2017 (7) TMI 96 - AT - Service Tax

Refund claim - denial on the ground that the appellant has not followed the procedure as provided under Rule 5 of the Export of Services Rules 2005 and N/N. 11/2005-ST issued thereunder inasmuch as they filed refund claim in Form-R whereas as per N/N. 11/2005-ST they were supposed to file the refund/rebate claim in Form ASTR-1 - Held that - the claim by the appellant as a refund in Form-R is only a technical and procedural breach. For such breach refund cannot be outrightly rejected - The sanctioning authority can very well treat the refund under N/N. 11/2005-ST and Export of Services Rules 2005 and should have processed the same under the said provisions - Both the authorities have also not considered the fact that the appellant has charged service tax to their foreign service recipient - appeal allowed by way of remand.

Summary

Issues:
Refund claim rejection due to procedural lapses and time-barred aspect.

Analysis:
The appellant provided business auxiliary services to an overseas principal in Hong Kong and filed a refund claim for service tax paid in convertible foreign exchange. The adjudicating authority rejected the claim citing non-compliance with Export of Services Rules, 2005 and Notification No. 11/2005-ST. The appellant filed in Form-R instead of Form ASTR-1, leading to rejection on procedural grounds and being partly time-barred under Section 11B of the Central Excise Act, 1944. The Commissioner (Appeals) upheld the rejection, emphasizing compliance with Rule 5 of Export of Services Rules, 2005 and Notification No. 11/2005-ST. The appellant contended that the transaction qualifies as an export of service and cited precedents supporting their claim.

The appellant argued that the rejection based on procedural lapses was unjust as the substantive benefit of the refund claim should not be denied due to a technical breach. They highlighted previous judgments supporting their position and contended that technical breaches should not bar refunds. Additionally, they argued against the time-bar aspect, stating that service tax was not payable in export cases, citing relevant judgments to support their claim.

The Revenue reiterated the findings of the impugned order, emphasizing the applicability of Section 11B for service tax refunds and the issue of unjust enrichment. They argued that the appellant had charged service tax to the foreign recipient, which should preclude the refund.

The Tribunal found the transaction prima facie as an export of service and noted that the rejection was mainly due to procedural lapses in filing the refund claim. They emphasized that such breaches should not outrightly reject refunds but should be processed under the relevant provisions. The Tribunal also noted that the time-bar aspect and unjust enrichment issue needed further consideration by the adjudicating authority. Consequently, the appeal was allowed for a remand to the original authority for a fresh order considering the observations made.

In conclusion, the Tribunal's decision highlighted the importance of procedural compliance while acknowledging the need for a thorough reconsideration of the issues raised, emphasizing the technical nature of the breaches and the need for a comprehensive review by the adjudicating authority.