2009 (6) TMI 93 - AT - Service Tax

Respondent, as manufacturer of certain goods, took over liability to pay service tax on certain port services which were received by another party who exported the said goods. - Subsequent to such exports, the respondent-manufacturer filed refund claims for refund of the service tax paid on port services which were used for export of various consignments - After hearing both sides and examining the provisions of Notification No. 41/2007-S.T., I am of the prima facie view that the respondent-manufacturer of the goods cannot claim refund of service tax paid on port services received by another party operation of impugned order granting such refund to manufacture stayed

Summary

Issues:
1. Stay of operation of the impugned order allowing refund of service tax to the respondent under Notification No. 41/2007-S.T.
2. Eligibility of the respondent-manufacturer to claim refund of service tax paid on port services received by another party for export of goods under Notification No. 41/2007-S.T.
3. Interpretation of the notification to confer benefits on exporters only and not on third parties like manufacturers.
4. Application of the rule of strict interpretation to exemption notifications.

Analysis:
1. The applications filed sought stay of the impugned order where the Commissioner (Appeals) allowed refund of service tax to the respondent under Notification No. 41/2007-S.T. The respondent, a manufacturer, took over the liability to pay service tax on port services received by an exporter. Refund claims filed by the manufacturer were rejected by the original authority, stating they were in breach of the conditions of the notification. The Commissioner (Appeals) held in favor of the respondent, making them eligible for the refund. The Revenue prayed for restoration of the original orders and sought stay of the Commissioner's decision.

2. The Tribunal examined Notification No. 41/2007-S.T. and found that only an exporter, not a manufacturer, can claim the refund of service tax paid on port services used for exporting goods. The notification aims to benefit exporters assuming the service tax liability for port services used in exports. The respondent's conduct of entering into an agreement with the exporter to take over the service tax liability rendered the notification unworkable for them to claim the refund.

3. The Tribunal emphasized the rule of strict interpretation for exemption notifications. The purpose of the notification is to benefit exporters liable for service tax on port services used for exports. The benefit under the notification cannot be extended to third parties like manufacturers. The notification does not mention manufacturers being eligible to claim the benefit intended for exporters.

4. Considering the above analysis, the Tribunal decided to stay the operation of the Commissioner (Appeals) order until the final disposal of the appeals. The decision was based on the strict interpretation of the notification, which limits the refund of service tax on port services to exporters, not manufacturers who take over the service tax liability.