2020 (5) TMI 473 - AT - Service Tax

100% EOU - Refund of service tax paid - refund claim was rejected by the department on the ground that consequent to allegation of illicit mining of beach sand, the Government of Tamil Nadu vide GO dated 8.8.2013 and 17.9.2013 had banned mining of beach sand miners and also formed District level committee to verify the allegation - HELD THAT - The ground for rejection is on an allegation that the appellant has done unlawful mining of raw sand and other minerals in excess of the permission granted to them. This aspect has to be looked into by the Govt. of Tamil Nadu as well as the committee formed for this purpose. The provisions of Mines and Minerals Act of the State has to look into the legal consequences of unlawful mining. When the appellant has exported the goods paying service tax on the services availed for exporting the goods, the department cannot deny the refund stating reasons beyond the Customs Act as well as Finance Act - Since the department does not have a case that the appellants have violated provisions of the Finance Act or the notification, the rejection of refund claim cannot sustain. Appeal allowed.

Summary

Issues:
Refund claim rejection based on alleged unlawful mining of raw sand and minerals; Appeal against rejection of refund claim under Notification No.41/2012-ST dated 29.6.2012.

Analysis:
The appellants, a 100% EOU, filed a refund claim for service tax paid on taxable services availed for exporting goods, specifically 'Garnet Abrasive.' The claim was rejected by the department due to allegations of illicit mining of beach sand, leading to a ban on mining by the Government of Tamil Nadu. The rejection was upheld by the Commissioner (Appeals), prompting the current appeal.

The appellant argued that all conditions under Notification 41/2012-ST were met, and the rejection was solely based on the illicit mining allegations. The department contended that the goods became contraband due to unlawful mining, justifying the refund rejection.

After considering both arguments, the Tribunal found that the rejection was solely based on the allegation of unlawful mining exceeding permitted limits. The matter of unlawful mining falls under the purview of the State's Mines and Minerals Act, not the Finance Act or Customs Act. Since the appellant paid service tax on exported goods and there was no violation under the Finance Act or Notification 41/2012, the refund rejection was deemed unjustified.

Therefore, the Tribunal set aside the impugned order, allowing the appeal with any consequential relief. The decision emphasized that refund claims cannot be denied based on reasons beyond the scope of relevant acts and notifications governing the matter, especially when no violation under those laws is established.