2017 (6) TMI 101 - AT - Central Excise

Refund claim - courier services availed for the export of goods - rejection on the ground of non-realization of foreign exchange - the appellants have exported the spare parts to their dealers abroad by way of free warranty replacement as per their contract which is placed on record and for exporting the said components they have availed the services of courier agency for which they have paid the service tax - Held that - the appellant has produced the invoices on record which clearly shows that it is free warranty replacement and the invoices have been produced on record - Appellants have also produced a copy of the agreement between his dealers by which the appellants are under obligation to supply the parts under free warranty replacement, then in that case no monetary consideration flow from the buyer and therefore the department s view that bank realization certificate has not been produced is not justified ground for refusal of the refund - refund allowed - appeal allowed - decided in favor of appellant.

Issues:
- Refund of service tax paid on courier services for export of goods under Notification No. 52/2011-ST dated 30.12.2011.
- Fulfillment of conditions for refund eligibility under the said Notification.
- Requirement of realization of sale proceeds within the period prescribed under FEMA 1999.
- Eligibility for availing CENVAT credit of service tax paid on courier agency services.

Analysis:
1. Refund of Service Tax Paid on Courier Services:
The appellants, manufacturers of two-wheeler motor vehicles, exported motor cycle spare parts and claimed a refund of service tax paid on courier services under Notification No. 52/2011-ST dated 30.12.2011. The department raised concerns regarding non-realization of sale proceeds and issued show-cause notices to reject the refund claim. The adjudicating authority and Commissioner (Appeals) both rejected the refund claim, leading to the appeals before the Tribunal.

2. Fulfillment of Conditions for Refund Eligibility:
The appellants argued that they fulfilled all substantial conditions for refund eligibility under Notification No. 52/2011-ST. They contended that the condition of realization within the period allowed under FEMA 1999 is applicable only when an amount of foreign exchange is due or accrued. In this case, the appellants exported components as free warranty replacements, and the recovery of export proceeds did not fall under FEMA requirements. The Tribunal found that the appellants had indeed exported spare parts under warranty replacements, as evidenced by invoices and agreements with dealers, meeting the conditions for refund eligibility.

3. Realization of Sale Proceeds under FEMA 1999:
The department insisted on the requirement of realization of sale proceeds within the FEMA 1999 prescribed period for exports to be eligible for a refund. However, the Tribunal noted that in the case of free warranty replacements where no monetary consideration flows, the condition of sale proceeds realization should be considered fulfilled when the amount due to be realized is nil. The appellants had already received export proceeds when the main products were exported, making the demand for bank realization certificates unjustified.

4. Eligibility for CENVAT Credit:
The appellants also claimed eligibility for availing CENVAT credit of service tax paid on courier agency services. The Tribunal, after considering submissions and evidence, found that the appellants had indeed exported spare parts under warranty replacements as per their contract, and the denial of refund based on lack of evidence was unfounded. Consequently, the Tribunal set aside the impugned orders and allowed the appeals of the appellant.

In conclusion, the Tribunal ruled in favor of the appellants, holding that they met the conditions for refund eligibility under Notification No. 52/2011-ST and that the impugned order denying the refund was not sustainable in law. The judgment emphasized the specific circumstances of warranty replacements and the absence of monetary consideration, leading to the decision to allow the appeals and grant the refund of service tax paid on courier services used for exporting goods.

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