2017 (9) TMI 935 - AT - Service Tax

Refund claim - rejection on the ground of time bar - whether the respondent is eligible for refund of Service Tax paid on the business auxiliary service availed for export of goods? - Held that - the issue stands settled by the ruling of Hon ble Delhi High Court in the case of Sony India Ltd. vs. Union of India 2014 (4) TMI 870 - DELHI HIGH COURT , where it was held that limitation cannot start to run prior to the date when the right to claim refund crystallizes - the exporter has to pay the tax on the services availed by making payment to the service provider and thereafter only the exporter can claim refund - refund allowed - appeal dismissed - decided against Revenue.

Summary

Issues Involved:
1. Eligibility for refund of Service Tax on business auxiliary service for export of goods.
2. Time limitation for filing refund claim under Notification No. 41/2007-ST.
3. Applicability of special provisions of Notification No. 41/2007 over Section 11B of the Central Excise Act.

Analysis:

Issue 1: Eligibility for refund of Service Tax on business auxiliary service for export of goods
The appeal by Revenue questioned the eligibility of the respondent for a refund of Service Tax paid on business auxiliary service used for exporting goods, which was initially denied by the Adjudicating Authority on the grounds of being time-barred. The Commissioner (Appeals) allowed the refund, emphasizing that the refund claim was filed within one year from the date of tax deposit, as per Section 11B of the Central Excise Act. The Tribunal considered the date of Service Tax payment as crucial, in line with FEMA regulations where remittance to foreign service providers is linked to export proceeds realization. The Tribunal concluded that the refund claim was valid as it was filed within the stipulated time frame.

Issue 2: Time limitation under Notification No. 41/2007-ST
The Revenue contended that there is a strict six-month time limit under para-2(e) of Notification No. 41/2007-ST, without any provision for extension. They argued that this specific provision should prevail over the general provisions of Section 11B of the Central Excise Act. However, the Tribunal referred to the ruling of the Delhi High Court in Sony India Ltd. vs. Union of India, where it was held that the limitation period for claiming a refund cannot start before the right to claim refund crystallizes. The Tribunal noted the scheme under Notification No. 41/2007, requiring the exporter to pay the tax to the service provider before claiming a refund. Consequently, the Tribunal dismissed the appeal by Revenue, citing the precedent and directing the Adjudicating Authority to issue the refund promptly.

Issue 3: Applicability of special provisions of Notification No. 41/2007 over Section 11B of the Central Excise Act
The Revenue argued that the specific time limit mentioned in Notification No. 41/2007 should take precedence over the general provisions of Section 11B of the Central Excise Act. However, the Tribunal relied on the Delhi High Court's ruling, emphasizing that the right to claim a refund must first crystallize before the limitation period begins. The Tribunal held that the scheme under the notification mandates payment to the service provider before seeking a refund, aligning with the principles established in the Sony India Ltd. case. Consequently, the Tribunal dismissed the Revenue's appeal and instructed the Adjudicating Authority to process the refund promptly, adhering to the established legal principles.

This comprehensive analysis of the judgment highlights the key issues addressed by the Tribunal and the legal reasoning behind their decision, providing a detailed understanding of the case.