2024 (7) TMI 1359 - AT - Service Tax

Denial of benefit of exemption from payment of service tax under the N/N. 42/2012 ST dated 29.06.2012 on account of delayed furnishing of Form EXP 3 - non-submission of the invoice of the service provider with half yearly return. Non-suited for grant of exemption is violation of the Condition No.3 of the notification - HELD THAT - The Authorities below have misconstrued the provisions of Condition No.3 in as much as the exemption is prohibited in the event the Indian partner has an equity participation in an overseas joint venture or wholly owned subsidiary whereas in contra 69.62% shares of the appellant company are held by the Dutch US holding B.V. Netherlands. Therefore, the said condition is not really applicable in the facts of the share holding pattern - there is no violation of the said condition to dis-entitle the appellant to claim the exemption under the notification. The next ground is that EXP 3 Form, which was an intimation to the Department of intending to avail the benefit of the notification was filed by the appellant belatedly - HELD THAT - The learned counsel for the appellant is agreed upon that this is just a procedural lapse as the half yearly return in EXP 4 that they have availed the exemption was filed within the time limit prescribed with all the requisite documents, which clearly shows that the goods have been exported. The intimation to avail exemption under Form EXP 3 was merely a procedural condition and strict compliance thereof is not required so as to deny the exemption to the appellant. The next issue raised is that the invoices issued by the foreign commission agents were not submitted to the Department - HELD THAT - The submission on behalf of the appellant is that the commission amount has been paid as per the agency agreement through HDFC bank to the agents bank account after receipt of payments of exported goods from the customers. The details of the export invoices number and date, name of agents, shipping bills, number and date with bank reference number, F.O.B. value and amount of commission paid with copies of HDFC bank and debit advices were filed with the Department. Since the commission was paid on the basis of percentage of FOB, as mentioned in the agreement itself, there was no requirement of raising any invoice by the agent and accordingly, the same has not been raised - The export of goods is evidenced by the shipping bill and the amount of compensation as per the agreement is evident from the payment advice of the bank. The lapse, if any, is not very fatal so as to dis-entitle the appellant to claim the exemption. Similarly, the learned Single Member in M/S RADIANT TEXTILES LTD. VERSUS CCE, CHANDIGARH-II 2016 (10) TMI 242 - CESTAT CHANDIGARH considered the decisions of the High Court of Bombay in UNION OF INDIA VERSUS FARHEEN TEXTURISERS AND OTHERS 2010 (7) TMI 982 - BOMBAY HIGH COURT and of the Allahabad High Court in COMMR. OF CUS. C. EX. VERSUS J.S. GUPTA AND SONS 2015 (7) TMI 379 - ALLAHABAD HIGH COURT to conclude that the basic requirement of the notification has not been disputed by the Revenue, therefore substantive benefit cannot be denied on account of technical lapse. The appellant had complied with all the conditions of the notification and is, therefore, entitle to avail the benefit thereof. Since the issue has been decided on merits, the invocation of extended period of limitation or the interest and penalty does not require any consideration. The impugned order is unsustainable and is hereby set aside - Appeal allowed.

Summary

Issues Involved:
1. Denial of exemption from payment of service tax due to delayed submission of Form EXP-3.
2. Applicability of Condition No.3 of Notification No. 42/2012-ST.
3. Non-submission of invoices of the service provider with half-yearly returns.

Detailed Analysis:

1. Denial of exemption from payment of service tax due to delayed submission of Form EXP-3:
The appellant contended that the delayed submission of Form EXP-3 was merely a procedural lapse. The Tribunal agreed, noting that the half-yearly return in Form EXP-4, which included all requisite documents, was filed within the prescribed time limit. The Tribunal emphasized that strict compliance with procedural conditions is not required to deny the exemption, especially when the substantial conditions have been met. The Tribunal referenced several precedents, including HEG Ltd v Commissioner of Customs, Bhopal, where procedural lapses did not result in denial of substantive benefits.

2. Applicability of Condition No.3 of Notification No. 42/2012-ST:
Condition No.3 of the notification states that the exemption shall not be available for export made by an Indian partner in a company with equity participation in an overseas joint venture or wholly owned subsidiary. The appellant argued that this condition was misconstrued by the authorities, as 69.62% of the appellant company's shares were held by Dutch US holding B.V. Netherlands, and not the other way around. The Tribunal agreed with the appellant, stating that the condition was not applicable given the shareholding pattern and thus, there was no violation of Condition No.3.

3. Non-submission of invoices of the service provider with half-yearly returns:
The appellant did not submit invoices issued by the foreign commission agents, which was seen as a violation of proviso (b) of the notification. The Tribunal noted that proviso (b) was drafted broadly to include "any other document by whatever name called" issued by the service provider to the exporter. The appellant argued that the commission was paid based on the agency agreement through HDFC bank, and detailed documents were provided to the Department. The Tribunal found that all primary conditions were satisfied and that the lapse in submitting specific invoices was not fatal enough to deny the exemption. The Tribunal cited the principle that substantial benefits cannot be denied due to procedural lapses, referencing decisions such as Radiant Textiles Ltd. Vs. Commissioner of Central Excise, Chandigarh.

Conclusion:
The Tribunal concluded that the appellant had complied with all substantive conditions of the notification and was entitled to the exemption. The impugned order was set aside, and the appeal was allowed. The Tribunal also noted that since the issue was decided on merits, the invocation of the extended period of limitation, interest, and penalty did not require consideration.