2018 (8) TMI 1404 - CGOVT - Service Tax

Rebate of Service Tax - N/N. 41/2012-S.T. - denial of rebate on the ground that it is not technically possible at this point of time as the electronic Shipping Bills have been filed by the respondent and once the electronic Shipping Bills are filed by the respondent without declaration as per Para 2(d) of the N/N. 41/2012-S.T., dated 29-62012, the refund cannot be filed or sanctioned. Held that - While the rebate of Service Tax under Para 3 is normally rejectable for noncompliance of the condition stipulated in Proviso (c) of Notification No. 41/2012S.T. when the exporter is in a position to exercise either of the two options freely and effectively, the Government is of the considered view that the said condition in Proviso (c) is not meant for rejection of the rebate claim of the exporter when they were not having the option to file rebate under Para 2 at all for no fault on their part - The Commissioner (Appeals) in his order has clearly recorded that the EDI facility in the customs formation was not functional and it has not been denied anywhere in the revision application also. Further in case disbursement of rebate of Service Tax under Para 2 is not technically feasible at this juncture as claimed by the applicant, the rebate of service tax may be given under Para 3 on the basis of actual Service Tax paid by the respondent for which the applicant cannot have any technical difficulty at present. But it is not fair at all to hold a view in this case that the rebate of service tax will not be granted under both the Paras of the notification even when the respondent has undeniably exported the goods by using taxable input services for export of the goods. Revision application disposed off.

Summary

Issues:
1. Whether the rebate of Service Tax can be denied to the respondent under Para 3 of Notification No. 41/2012-S.T. due to non-functioning of the EDI System when the difference between the rebate claimed under Para 2 and Para 3 is not more than 20%.
2. Interpretation of the provisions of Notification No. 41/2012-S.T. regarding the eligibility of rebate claims under Para 2 and Para 3.
3. The impact of technical difficulties on the eligibility of rebate claims under the notification.

Issue 1:
The main issue in this case is whether the rebate of Service Tax can be denied to the respondent under Para 3 of Notification No. 41/2012-S.T. when the EDI System was non-functional, and the difference between the rebate claimed under Para 2 and Para 3 is not more than 20%. The Commissioner (Appeals) allowed the rebate under Para 2 when claims were not admissible under Para 3 due to non-fulfillment of the condition. The Government found that the condition in Proviso (c) should not lead to rejection of the rebate claim when the exporter had no option to claim under Para 2 due to technical issues with the EDI System. The purpose of the rebate is to refund actual Service Tax paid on services used for export, and in this case, the respondent had no choice but to claim under Para 3. Therefore, the Government held that the rebate under Para 2 was admissible in these circumstances.

Issue 2:
The interpretation of Notification No. 41/2012-S.T. reveals that manufacturers-exporters have the option to claim rebate of Service Tax under Para 2 based on specified rates or under Para 3 based on documents. However, the option under Para 3 is limited to cases where the difference between the rebate amounts under Para 2 and Para 3 is more than 20%. The Government noted that the intention is to encourage claiming under Para 2, and Para 3 is allowed only when the rebate based on actual payment of Service Tax is significantly higher. The condition in Proviso (c) should not be applied to reject rebate claims when exporters had no option to claim under Para 2 due to technical issues.

Issue 3:
The impact of technical difficulties on rebate claims under the notification was a crucial aspect of the case. The Government found that the EDI System was not functional during the relevant time, as acknowledged by the Commissioner (Appeals) and the respondent. The Revenue's argument that rebate under Para 2 was not feasible due to electronic shipping bills was deemed incompatible with the circumstances. The Government concluded that if disbursement under Para 2 was not technically feasible, the rebate could be granted under Para 3 based on actual Service Tax paid. It was emphasized that denying the rebate under both Paras of the notification when the respondent had used taxable input services for export would be unfair.

In conclusion, the revision application was disposed of based on the detailed analysis of the issues surrounding the denial of the rebate of Service Tax under Para 3, the interpretation of the notification's provisions, and the impact of technical difficulties on the eligibility of rebate claims.