2016 (4) TMI 331 - AT - Service Tax

Admissibility of refund of service tax - Notification No. 41/2007 - ST - Goods exported under claim of drawback under Customs and Excise Duties and Service Tax Drawback Rules 1995 - Held that - by applying the ratio of CESTAT judgment in the case of Rajasthan Textile Mills Vs. CCE 2014 (8) TMI 853 - CESTAT NEW DELHI the refund is not admissible. - Decided in favour of revenue

Summary

Issues:
Refund of service tax under Notification No. 41/2007 - ST when goods exported under claim of drawback under Customs and Excise Duties and Service Tax Drawback Rules, 1995.

Analysis:
The main issue in this case is whether a refund of service tax under Notification No. 41/2007 - ST is permissible when goods have been exported under the claim of drawback under Customs and Excise Duties and Service Tax Drawback Rules, 1995. The 1st appellate authority allowed the refund even though goods were exported under claim of drawback, citing lack of evidence that drawback was claimed for the service tax paid on the services for which the refund was claimed. The departmental representative argued that the conditions of the notification must be strictly construed and referred to a judgment by CESTAT in the case of Rajasthan Textile Mills. The advocate for the assessee acknowledged that the issue was decided against them in a previous judgment by CESTAT in the same case.

Upon reviewing the contentions and records, the Tribunal found that during the relevant period, Notification No. 41/2007 - ST included a proviso (e) which stated that goods must have been exported without availing drawback of service tax paid on specified services under the Customs, Central Excise Duties, and Service Tax Drawback Rules, 1995. Since the goods in question were exported under a claim of drawback under these rules, no refund was admissible under the said notification. The Tribunal noted that the proviso (e) was later deleted, but the amendment did not have retrospective applicability. Citing the principle that exemption notifications are to be strictly construed, the Tribunal referred to a Supreme Court judgment and the previous CESTAT decision in the case of Rajasthan Textile Mills, which held that availing drawback made the assessee ineligible for the benefit under Notification No. 41/2007 - ST.

Based on the analysis and precedents, the Tribunal allowed the Revenue's appeal and dismissed the assessee's appeal, upholding that the assessee was not entitled to a refund under Notification No. 41/2007 - ST due to availing drawback under the relevant rules.