions and that documentary verification by production of invoices and FIRCs sufficed to discharge the verification purpose. 2.4 Ratio vs. Obiter: Ratio - non-exercise of the formal verification power does not invalidate rebate where later or documentary evidence establishes that there is no likelihood of evasion and substantive conditions are satisfied. Obiter - discussion as to the exact timing or methods of verification in all contexts. 2.5 Conclusion: Lack of prior verification by the sanctioning authority did not disentitle the claimant where documentary evidence dispelled any suspicion of evasion and satisfied the substantive requirements of the Notification; therefore the appellate finding to the contrary was set aside. Issue 3 - Procedural infraction v. substantive disqualification 3.1 Legal framework: Distinction between substantive conditions (eligibility criteria in Para-2) and procedural prescriptions (Para-3) is central; established principles require that procedural irregularities should not defeat substantive entitlements unless the procedure is a condition precedent integral to the substantive right or its omission causes infirmity affecting the substantive requirement. 3.2 Precedent treatment: Earlier decisions cited in the record endorse a liberal approach in export rebate schemes, holding that procedural lapses may be condoned where exports are proved and duty paid; administrative authorities should not rely on technicalities to deny beneficial provisions intended to promote exports. 3.3 Interpretation and reasoning: The Tribunal applied this principle to the facts: because the substantive requisites (export of service, payment of tax on inputs, non-availment of CENVAT credit) were evidenced by invoices and remittance certificates, the procedural lapse (non-filing of declaration) did not amount to non-compliance of the substantive condition; the procedural requirement was to facilitate verification and prevent evasion, a purpose satisfied by the documentary record in this case. 3.4 Ratio vs. Obiter: Ratio - procedural non-compliance in the form of non-filing of prescribed declaration is condonable where substantive compliance is demonstrated and there is no risk of evasion; Obiter - remarks on broader administrative policy favouring exporters. 3.5 Conclusion: The Tribunal held that substantive benefit cannot be denied on account of the procedural lapse in the circumstances of the case and restored the sanctioning authority's orders allowing rebate. Disposition 4. The Tribunal set aside the appellate rejection of the rebate claims, restored the original sanctioning authority's orders granting rebate, and allowed the appeals with consequential reliefs as per law on the ground that substantive compliance was established and procedural defaults did not warrant denial of the rebate in the absence of any indication of evasion.