2018 (3) TMI 1729 - CGOVT - Service Tax

Rebate claim - service tax paid on railway freight services used in relation to export of Phospho Gypsum and Gypsum made - rejection on the ground that since the applicant had already recovered freight charges and the service tax paid thereon from its foreign buyers, sanctioning of rebate would entail double benefit to the applicant which is contrary to the provisions of law and M/s. Paradeep Phosphate, who had paid service tax on rail freight, had not given any NOC to the applicant for getting rebate of tax - Held that - M/s. Paradeep Phosphate Ltd. does not have any objection with the rebate claim filed by the applicant in this case. Even otherwise M/s. Paradeep Phosphate have not claimed any rebate against the service tax paid on the exported goods. The Government finds that the principle of unjust enrichment is not applicable to the rebate of service tax by virtue of proviso to Section 11B(2) of the Central Excise Act which is made applicable to service tax matters by virtue of Section 83 of the Finance Act, 1994. Therefore, while the Government does not agree with the applicant s claim that Notification No. 41/2012-S.T. is a complete code and Section 11B of the Central Excise Act is not applicable to rebate of service tax, it fully agrees with the applicant s contention that the rebate of service tax in respect of exported goods cannot be refused for the reason that they have recovered freight and service tax amount from the foreign customers. Revision application allowed.

Issues:
1. Refund claims of service tax paid on railway freight services for export of Phospho Gypsum and Gypsum.
2. Rejection of rebate claims by the Commissioner of Central Excise.
3. Applicability of Notification No. 41/2012-S.T. and Section 11B of the Central Excise Act.
4. Principle of unjust enrichment in rebate claims.
5. Legal tenability of the Commissioner (Appeals)'s decision.

Refund Claims of Service Tax:
The applicant filed refund claims for service tax paid on railway freight services used in exporting Phospho Gypsum and Gypsum. The jurisdictional Assistant Commissioner initially sanctioned the rebate claims, but the Commissioner reviewed the decision. The Commissioner rejected the claims citing that the applicant had already recovered the freight charges and service tax from foreign buyers, leading to a double benefit situation. The Department filed appeals, which were allowed by the Commissioner (Appeals) based on the grounds mentioned.

Applicability of Notification No. 41/2012-S.T. and Section 11B:
The applicant contended that Notification No. 41/2012-S.T. is a complete code and argued against the application of Section 11B of the Central Excise Act to rebate claims. The applicant asserted that the principle of unjust enrichment does not apply to rebate claims as per the proviso to sub-section (2) of Section 11B of the Act.

Legal Analysis and Decision:
The Government conducted a thorough examination of the revision application, additional submissions, and relevant records. It was observed that the Commissioner (Appeals) allowed the Revenue's appeal on the grounds that M/s. Paradeep Phosphate did not issue a No Objection Certificate (NOC) for the rebate claim and that the applicant had recovered the service tax amount from foreign customers. However, the applicant provided a letter from M/s. Paradeep Phosphate stating that they had been reimbursed by the applicant and had no objection to the rebate claim. The Government found that the principle of unjust enrichment does not apply to service tax rebate claims as per the relevant provisions of the Central Excise Act. While disagreeing with the applicant's argument regarding the completeness of Notification No. 41/2012-S.T., the Government agreed that the denial of rebate based on the recovery of charges from foreign customers was not legally tenable. Consequently, the revision application was allowed, and the Commissioner (Appeals)'s order was set aside.

This detailed analysis highlights the issues surrounding the refund claims, the interpretation of relevant legal provisions, and the ultimate decision reached by the Government in setting aside the Commissioner (Appeals)'s order.

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