2025 (11) TMI 679 - AT - Service Tax

Export-related services used beyond the factory qualify as specified services under Notification No.41/2012-ST, rebate granted

CESTAT CHENNAI - AT allowed the appeal, setting aside the impugned order and directing refund of Rs.11,07,308 to the appellant. The Tribunal held that ... Specified services or not - services used by the Appellant for exports during the period from October, 2016 to December, 2016 - Appellant’s claim for rebate of the service tax paid by the Appellant on the impugned services used by the Appellant for exports should be set aside or not - HELD THAT:- In M/S. STEEL STRIPS WHEELS LTD. VERSUS COMMISSIONER OF CENTRAL TAX: CGST & CENTRAL EXCISE, CHENNAI [2019 (5) TMI 1290 - CESTAT CHENNAI], this Tribunal held that taxable services used beyond the factory for export of goods are specified services and are eligible for rebate under Notification No. 41/2012-ST. Further it was held that when separate definition is given in the Notification for “specified services”, the definition of “input services” cannot be imported for granting rebate. Judicial discipline requires that the above judgment of this Tribunal based on earlier decisions of the Tribunal in the cases of Polyplex Corporation Ltd v. CCE, Meerut [2015 (10) TMI 230 - CESTAT NEW DELHI] and Jain Irrigation Systems Ltd. v. CCE, Mumbai [2015 (11) TMI 972 - CESTAT MUMBAI] should be followed. Therefore, the Appellant is eligible for the refund of Rs.11,07,308/- as claimed and the impugned Order is ordered to be set aside. Appeal allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether services described as 'Handling Charge destination', 'Destination Charges', 'Custom Scan Charges at Destination', 'Pier transfer at arrival port', 'Sorting at Destination', 'Container handling at port of arrival', and 'Warehouse charge to Destination' used in connection with export of excisable goods during October-December 2016 qualify as 'specified services' under Notification No. 41/2012-ST (as amended)? 2. Whether rebate of service tax paid on such impugned services, which were rendered/delivered in foreign territory (post-export), is permissible under the Notification and related statutory scheme, or properly rejectable on the ground that rebate is limited to services used up to the port of export within Indian territory? 3. Whether earlier decisions of the Tribunal and other benches (holding that taxable services used beyond the factory for export are eligible for rebate) constitute binding precedent requiring allowance of the rebate in the present facts. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Qualification of the impugned services as 'specified services' under the Notification Legal framework: Notification No. 41/2012-ST defines 'specified services' for rebate purposes; the 03.02.2016 amendment substituted the phrase 'beyond factory or any other place or premises of production or manufacture of the said goods, for their export' in place of the earlier phrase 'beyond the place of removal'. The notification also prescribes time limits and the 'date of export' (linked to customs clearance under Section 51 of the Customs Act) for filing rebate claims. Precedent treatment: Earlier Tribunal decisions (noted in the judgment) have held that taxable services used beyond the factory for export qualify as specified services and are eligible for rebate; those decisions also held that the definition of 'input services' in CENVAT rules cannot be imported into the notification governing rebate. Interpretation and reasoning: The Tribunal interprets the 2016 amendment as replacing 'beyond the place of removal' with 'beyond factory or any other place or premises of production or manufacture', thereby widening/clarifying the class of services qualifying as 'specified services' to include services used beyond the factory boundary for export. The Tribunal reasons that once the taxable services are shown to have been used beyond the factory/premises of manufacture in relation to export, they fall squarely within the notification's definition irrespective of whether delivery or performance occurred partly or wholly outside Indian territory. Ratio vs. Obiter: Ratio - The amendment concretely defines 'specified services' to mean taxable services used beyond the factory for export, and thus services used beyond factory are eligible for rebate; the conclusion that 'input services' notions do not restrict the notification is treated as binding reasoning in the decision. Conclusion: The impugned services, being used beyond the factory for export, qualify as 'specified services' under the amended notification. Issue 2 - Permissibility of rebate for services rendered/delivered in foreign territory (post-export) versus requirement that services be used up to port of export within Indian territory Legal framework: Notification No. 41/2012-ST (as amended) grants rebate on specified services used for export; the notification's procedural provisions link the rebate claim timeline to the date of export certified by customs. CENVAT Credit Rules and departmental circulars (e.g., Circular No. 999/6/2015-CX) concern eligibility of credit and the concept of 'place of removal' extending to port of export for credit purposes. Precedent treatment: Decisions of certain benches (Polyplex, Jain Irrigation - as relied on in the judgment) have allowed rebate/refund of service tax attributable to ocean freight, on-carriage, terminal handling at destination etc., even where some services are rendered outside India, reasoning that such services form part of services used for export and the exporter retained responsibility/ownership of goods or had contracted for delivery. Interpretation and reasoning: The Tribunal distinguishes relevance of the departmental circular and CENVAT 'place of removal' concept from the notification's separate definition of specified services. It holds that the circular and credit-rule concepts govern credit and place-of-removal for domestic CENVAT purposes but cannot curtail the notification's express relief. The 2016 amendment retrospective effect and the express rebate direction support granting rebate where services were used beyond the factory even if performance extended beyond Indian territorial ports. The Tribunal also reasons that the export process attains finality at customs clearance for export, but that does not negate that services used beyond factory for export fall within the statutory definition; hence services rendered post-export in foreign territory, where they were used in connection with export obligations (e.g., delivery terms), may still be rebate-eligible under the notification interpreted in light of legislative amendment and precedents. Ratio vs. Obiter: Ratio - The notification's definition of 'specified services' must be applied as amended, and cannot be restricted by importing the 'input services'/place-of-removal limitations from credit rules or departmental circulars when the notification itself grants rebate for services used beyond factory; thus services used beyond factory (even if performance occurs outside India in foreign territory) can be eligible for rebate. Obiter - Observations about customs clearance timing and finality are descriptive of procedural aspects and supportive but not the primary basis for the rebate entitlement. Conclusion: The impugned services, although rendered/delivered in foreign territory post-export, cannot be automatically denied rebate on the ground that the services were rendered beyond the port of export; under the amended notification and consistent precedents, such services used beyond factory for export qualify for rebate. Issue 3 - Binding nature of prior Tribunal decisions and application to the present appeal Legal framework: Principles of judicial discipline require following prior decisions of the same Tribunal/bench when the legal question and facts are materially similar. Precedent treatment: The Tribunal refers to its earlier Final Order in the appellant's own case for an earlier period and to other Tribunal decisions (Polyplex and Jain Irrigation) that resolved the question in favour of exporters seeking rebate on destination/on-carriage/terminal handling charges and similar services. Interpretation and reasoning: The Tribunal applies judicial discipline to follow analogous earlier decisions: the earlier Final Order in the appellant's own case (for January-September 2016) held that taxable services used beyond the factory are specified services eligible for rebate; subsequent Commissioner (Appeals) orders for later periods adopted the same view. The Tribunal reasons that those precedents, grounded on the amended notification and consistent reasoning, are binding and support granting the rebate for October-December 2016. Ratio vs. Obiter: Ratio - Where prior Tribunal decisions have held that specified services include taxable services used beyond the factory for export and such services are rebate-eligible, the Tribunal treats those decisions as binding and follows them. Observations about departmental appeals or acceptance status of particular earlier orders are factual and procedural, not altering the legal ratio. Conclusion: The Tribunal follows its prior decisions and holds that the appellant is entitled to rebate of the disallowed amount (Rs.11,07,308/- as claimed), setting aside the appellate authority's rejection; the appeal is allowed with consequential relief.