2024 (7) TMI 554 - HC - Service Tax

Rebate claim for refund of service tax - Export of consignment of garnets extracted out of illegally mined sea sand - applicability of N/N. 1/12-ST, dated 29.06.2012 issued under Section 93A of the Finance Act, 1994 - HELD THAT - Both the exports and perpetrator of crime are one and the same. If the Corporate facade is lifted, it is clear that the same M.Ramesh, who is the Managing Director of the petitioner, is the proprietor of Manickam Minerals. Therefore, the export incentives are not to be given for proceeds of crime. Grant of exports incentivies which are out of the illegal activity would not be keeping in tune with the public purpose for which exemption Notification No.41/12-ST, dated 29.06.2012 issued under Section 93A of the Finance Act, 1994 was issued. The export incentives under the Central Excise Act particularly Rules 18 and 19 of the Central Excise Rules, 2002 read with relevant Notifications and Rule 5 of the CESTAT Credit Rules, 2002 as also under Notification No.41/12-ST dated 29.06.2012 issued under Notification No.41/12-ST, dated 29.06.2012 issued under Section 93A of the Finance Act, 1994 are intended to incentivise legitimate exports. The idea of the incentivising such exports is to encourage such exporters, who compete in the international market and bring precious foreign exchange for the country, which enhances the foreign exchange reserves of the country and stabilizes the Government's position quay balance of payments. Unless the exports are legitimate, the question of incentivising such exports would not and could not subserve public purpose. The public purpose in Section 93A of the Act would mean those exports which are legitimate and are within the four-corners of the law. Proceeds of crime and proceeds of illegal exports would not enure in favour of the petitioner in the form of rebate/albit refund of service tax borne on services used in the export of goods in violation of G.O(Ms)No.156, Industries (MMD) Department, dated 08.08.2013. Merely because the Custom Department has not taken any punitive action against the petitioner ipso facto would not mean that the petitioner would be entitled to export incentives under Notification No.41/12-ST, dated 29.06.2012 issued under Section 93A of the Finance Act, 1994 Therefore, the Writ Petition is devoid of merits. Petition dismissed.

Summary

Issues Involved:
1. Legitimacy of the petitioner's rebate claims for service tax on exported garnets.
2. Jurisdiction of the Revisional Authority under Section 35EE of the Central Excise Act, 1944.
3. Applicability of Notification No.41/12-ST dated 29.06.2012 for rebate claims.
4. Impact of illegal mining on eligibility for export incentives.
5. The role of the Customs Department in the export process.

Detailed Analysis:

1. Legitimacy of the petitioner's rebate claims for service tax on exported garnets:
The petitioner exported garnets extracted from illegally mined sea sand, contrary to restrictions by the Government of Tamil Nadu. The rebate claims for refund of service tax on services used in the export were rejected by the Rebate Sanctioning Authority and affirmed by the Appellate Commissioner. The petitioner argued that the issue was covered by a decision of the CESTAT, South Zonal Bench, Chennai, in V.V.Minerals Vs. Commissioner of GST and Central Excise, Madurai, which allowed similar claims. However, the court found that the exports were out of illegally mined sea sand, and hence the petitioner was not entitled to export incentives.

2. Jurisdiction of the Revisional Authority under Section 35EE of the Central Excise Act, 1944:
The petitioner approached the Revisional Authority under Section 35EE, which applies to rebate claims under the Central Excise Rules, 2002. The respondents argued that the petitioner should have filed an appeal before the CESTAT under Section 86 of the Finance Act, 1994. The court noted that the petitioner had approached the wrong forum and should have approached the CESTAT. However, at this distant point of time, the court decided not to relegate the petitioner to the alternate forum.

3. Applicability of Notification No.41/12-ST dated 29.06.2012 for rebate claims:
Notification No.41/12-ST grants rebate of service tax paid on taxable services received by an exporter and used for export of goods. The petitioner argued that the notification is silent on the source of the material and that as long as exports are made, the rebate cannot be denied. The court, however, held that the notification is intended to incentivize legitimate exports and not those arising from illegal activities.

4. Impact of illegal mining on eligibility for export incentives:
The court emphasized that export incentives are intended for legitimate exports that bring foreign exchange and stabilize the government's balance of payments. The petitioner’s claim was based on exports made from illegally mined sea sand, which does not serve the public purpose of the notification. The court cited the principle "Ex turpi causa non oritur actio" (no right can arise from an illegal act) to deny the rebate claims.

5. The role of the Customs Department in the export process:
The petitioner argued that the Customs Department had not initiated any proceedings against the exports and that Let Export Orders were issued. The court noted that merely because the Customs Department had not taken punitive action does not entitle the petitioner to export incentives. The legitimacy of the exports is crucial for the rebate claims, and the illegal mining activities disqualified the petitioner from receiving such incentives.

Conclusion:
The court dismissed the writ petitions, holding that the petitioner was not entitled to export incentives for goods made from illegally mined sea sand and had approached the wrong forum. The court emphasized that export incentives are meant for legitimate exports that comply with the law and serve the public interest.