2024 (3) TMI 856 - AT - Service Tax

Exemption for export promotion under N/N. 18/2009-ST dated 01.07.2009 - seeking relief of taxes paid on the services used in manufacture of export products - failure to submit the relevant documents showing the payment of commission to their foreign commission agents - HELD THAT - The Hon ble Apex Court in a Constitution Bench judgment in S. AMARJIT SINGH KALRA (DEAD) BY L. RS. ORS. VERSUS PRAMOD GUPTA (DEAD) BY L. RS. ORS. 2002 (12) TMI 607 - SUPREME COURT observed Laws of procedure are meant to regulate effectively, assist and aid the object of doing substantial and real justice and not to foreclose even an adjudication on merits of substantial rights of citizen under personal, property and other laws. Procedure has always been viewed as the handmaid of justice and not meant to hamper the cause of justice or sanctify miscarriage of justice. It is not disputed that there has been a delay in filing the EXP-2 Return the reason for which has been explained by the Appellant. This delay is not shown to cause any prejudicial consequence for Revenue. However, the Appellant had furnished material which shows a substantial compliance with the requirements of the exemption notification - While determining whether a provision is mandatory or directory, in addition to the language used in the notification, the context in which the provision is used and the purpose it seeks to achieve should also be examined. A beneficial legislation should not be viewed very rigidly. It is noted that there were no allegations of any blame worthy act by the Appellant. The claim should hence have been scrutinized and the Appellant allowed to satisfy whatever doubts that the Original Authority had. In the circumstances, the substantial rights of the appellant should not have been denied on procedural grounds. An order imposing a penalty involves an exercise of judicial discretion, which requires the decision to be fair, reasonable and objective. On the obverse side, anything arbitrary and whimsical would not satisfy the said requirement. This action of the Lower Authority has surprisingly found no comment in the impugned order and is defective to that extent. A simple act of claiming a tax benefit cannot be at the pain of being held liable for penalty. Such an order cannot be allowed to survive - there are no hesitation in not only quashing the penalty but also in setting aside the order. Matter remanded back to the Original Authority for de novo adjudication on merits of the Appellants claim for duty exemption as per Notification 18/2009 Service Tax, dated 07/07/2009 only - appeal disposed off.

Summary

Issues involved:
The issues involved in the judgment are related to the appellant's claim for exemption from payment of service tax under Notification No. 18/2009-ST dated 7.7.2009 for utilizing various input services in the manufacture and export of footwear, specifically concerning the commission paid to agents located outside India under 'Business Auxiliary Service (BAS)'.

Summary:
The appellant, engaged in the manufacture and export of footwear, filed Form EXP-1 followed by Form EXP-2 to avail exemption from service tax under Notification No. 18/2009-ST dated 7.7.2009. The Original Authority confirmed the demand for service tax as the appellant failed to substantiate their claim for exemption due to non-submission of relevant documents showing commission payment to foreign agents. The appeal before the Commissioner (Appeals) was rejected, leading to the present appeal before the Tribunal.

Issue 1 - Compliance with Notification No. 18/2009-ST:
The demand was confirmed based on the appellant's failure to fulfill the conditions of the notification. The impugned order highlighted additional documents not produced by the appellant, such as shipping bill showing commission payment, copy of the agreement with the agent, and original documents proving commission payment, leading to the rejection of the appeal.

Issue 2 - Delay in Filing Return and Penalty Imposition:
The appellant argued that the delay in filing Form EXP-2 was procedural and should not deny the substantial benefit of exemption. They contended that penalty under Sec 76 of the Finance Act, 1994 cannot be imposed without establishing blameworthy conduct. Citing legal precedents, they emphasized that in cases of interpretational nature, penalties are not liable to be imposed.

Judgment and Analysis:
The Tribunal observed that the delay in filing the return did not prejudice the revenue and noted the substantial compliance with the exemption notification requirements. It was highlighted that the appellant provided relevant documents, although there was a lack of conversion factor for foreign currency payments. The Tribunal emphasized that procedural issues should not deny substantial rights and criticized the imposition of penalty without establishing any blameworthy act.

The Tribunal set aside the impugned order, remanding the matter back to the Original Authority for de novo adjudication on the merits of the appellant's claim for duty exemption. The procedural issues regarding delay in filing the return and penalty imposition were not part of the remand terms. The Original Authority was instructed to follow principles of natural justice and provide a time-bound opportunity for the appellant to present evidence before issuing a speaking order. The appellant was directed to cooperate for verification within ninety days of the order receipt.