2011 (8) TMI 677 - AT - Service Tax

Export of services - Refund claim of Service Tax Credit on Technical Testing Service - Denied on the grounds of no written agreement between exporter and buyer - Held That - letter of credit is opened by the bank can not be treated as agreement between parties - a liberal view has to be taken for the interpretation to reduce the cost of goods exported - Reference also given for Convergys India 2009 (5) TMI 50 - CESTAT NEW DELHI . - Benefit of export allowed - Decided in favour of assessee.

Summary

Issues:
Refund claim for service tax on technical testing and analysis service under Notification 41/07 as amended.

Analysis:
The appellant filed appeals against the order upholding the rejection of their refund claim for service tax paid on technical testing and analysis service. The lower adjudicating authority denied the refund due to the absence of a written agreement between the exporter and the buyer, a condition stipulated in the Notification. The revenue challenged this decision, leading to the appeals. The appellant contended that the letter of credit, which required an original inspection certificate, fulfilled the agreement requirement, as it was opened by the bank on the customer's instructions.

The JDR argued that strict adherence to the conditions of the Notification is necessary to claim the exemption. Citing relevant Supreme Court decisions, the JDR emphasized that non-compliance with Notification conditions leads to denial of benefits. The appellant's failure to produce a written agreement was highlighted as the reason for their ineligibility for the Notification's benefits.

In response, the appellant's CA argued that the case laws cited by the JDR pertained to Central Excise, not exports, advocating for a liberal interpretation in export-related matters. Referring to a Tribunal decision, the CA emphasized the need for a lenient view in export scenarios. The Tribunal had previously ruled that procedural non-compliance of a technical nature should not negate substantive concessions, especially in cases of export benefits.

The presiding judge considered the submissions and evidence. Acknowledging that the appellant had paid the service tax and exported the goods, the judge noted the presence of the inspection certificate requirement in the letter of credit. The judge agreed with the appellant's stance that the bank's involvement in opening the letter of credit did not diminish the agreement's validity, as it was done at the customer's behest. Emphasizing the need for a liberal interpretation to support export cost reduction, the judge highlighted that the cited case laws were not directly relevant to export matters. Quoting a Tribunal decision, the judge reinforced the principle that a lenient view should be adopted for exports, and procedural lapses should not bar benefits under export-related legislation.

In conclusion, the judge set aside the lower authority's orders and allowed the appeals, emphasizing that taxes cannot be exported and supporting the appellant's claim for the refund based on the liberal interpretation required for export-related matters.