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2017 (10) TMI 405 - AT - Service TaxRefund/Rebate claim - POPOS Rules - Service Tax paid on the rent paid by the Respondent to the Airport Authorities, for running their duty free shops situated in the departure lounge of various airports - N/N. 41/2012-ST dated 29.06.2012 - Held that - The Department heavily relies on Article 286 of the Constitution of India and the judgment in Hotel Ashoka vs Asstt. Commissioner of Commercial Taxes, 2012 (2) TMI 62 - Supreme Court of India , which was also rendered in the case of similar duty free shops, where it was held that the Duty Free Shop which is Customs Bonded Warehouse is considered by the Department as a space outside India. Clause (5) of the Place of Provision of Services Rules, 2012 notified by N/N. 28/2012-S.T., dated 20-6-2012, w.e.f. 1st July, 2012, leaves no doubt that the place of provision of services relating to immovable property in the instant case is the place where the immovable property in this case Customs Bonded warehouse (Duty-Free Shop) is located, which admittedly is beyond customs barriers in non-taxable territory. In the case of rent paid for the space of duty free shops, the place of provision of services is thus the place where duty free shop is located, which is admittedly beyond Customs Frontiers - Even in the Integrated Goods And Services Tax Act, 2017,as per Section 13(4) the place of supply of services remains the place where immovable property is located. There is no dispute that the duty-free shops, whether in arrival or departure lounge, of the International Airports are beyond the customs frontiers. Thus, they are outside the taxable territory and thus in non-taxable territory. The Grounds taken in the Appeal also show that the department deems these duty free shops in foreign territory. Since, the rent is paid for the rental space in arrival or departure lounge area in non-taxable territory, the same therefore is not a taxable service - no Service Tax is chargeable at the first instance on rent for rental of Customs Bonded Warehouse (Duty Free Shop), whether it be in the arrival lounge or in the departure lounge. The levy of Service Tax paid by the Respondent is therefore not authorised by law in view of provisions of Finance Act, 1994 read with Article 286 of the Constitution of India. Eligibility for refund - Held that - There is no dispute on the fact that it is not possible to carry on the export sales at the Duty Free Shop at the departure terminals, without having a space there, which can only be possible by taking the duty free shops on rent from Airport Authority of India. In view of the above, the renting of airport premises at the departure module has a direct nexus with the export sale being made by the Respondent - the Service Tax is collected without authority of law. Such collection of tax on services which are not taxable services, entitles the Respondent for grant of refund. Unjust enrichment - Held that - The Commissioner (Appeals) has examined the export invoices issued to the international passengers, which is also countersigned by the Customs Officers. No duty or taxes are charged or recovered in the said export invoice. Hence, no incidence of tax or duty has been passed on to their buyer international passengers. Refund/ Rebate allowed - appeal dismissed - decided against Revenue.
Issues Involved:
1. Levy of Service Tax on rent paid by the Respondent. 2. Classification of sales at duty-free shops as exports. 3. Compliance with Notification No. 41/2012-ST dated 29.06.2012 for rebate/refund. 4. Applicability of the doctrine of unjust enrichment. 5. Legality and propriety of the Orders-in-Appeal. Detailed Analysis: Issue 1: Levy of Service Tax The Tribunal examined whether the levy of Service Tax on rent paid by the Respondent for duty-free shops is authorized under the Finance Act, 1994, considering Article 286 of the Constitution of India. It concluded that: - Article 286(1) prohibits imposing tax on the supply of goods/services outside the state, during import into, or export out of India. - The Supreme Court in Hotel Ashoka held that sales at duty-free shops are outside the customs frontiers of India and thus not subject to state tax. - Clause (5) of the Place of Provision of Services Rules, 2012, and Section 66B of the Finance Act, 1994, indicate that services provided in non-taxable territories (such as duty-free shops) are not subject to Service Tax. - Consequently, the rent for duty-free shops, being beyond customs barriers, is not a taxable service, and the levy of Service Tax on such rentals is unauthorized. Issue 2: Classification of Sales at Duty-Free Shops as Exports The Tribunal addressed whether sales at duty-free shops to international passengers qualify as exports under Notification No. 41/2012-ST dated 29.06.2012: - The Commissioner (Appeals) found that goods sold at duty-free shops are exported as they are not cleared for home consumption and are under customs control. - The sales are considered exports under Section 69 of the Customs Act, and the goods are treated as imported goods under Chapter IX of the Customs Act. - The Tribunal upheld that sales at duty-free shops are exports since the goods are taken out of India by international passengers, satisfying the definition of export under Section 2(18) of the Customs Act. Issue 3: Compliance with Notification No. 41/2012-ST The Tribunal evaluated whether the conditions of Notification No. 41/2012-ST for rebate/refund were met: - The Assistant Commissioner sanctioned refunds after verifying compliance with the notification's conditions. - The Commissioner (Appeals) confirmed that renting airport premises has a direct nexus with export sales, as duty-free shops cannot operate without renting space at departure terminals. - The Tribunal found no error in the findings that conditions of the notification were satisfied, thus upholding the refund. Issue 4: Applicability of Doctrine of Unjust Enrichment The Tribunal considered whether the doctrine of unjust enrichment applies: - The Commissioner (Appeals) found that the doctrine does not apply to export transactions, as per clause (a) of the proviso to Section 11B(2) of the Central Excise Act, 1944. - The Tribunal agreed that no incidence of tax or duty was passed on to international passengers, as evidenced by export invoices countersigned by Customs Officers. - The Tribunal concluded that unjust enrichment provisions do not bar the refund in this case. Issue 5: Legality and Propriety of Orders-in-Appeal The Tribunal reviewed the legality and propriety of the Orders-in-Appeal: - It upheld the findings of the Commissioner (Appeals) that the Respondent is entitled to a refund of Service Tax paid on rent for duty-free shops. - The Tribunal dismissed the Department's appeals, affirming that the Orders-in-Appeal were legal and proper. Conclusion: The Tribunal dismissed the Department's appeals, affirming that the Respondent is entitled to a refund of Service Tax paid on rent for duty-free shops as the sales are considered exports, the conditions of Notification No. 41/2012-ST were satisfied, and the doctrine of unjust enrichment does not apply. The levy of Service Tax was found unauthorized, and the Orders-in-Appeal were deemed legal and proper.
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