2017 (6) TMI 163 - AT - Service Tax

Refund claim - denial on the ground of non-realization of foreign exchange and treating that the same was sanctioned erroneously - Held that - the orders-in-original sanctioning the refund have already attained finality and the Revenue has not filed any appeal against the sanctioning of the refund order and the Revenue wants to recover the erroneously sanctioned refund by parallel proceedings by issue of SCN which is not permitted under law. The appellant has also produced a copy of the agreement between his dealers by which the appellants are under obligations to supply 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 denial of refund. Appeal allowed - decided in favor of appellant.

Issues:
1. Eligibility for refund of service tax paid on courier services under Notification No. 17/2009 ST.
2. Recovery of erroneously refunded amount.
3. Finality of orders-in-original sanctioning refund.
4. Requirement of realization of sale proceeds for refund eligibility.
5. Production of foreign exchange realization certificate for refund eligibility.

Analysis:
1. The appeal involved a dispute regarding the eligibility for refund of service tax paid on courier services under Notification No. 17/2009 ST. The appellants, who were manufacturing two-wheeler motor vehicles and exporting motor cycle spare parts, had initially claimed and received refunds. However, show-cause notices were later issued to recover the refunded amount due to non-realization of foreign exchange, leading to the rejection of the refund by the adjudicating authority. The Commissioner(Appeals) upheld this decision, prompting the appellants to file three appeals challenging the rejection.

2. The issue of recovery of erroneously refunded amounts was raised in two appeal numbers, where the adjudicating authority demanded the refunded amounts back. The Commissioner(Appeals) rejected the appeals of the appellant on the grounds of ineligibility for refund and the recoverability of erroneously refunded amounts. The appellants argued that the orders-in-original sanctioning the refunds had already attained finality, and initiating new proceedings without challenging those orders was impermissible.

3. The finality of orders-in-original sanctioning the refund was a crucial aspect of the case. The Revenue had not filed any appeal against the sanctioning of the refund orders, and attempting to recover the erroneously sanctioned amounts through parallel proceedings via show-cause notices was deemed impermissible under the law. The Tribunal found that the orders-in-original sanctioning the refund had indeed attained finality, and the Revenue's attempt to recover the amounts through new proceedings was legally untenable.

4. The issue of the requirement of realization of sale proceeds for refund eligibility was a key point of contention. The appellants contended that they had fulfilled all substantial requirements for refund eligibility under Notification No. 17/2009 ST. They argued that the condition of realization of sale proceeds, as stipulated in the notification, should be interpreted in line with the provisions of FEMA 1999. They further contended that the condition should be considered fulfilled even when the amount due to be realized is nil, citing relevant legal provisions and precedents to support their argument.

5. The production of a foreign exchange realization certificate for refund eligibility was another aspect under scrutiny. The respondent argued that the appellants were only eligible for a refund upon producing the foreign exchange realization certificate issued by banks. However, the Tribunal found that the appellants had exported spare parts to their dealers abroad as free warranty replacements, supported by invoices and agreements on record. The Tribunal held that the appellants had already received the export proceeds when the main product was exported, making the denial of refund based on the lack of a bank realization certificate unjustified.

In conclusion, the Tribunal set aside the impugned order, allowing all the appeals of the appellant with consequential relief, if any, as the impugned order was found to be unsustainable in law.

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