2015 (9) TMI 688 - AT - Service Tax

Denial of refund claim - when the services are provided within and outside India and the recipient has paid the Service Tax, whether the appellant is entitled to refund on the part of services provided outside India by the service provider - Held that - Admittedly the claim of refund is not time barred under the provisions of Finance Act or under Section 11B of the Central Excise Act. Hence, the ruling of the Hon ble Bombay High Court relied upon by the Revenue in the case of Andrew Telecom (2014 (4) TMI 507 - BOMBAY HIGH COURT) has not application in the facts of this case. Secondly, I hold that under the facts and circumstances, Revenue have received the amounts deposited either as tax or deposit, the Revenue is bound to refund the same when a claim have been made under the provisions of the Act in accordance with law. The amount of Service Tax credited to the exchequer on which admittedly the Service Tax is not leviable under the Act, takes the nature of deposit. - No amount can be collected from the assessee by the Revenue if it is not in accordance with the tax law, as has been provided under Article 265 of the Constitution of India - Decided in favour of assessee.

Issues Involved:
1. Entitlement to refund of Service Tax for services provided outside India.
2. Applicability of Service Tax on services performed at foreign ports.
3. Interpretation of Notification No. 17/2009-ST and Notification No. 41/2007-ST.
4. Treatment of amounts paid as Service Tax but not leviable under the Finance Act, 1994.
5. Applicability of Section 11B of the Central Excise Act for refund claims.

Issue-wise Detailed Analysis:

1. Entitlement to refund of Service Tax for services provided outside India:
The appellant, a manufacturer and exporter, entered into a service contract with Maersk Line for export of goods, which included services at both Indian and foreign ports. The appellant paid Service Tax on the total service provided, including those performed outside India. The appellant sought a refund under Notification No. 17/2009-ST, which was partially rejected by the Dy. Commissioner on the grounds that services performed at foreign ports do not attract Service Tax under 'port service'. The Commissioner (Appeals) upheld this decision, stating that services performed at foreign ports are not taxable under the Finance Act, 1994.

2. Applicability of Service Tax on services performed at foreign ports:
The Commissioner (Appeals) concluded that handling charges at destination, inland haulage (import) charges, and documentation fees at destination are related to services provided at foreign ports. According to Section 65(82) of the Finance Act, 1994, 'Port service' is defined as any service rendered by a port in relation to a vessel or goods. However, this definition applies only to ports governed by the Major Port Trusts Act, 1963, or the Indian Ports Act, 1908, which do not include foreign ports. Therefore, services performed at foreign ports are not subject to Service Tax under the Finance Act, 1994.

3. Interpretation of Notification No. 17/2009-ST and Notification No. 41/2007-ST:
The appellant argued that the services provided by Maersk Line, including those at foreign ports, should be eligible for a refund under Notification No. 17/2009-ST. However, the Commissioner (Appeals) held that Notification No. 17/2009-ST does not cover services performed entirely outside India. The appellant's reliance on various case laws was found irrelevant as those cases involved services performed at Indian ports.

4. Treatment of amounts paid as Service Tax but not leviable under the Finance Act, 1994:
The Tribunal found that the amount paid by the appellant as Service Tax on services provided outside India, which are not taxable under the Finance Act, 1994, should be treated as a deposit. The Tribunal referred to the case of KVR Construction, where amounts paid by mistake were treated as deposits and refunded. The Tribunal held that retaining such amounts is against the policy of the Government of India, which aims not to export taxes and duties.

5. Applicability of Section 11B of the Central Excise Act for refund claims:
The Tribunal noted that the refund claim was not time-barred under the provisions of the Finance Act or Section 11B of the Central Excise Act. The Tribunal distinguished the case from the ruling in Andrew Telecom (I) Pvt. Ltd., where the refund claim was time-barred. The Tribunal held that the Revenue is bound to refund the amount when a claim is made in accordance with the law, as per Article 265 of the Constitution of India.

Conclusion:
The Tribunal allowed the appeal, directing the adjudicating authority to refund the amount of Rs. 7,14,617/- along with interest as per rules. The refund should be processed within 45 days of receiving the order. The Tribunal emphasized that no amount can be collected from the assessee if it is not in accordance with the tax law.

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