Commissioner Of Service Tax, Mumbai vs Inox Air Products Ltd

(Arising out of Order-in-Appeal No. M-I/AV/29/2011 dated 31.01.2011 passed by Commissioner of Central Excise (Appeals), Mumbai-1)

For approval and signature:

Honble Mr. M.V. Ravindran, Member (Judicial) ======================================================

1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2. Whether it should be released under Rule 27 of the : No CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3. Whether Their Lordships wish to see the fair copy : Seen of the Order?

4. Whether Order is to be circulated to the Departmental : Yes authorities?

====================================================== Commissioner of Service Tax, Mumbai Appellant Vs. Inox Air Products Ltd. Respondent

Appearance: Shri B. Kumar Iyar, Supdt. (AR) for Appellant Shri Vinay Jain, C.A. for Respondent

CORAM: Honble Mr. M.V. Ravindran, Member (Judicial)

Date of Hearing : 11/09/2015 Date of Decision : 11/09/2015

ORDER NO

Per: M.V. Ravindran

This appeal is filed by the Revenue against Order-in-Appeal No. M-I/AV/29/2011 dated 31.01.2011.

2. Heard both sides and perused the records.

3. On perusal of the records it transpires that the Revenue is aggrieved by order of the first appellate authority on the ground that he had set aside the order-in-original and granted the refund of the amount without considering the provisions in correct perspective.

4. The respondent had received an amount as commission for orders to procure and products sold by principal located outside, in India. Respondent discharged the service tax liability on the said commission received by them. Subsequently noting that service tax liability does not arise on such a transaction, refund claim was filed which was rejected by the adjudicating authority after following the due process of law, on an appeal the first appellate authority has held in the favor of assessee and hence, Revenue is challenging the said order.

5. Learned departmental representative would submit that the service tax which is rendered by the appellant are on a commission received on the products which are sold in India, said cannot be called export services. It is his submission that the services rendered by the appellant of marketing of the products has to be discharged as the services rendered in India, It is also his submission that provisions of section 11B would be applicable for claim of refund and are to granted to assessee under the provisions of notification no. 11/2005-ST dated 19-04-2005, also includes that the refund claim are subject of limitation as provided under section 11B of Central Excise Act, 1944.

6. Learned counsel on the other hand would submit that identical/similar issue of another assessee was before this bench in Appeal no. ST/450/11 in the case of HINCON Technoconsult Ltd. and by final order dated 04.09.2014, Tribunal held in favor of the assessee as reported as 2014-TIOL-2373-CESTAT-Mum. He produces a copy of said order.

7. After considering the submissions made by both sides, I find that it is undisputed fact that the respondent has rendered the services to foreign principle in respect of products Marketed in India, on which a commission is received by him. Considering such commission is taxable under Business Auxiliary Services has discharged the service tax liability. Noticing that they are discharged the service tax wrongly, they filed the refund claim.

8. The first appellate authority while setting aside the order in original as recorded the following findings. Relevant paragraphs are:

6. The adjudicating authority has held that the service tax had been correctly paid by the appellants and that the fact of export of services had not been established. The appellants are indenting agents and market the products of the company outside India for which they get the commission. The foreign clients pay the commission proportionate to the orders procured and the Products sold by their foreign principals. Such service of marketing the products for foreign principals for consideration i.e. commission is the service classifiable under the category of Business Auxiliary Service. The issue regarding whether such services which are Tendered within India for their principals outside India and which results in import of goods for those principals, amounts to export or not has been clarified by the Board vide Circular No. 111/5/2009 ST dated 24.2.2009 wherein it has been stated that Indian agents who undertake marketing in India for goods of a foreign seller are categorized under Rule 3 (1) (iii) wherein export of service would take place even when all the relevant activities take place in India so long as the benefit of these services accrues outside India. Thus, there is no dispute that rendering of such services to the foreign principals would amount to export of services. This has also been held by the Tribunal in the case of IBM India (P) Ltd. vs. CCE, Bangalore (2010 (19) STR 520 (Tri. Bangalore) and-Blue Star Ltd. vs. CCE, Bangalore (2008 (11) STR 23 (Tri. Bangalore). The appellants had therefore indeed exported the services under the category of Business Auxiliary Service.

7.The adjudicating authority has then held that the condition of Notification NO..11/2005 dated 19.4.2005 were not satisfied and that the procedure laid down in the Export of Services Rules, 2005 had not been followed. Further that in the ST3 returns, it was not mentioned that the services had been exported, I find that Notification No. 11/2005 ST dated 19.4.2005 merely requires that the fact of export of services should be established and payment thereof should be received in convertible foreign exchange. The appellants have produced evidence regarding receipt of payment in convertible foreign exchange. Non declaration of the fact of export in their ST3 returns cannot deprive the appellants of their rightful claims. Similarly the submission of refund claim in form 'R' instead of ASTR is only a procedural mistake and cannot result in denial of their claim of rebate. There are no other conditions under Notification No. 11/2005. The findings of the adjudicating authority therefore that the procedure laid down under this Notification had not been fulfilled cannot be sustained.

8. The adjudicating authority has then gone on to hold that the claim was barred by limitation in terms of Section 11B as also by doctrine of unjust enrichment. Since the rebate is being granted in terms of the Export of Services Rules, 2005 and the Notification No. 11/2005 dated 19.4.2005, the question of applicability of provisions of Section 11B in terms of time bar as well as doctrine of unjust enrichment cannot arise. The notification itself does not lay down any such restrictions. The claim is therefore required to be examined and sanctioned in terms of Notification itself without any reference to the provision of section 11B.

9. From the above reproduced findings it can be seen that the first appellate authority has considered the entire issue from all angles, against such reasoned order, the grounds of appeal as taken by the revenue are as under.

1. Commissioner (Appeals) has allowed the appeal and set aside the order-in-Original in question by holding that there is no limitation for claiming rebate under notification No. 11/2005 dated 19.04.2005 which is incorrect as all refund claims are subject to the clause of limitation as laid down in Section 11B of the Central Excise Act, 1944.

2. Section 11B of the Central Excise Act, 1944 is applicable in Service Tax matters in terms of Section 83 of the Finance Act, 1994 Explanation to Section 83 Clearly states that refund includes rebate.

10. It can be seen from the above reproduced grounds of appeal that revenue is not seriously contesting the factual position as has been considered by the first appellate authority, while setting aside the order in original. I also find strong force in the contention raised by the learned counsel that an identical issue is now settled by the Tribunal in the case of HINCON Technoconsult Ltd. (supra). I reproduce the relevant paragraphs.

4. Being aggrieved, the Revenue have filed the present appeal before this Tribunal on the ground that by virtue of Section 83 of the Finance Act, 1994, the provisions of Section 11B of the Central Excise Act are applicable to Service Tax which provides for filing of refund claim within one year from the relevant date. Further, by virtue of explanation to Section 11B, refund includes rebate. It is further urged that the provisions of Section 11B override the provisions of Notification No. 11/2005-ST and reliance was placed on the ruling of this Tribunal in the case of Precision Controls Vs. Commissioner of Central Excise, Chennai - 2004 (176) ELT 147 (Tri-Chennai) = 2004-TIOL-751-CESTAT-MAD, where in case of rebate claim under Rule 12 of Central Excise Rules, 1944 Commissioner has no power to condone any delay in filing rebate claim.

5. The learned Counsel for the respondent assessee argued that export of service is not chargeable to Service Tax. Further, Rule 4 of the Export of Service Rule give option to the assessee to export the service without payment of tax, whereas Rule 5 provides for rebate where tax has been paid relating to export of service. Thus, once the service is not taxable, the amount deposited by the appellant is not tax but in the nature of deposit and as such for refund of deposit, limitation as per Section 11B does not attract. Accordingly, he prays for upholding the impugned appellate order.

6. Having considered the rival contentions, I find that Rule 4 of the Export of Service Rules provides for export of service without payment of tax as export of service is not exigible to tax. Further, Rule 5 provides for mechanism for rebate in case the tax has been paid mistakenly or by way of abundant caution. Thus, the amount of tax deposited by the assessee herein is not tax but in the nature of deposit. The same not being tax, there is no time limit for refund of deposit as Section 11B applies to refund of duty/tax only. Further, I find that the ruling in the case of Precision Controls (supra) relied upon by the Revenue relates to export of goods and refund under the Central Excise Rules, 1944 and the same is not applicable in the facts of the present case. Thus, the appeal of the Revenue is dismissed. Cross-objection also stands disposed of. The respondent assessee will be entitled to consequential relief, if any, in accordance with law.

11. It can be noticed that a view which had taken by the revenue in identical/similar issue; in view of above it is held that the appeal is devoid of merits. Accordingly, the same is rejected and the impugned order is upheld as correct and legal.

(Pronounced in Court)

(M.V. Ravindran) Member (Judicial)

akp 1 6 APPEAL No. ST/322/11-Mum