Refund of service tax paid on terminal handling charges by Exporters allowed

By | January 27, 2016

Jain Irrigation Systems Ltd.


Commissioner of Central Excise, Mumbai


ORDER NOS. M/4872/2015/SMB AND A/3580-3581/2015/SMB
APPEAL NOS. ST/89895 AND 89901/2014

OCTOBER  28, 2015

Aqueel Sheeraji, Adv. for the Appellant. A.B. Kulgod, Asstt. Commr. (AR) for the Respondent.


1. These two appeals filed by the appellant are against orders-in-appeal No. NSK-EXCUS-000-APP-34-14-15 dated 14.08.2014 and NSK-EXCUS-000-APP-42-14-15 dated 29.9.2014. Appellant is also filed a miscellaneous application seeking disposal of both the appeals together.

2. Heard both sides on 27th and 28th October 2015 at length.

3. On perusal of the records I find that the issue that falls for consideration is whether the appellant is eligible for refund of service tax paid on various services which were availed by them in respect of the terminal handling charges, inland haulage service and other documentation charges incurred for the goods on reaching the port of destination. The appellant was granted refund of an amount of service tax paid which were received by them on the goods which were exported from India, but were denied refund of an amount of service tax paid for the services rendered by the service providers at the place of destination. Appellant is aggrieved by the rejection of the refund amount for the period October 2012 to March 2013 only on the ground that the services were rendered on the goods after they were exported from India, though the contract was for door delivery of goods.

4. Learned Counsel would draw my attention to the fact that the refund claim of an amount of service tax paid as per the provisions of Notification 41/2012-ST dated 29.06.2012 and submit that this Notification specifically grants refund of service tax paid on the specified services which have been used beyond the place of removal for the export of the goods. It is his submission that the appellant has exported the goods and not the services. He would also submit that a similar issue came before the Tribunal in the case of Polyplex Corpn. Ltd. v. CCE [Final Order No. A/50336 of 2015, dated 5-2-2015] and the Bench held in favour of the assessee therein. He would also draw my attention to the findings recorded and the reasoning given by the Bench. He would also submit that for the subsequent period i.e. April 2013 to June 13 refund claim of an identical nature were rejected by the adjudicating authority but the first appellate authority has allowed the same relying upon the provisions of Notification No. 41/2012-S.T.

5. Learned D.R. reiterates the findings of the adjudicating authority as well as the first appellate authority.

6. In order to come to a conclusion, the relevant provisions of Notification 41/2012-ST needs to be visited hence they are reproduced.

“G.S.R. (E). – In exercise of the powers conferred by section 93A of the Finance Act, 1994 (32 of 1994) (hereinafter referred to as the said Act) and in supersession of the notification of the Government of India in the Ministry of Finance (Department of Revenue) number 52/2011 – Service Tax, dated the 30th December, 2011, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) vide number G.S.R. 945(E), dated the 30th December, 2011, except as respects things done or omitted to be done before such supersession, the Central Government, on being satisfied that it is necessary in the public interest so to do, hereby grants rebate of service tax paid (hereinafter referred to as rebate) on the taxable services which are received by an exporter of goods (hereinafter referred to as the exporter) and used for export of goods, subject to the extent and manner specified herein below, namely:—

Provided that

(a) the rebate shall be granted by way of refund of service tax paid on the specified services.

Explanation. – For the purposes of this notification,—

(A) ‘specified services’ means—
(i) in the case of excisable goods, taxable services that have been used beyond the place of removal, for the export of said goods;
(ii) in the case of goods other than (i) above, taxable services used for the export of said goods;

but shall not include any service mentioned in sub-clauses (A), (B), (BA) and (C) of clause (l) of rule (2) of the CENVAT Credit Rules, 2004;

(B) ‘place of removal’ shall have the meaning assigned to it in section 4 of the Central Excise Act,1944 (1 of 1944);” (Emphasis Supplied)

7. It can be seen from the above reproduced portion of the clauses of Notification, that it talks about granting of rebate on specified goods which is defined as services which have been used beyond the place of export of such goods. It is undisputed that in the case in hand, appellant exported the excisable goods and utilized the services for such export and the place of removal in the case in hand is factory gate. It is also undisputed that in some of their clients’ case, appellant had accepted the terms of delivery of the goods till the door steps of the clients. It would mean that the appellant was responsible for the delivery of the goods in the hands of the appellant’s clients. Hence services received by the appellant for such activity is eligible for refund under Notification 41/2012-ST (as reproduced hereinabove).

8. I find strong force in the contentions raised by the learned Counsel that identical issue has been decided by the Delhi Bench in the case of Polyplex Corpn. Ltd. (supra) and I reproduce the ratio as in para 8.

“8. With regard to services, namely, Ocean freight, On-Carriage and Terminal Handling (Destination), the argument of the learned AR for the Revenue is that services availed by the appellant outside India, they are not entitled to claim refund of Service Tax. To claim refund of service tax on services in question provided by the service provider located in India and the service recipient is also located in India. I find that service provider in India was required to be delivered the goods outside India at the destination of the buyers, the charges on the services have to be formed part of the price of the goods in question. Therefore, I hold that the appellant is entitled to claim refund of service tax on these services. With regard to learned AR’s contention that the appellant has never said that the goods sold were under the ownership of the appellant till they reached to foreign buyers. This argument of the learned AR is not acceptable as the ownership of the goods remained with the appellant.”

9. In view of the foregoing and in the facts and circumstances of the case, I find that the impugned orders to the extent contested before the Tribunal are unsustainable and liable to be set aside.

10. Impugned orders are set aside to the extent they are contested before the Bench and the appeals are allowed with consequential relief. Miscellaneous application is also disposed of.

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