Custom, Excise & Service Tax Tribunal
Ms Prachi Lethers Pvt Ltd vs Cgst & Ce Kanpur on 22 April, 2024
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
ALLAHABAD
REGIONAL BENCH - COURT No. I
Service Tax Appeal No.70026 of 2019
(Arising out of Order-in-Appeal No.143/Commr(A)/ST/Appl/KNP/2018 dated
12/03/2018 passed by Commissioner (Audit) Central Excise, Kanpur)
M/s Prachi Leathers Pvt. Ltd., .....Appellant
(C-3, Udyog Nagar, Kanpur)
VERSUS
Commissioner of Central Excise, Kanpur ....Respondent
(117/74, Sarvodaya Nagar, Kanpur-208005)
WITH
Service Tax Appeal No.70027 of 2019
(Arising out of Order-in-Appeal No.206/Commr(A)/ST/Appl/KNP/2018 dated
26/03/2018 passed by Commissioner (Audit) Central Excise, Kanpur)
M/s Prachi Leathers Pvt. Ltd., .....Appellant
(C-3, Udyog Nagar, Kanpur)
VERSUS
Commissioner of Central Excise, Kanpur ....Respondent
(117/74, Sarvodaya Nagar, Kanpur-208005)
APPEARANCE:
Shri Vikas Garg, Chartered Accountant for the Appellant
Shri Manish Raj, Authorised Representative for the Respondent
CORAM: HON'BLE MR. P.K. CHOUDHARY, MEMBER (JUDICIAL)
HON'BLE MR. SANJIV SRIVASTAVA, MEMBER (TECHNICAL)
FINAL ORDER NOs.70219-70220/2024
DATE OF HEARING : 22 April, 2024
DATE OF DECISION : 22 April, 2024
SANJIV SRIVASTAVA:
These two appeals are directed against Order-in-Appeal
Nos. as under:-
Sl. No. Appeal No. Impugned O-I-A
1. ST/70026/2019 No.143/Commr(A)/ST/Appl/KNP/2018 dated
12/03/2018 passed by Commissioner (Audit)
Central Excise, Kanpur
2. ST/70027/2019 No.206/Commr(A)/ST/Appl/KNP/2018 dated
26/03/2018 passed by Commissioner (Audit)
Central Excise, Kanpur
Service Tax Appeal No.70026-70027 of 2019
2
1.2 By the impugned orders Commissioner (Appeals) has
partly allowed the benefit claimed by the appellant under
Notification No.18/2009-ST dated 07.07.2009 subsequently
under notification No.42/2012-ST dated 29.06.2012.
2.1 Appellants are engaged in export of leather footwear and
finished leather for which he procures orders through various
commission agents appointed by him abroad. In terms of the
agreement entered between the appellant and the commission
agent, after the receipt of payments against the export orders.
2.2 Appellant followed the due procedure and was claiming the
exemption under the said notifications by way of indicating the
details as required onl the shipping bills filed by them and
subsequently by filing EXP-2 or EXP-4 as prescribed by the said
notification.
2.3 While filing the said returns EXP-2 or EXP-4, appellants
would indicate only those shipping bills against which he has
already received the payments and also made payments to the
commission agents as per his understanding of the said two
notifications. In the process some of shipping bills which were for
the prescribed period of return went into the next period of
return.
2.4 Revenue authorities were of the view that exemption in
such cases would not be admissible to the appellants.
2.5 Show cause notices dated 09.10.2012 and 10.10.2013
were issued to the appellants proposing to denial of the
exemption for recovery of service tax for services of commission
agents along with interest and also proposed imposition of
penalties. The grounds stated in the show cause notice for
disallowing the exemption claimed are reproduced below:
"5. As per the conditions of the said Notifications ibid, for
availing the said exemption an exporter prior to availing
the exemption in respect of any specified services referred
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above; is required to file a declaration in proper Form EXP-
1 and thereafter w.e.f 01.07.2012 EXP-3 to their
jurisdictional Assistant/ Deputy Commissioner [as the case
may be] and subsequent to this, the said exporter is
required to file half yearly return in the Form EXP-2 and
EXP-4 w.e.f 01.07.2012 by 15th of April or 15th of October
[as the case may be] in the Financial year. In case where
no exemption is availed in respect of any specified services
in the period of six months i.e. for the period April to
September or October to March in the Financial year; even
then the exporter is required to file „NIL‟ half yearly return
in the Form EXP-2 and EXP-4 (as the case may be) by 15th
of April or 15th of October [as the case may be] in the
financial year to the jurisdictional Assistant/ Deputy
Commissioner.
6. On scrutiny of half yearly returns for the period April,
2012 to September, 2012 and October 2012 to March
2013 viz., namely Form EXP-4 dated 15.10.2012 and
EXP.4 dated 15.04.2013 (RUD No. 4), it has come to
notice that the party has wrongly availed the benefit of
exemption under Notification No. 18/2009-ST dated 7th
July. 2009 and Notification No. 42/2012-ST dated
29.06.2012 in respect of services provided/ rendered to
them by their foreign commission agents falling under the
category of taxable services i.e. "Business Auxiliary
Services" as defined under section 65 (105) (zzb) of the
ibid Act; and which have been used by them in relation to
export of their goods viz., leather footwear and finished
leather to foreign countries.
7. The party has filed half yearly returns in the Form EXP-4
dated 15.10.2012 for the period April, 2012 to September,
2012 and EXP-4 dated 15.04.2013 for the period October
2012 to March 2013 (RUD No. 4) to the jurisdictional
Assistant Commissioner Central Excise Divisior-1 Kanpur
and the same have been received and acknowledged in the
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Divisional fice on 16.10.2012 and 16.04.2013 under their
Diary Receipt No. 2676 and 1125 respectively.
Subsequently, the same have been onward transmitted to
the jurisdictional Superintendent, Service Tax Range-XIX
Kanpur. From the perusal of both the said returns EXP-4,
for first time, it has come to notice of the Range that the
party has availed he benefit of the said exemption in
respect of taxable services i.e. "Business Auxiliary
Services" which have been rendered by their "foreign
commission agents/foreign service providers" and used by
them for export of goods viz., "leather footwear and
finished leather" during the period from 05.10.2011 to
11.06,2012 and 19.07.2012 to 22.01.2013 [i.e. both dates
inclusive and indicating the date of "LET EXPORT ORDER"]
covered under the shipping bills as detailed in Table A of
EXP-4 return filed on 16.10.2012. It also came to notice
that the dates mentioned at serial no 1 to 7 pertained to
previous period and the relevant date of filing the return in
respect of shipping bills at SI.No.1 to 7 was 15.04.2012.
Further, export orders covered under shipping bills as
detailed in Table A of form EXP-4 return filed on
16.04.2013; the dates from serial no. 1 to 17 and serial
No. 21 pertained to previous period. The relevant date for
fling the return in respect of aforesaid shipping bills
mentioned at SI.No.1 to 17 and 21 was 15.10.2012. Thus,
it appears from the above that the said return EXP-4 has
not been filed in the time and also that the returns have
been filed without fulfilling the conditions laid down in the
said Notifications. As such the claims for entitlement of
exemption are time barred in respect of shipping bills
mentioned at serial no. 1 to 7 of EXP-4 filed on 16.10.2012
and in respect of shipping bills mentioned at serial no 1 to
17 and serial no. 21 of EXP-4 filed on 16.04.2013. Apart
from above, both the returns have also been filed after due
date of 15th on 16.10.2012 and 16.04.2013 and there is no
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provision in law for condonation of delay in respect of EXP-
4 returns,.
8. During the course of scrutiny of both the said EXP-4
returns 15.04.2013 (RUD No. 4) several discrepancies
were noticed and the party vide letters C.No.
444/GTA/PLPL/STR-XIX/05/ Pt/770 dated 15.05.2013 and
C No. 865 dated 18.06.2013 (RUD No. 5) of the
Superintendent, Central Excise Range - XIX was asked to
clarify the same. But, the party did not submit the reply to
the said letters
9. Further, on scrutiny of the said EXP-4 returns dated
15.10.2012 and 15.04.2013 (RUD No, 4), it has been
observed that the party has deliberately and intentionally
mis-declared the certain facts as enumerated below:-
(i) Party had filed only one EXP-1 declaration on
25.04.2011, which was valid upto 30.06.2012. From
01,07.2012 arty was required to file EXP-3
declaration under Notification No. 42/2012-ST dated
29.06.2012. Filing of EXP-3 declaration is a
precondition for availing benefit of Notification No.
42/2012-ST dated 29.06. 2012 before making export
but the party failed to do so.
(ii) Party was required to file EXP-2 form for the period
01.04.2012 to 30.06.2012 (i) under Notification No.
18/2009-ST dated 07.07.2009 and return in the form
of EXP-4 for my the period 01.07.2012 to
30.09.2012 under Notification No. 42/2012-ST dated
29.06.2012 effective from 01.07.2012, but the party
failed to do so and filed return only in form EXP-4 for
the period 01.04.2012 to 30.09.2012.
(iii) EXP-4 return for the period 01.04.2012 to
30.09.2012
a. In the Table - A, it is stated as "Details of goods
exported [on which exemption of service tax availed]
during the six months ending 30.09.2012". It means
Service Tax Appeal No.70026-70027 of 2019
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that the party has claimed the said exemption from
payment of service tax in respect of all the exports
made by them during the period from 01.04.2012 to
30.09,2012. But, from the perusal of the said return,
it is clearly evident that exports at serial no, 1 to 7
have not been made by them during this period. As
per details provided in the said return, these exports
have been made by the party under respective
shipping bills as mentioned at Sl. No. 1 to 7 of Table
A during the period from 05.10.2011 to 27.01.2012
b. In the Table-B, instead of providing the details of
invoices [i.e. "Invoice No. & Date"] raised by
"Foreign Service Providers" to them as customer;
they have deliberately left the column blank. When
the party was asked by the Range Superintendent to
provide the copies of the same; the party has not
provided the same to the jurisdictional Range. Even
the party did not bother to reply the letter issued by
range Superintendent dated 15.05.2013 and
18.06.2013. Further, in the instant case, agency
commission has been paid to "Foreign Service
Providers" after considerable lapse of time. in order
to ascertain the cause of such delay and exercise
check over the manipulative tactics; the party has
been asked to provide the proof of payment of
commission to foreign service provider in proper
form but, the same has not been provided by the
party to the Range with the intent to wrongly avail
the benefit of exemption from service tax under the
ibid Notifications.
(iv) EXP.4 return for the period 01.10.2012 to
31.03.2013.
a. In the Table - A, it is stated as "Details of goods
exported [on which exemption of service tax availed]
during the six months ending 31.03.2013". It means
that the party has claimed the said exemption from
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payment of service tax in respect of all the exports
made by them during the period from 01.10.2012 to
31.03.2013. But, from the perusal of the said return,
it is clearly evident that details of export mentioned
at serial no. 1 to 17 and serial no. 21 pertained to
previous period. As per details provided in the said
return, the said exports have been made by the
party under respective shipping bills during the
period from 19.07.2012 to 26,09.2012 [i.e. earlier
half yearly period]
b. In the Table -B, instead of providing the details of
invoices [i.e. "Invoice No. & Date"] raised by
"Foreign Service Providers" to them as customer;
they have deliberately left the column blank. When
the party was asked by the Range Superintendent to
provide the copies of the same; the party has not
provided the same to the jurisdictional Range. Even
party did not bother to reply the letter issued by
range Superintendent dated 15.05.2013 and
18.06.2013. Further, in the instant case, agency
commission has been paid to "Foreign Service
Providers" after considerable lapse of time. In order
to ascertain the cause of such delay and exercise
check over the manipulative tactics; the party has
been asked to provide the proof of payment of
commission to foreign service provider in proper
form but the same has not been provided by the
party to the Range with the intent to wrongly avail
the benefit of exemption from service tax under the
ibid Notifications. Party has also not submitted
certified copies of the documents with the return
Thus the party has not submitted copies of documents as
required in the form EXP-4 as per paras (b),(d),(e) and (f)
and column 4 () and (i) of table of the said notifications
Service Tax Appeal No.70026-70027 of 2019
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10. Whereas, the exemption from payment of service tax
on the specified services viz. services provided by a foreign
commission agent(s) is available subject to ftulfllmnent of
terms & conditions laid down in the Notification No.
18/2009-ST dated 07.07.2009 and Notification No.
42/2012-ST dated 29.06.2012
10.1 Whereas, from the perusal of said EXP-4 returns, it
appears that the party has made the exports of leather
footwear and finished leather during the period 05.10.11
to 11.06.12 (i.e. both dates inclusive and indicating of the
date of "LET EXPORT ORDER"] covered under the shipping
bills mentioned at Sl.No. from 1 to 14 in Table "A" of the
said EXP-4 return and during the period 19.07.2012 to
22.01.2013 covered under shipping bills mentioned at
serial no. 1 to 28. Hence only serial no. 8 to 14 of Table A
to EXP-4 dated 15.10.2012 and serial no. 18 to 20 and 22
to 28 of Table A to EXP-4 dated 15.04.2013 pertained to
return period.
10.2. Whereas, in no case, the exemption from payment of
service tax availed on services of foreign commission
agents by the party in respect of exported goods; the date
of let export orders of such goods exported under. various
shipping bills as per details mentioned in Table "A" to the
EXP-4 return (RUD No. 4) should precede the date of filing
of Form EXP-1 and EXP-3 filed in the Divisional office as
provided in Proviso (a) (i) of the Notification No. 18/2009-
ST dated 7th July, 2009 and notification no 42/2012- ST
dated 29.06.2012. The Proviso (a)(i) of the said
notifications reads as "the exemption shall be available to
an exporter who informs the Assistant Commissioner of
Central Excise or the Deputy Commissioner of Central
Excise, as the case may be having jurisdiction over the
factory or the regional office or the head office, as the case
may be, in Form EXP-1 and EXP-3 (w.e.f 01.07.2012),
before availing the said exemption". In this case party has
Service Tax Appeal No.70026-70027 of 2019
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not filed EXP-3 declaration to the jurisdictional Assistant
Commissioner.
10.3. Whereas, the party has filed the Form EXP-1 (RUD
No.6) to the jurisdictional Deputy/Assistant Commissioner
Central Excise Division-l, Kanpur on 25.04.2011 but, they
did not file EXP-3 with the Assistant Commissioner for the
relevant period. In the present case, it appears that from
01.07.2012, the exports under the shipping bills as
detailed in Table-A have been made without fling the Form
EXP-3. On account of this, the party appears to be
disentitled for exemption from payment of Service Tax on
such services provided by the foreign commission agents.
10.4. Whereas, from the foregoing discussions and
relevant provisions of law explained above, it appears that
the party has wrongly availed the exemption. The services
rendered/ provided to the party by "Foreign Service
Providers" in lieu of "Agency Commission" fall under the
category of taxable services i.e. "Business Auxiliary
Services as defined under section 65 (105) (zzb) of the
ibid Act. Thus, on this entire amount of commission paid as
"Agency Commission" to "Foreign Service Providers" in lieu
of services rendered by them, the party appears to be
liable to pay the service tax at the appropriate rate along
with interest due thereon
10.5. Whereas, as per said EXP-4 returns dated
15.10.2012 and 15.04.2013 (RUD No. 4) filed by the party
on 16.10.2012 and 16.04.2013, "Agency Commission
equivalent to Indian Rupees amounting to Rs. 11,85,456/-
and Rs. 40,43,881/- (i.e. totally amounting to
Rs.52,29,337/-) in the month of July, 2012 and October,
2012. February, 2013 and March, 2013 respectively has
been paid to Foreign Service Providers". On said amount of
commission, the party has not discharged the Service Tax
liability _ amounting to Rs. 6,46,346/- (S.Tax @ 12% adv
Service Tax Appeal No.70026-70027 of 2019
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i.e., Rs.6,27,521/-+ Ed Cess @ 2% of S.Tax i.e., Rs..
12,550/-+ H. Ed. Cess @ 1% of S.Tax Rs.6,275/-
10.6. Whereas, prior to the enactment of "Point of
Taxation Rules, 2011" vide Notification No. 18/2011-ST
dated 01.03.2011 (w.e.f. 01.04.2011); the party as a
recipient of Taxable Services is required to pay the Service
Tax on such amount of commission, only when such
commission has been paid to the service providers.
10.7. Whereas, in the instant case "Point of Taxation" has
no relevance for the purpose of determining the date of
applicability of such exemption. The date of fling the
declaration in Form EXP-1 and EXP-3 is crucial date i.e. on
and after that exemption can be availed by the party under
the ibid notifications subject to fulfillment of other
conditions viz. fling of Form EXP-2 and EXP-4 returns
within the stipulated period. Even, after fling the
declaration in Form EXP-1 and EXP-3, if no exemption has
been claimed the party is required to file the „Nil‟ return in
Form EXP-2 and EXP-4 on half yearly basis to the
jurisdictional Assistant Commissioner / Dy. Commissioner
by the 15th of April or 15th of October in the year as the
case may be.
10.8 Whereas the law does not provide for condonation of
any delay in filing of such Form EXP-1,EXP-3 and Form
EXP-2,EXP-4, by an exporter for availing exemption
11. Whereas, from the foregoing., it appears that M/s
Prachi Leathers Pvt. Ltd., C-3 Udyog Nagar, Near C.T.I.,
Kanpur-208022 have contravened the following provisions
of the Finance Act, 1994 and Service Tax Rules 1994, as
amended
(a) Section 66/66B of the Act, in as much as, they did not pay
the Service Tax at the appropriate rate on the value of
taxable services under the category of "Business Auxiliary
Services" as defined under section 65 (105)(zzb) and
65B(44) read with section 66A and taxation of services
Service Tax Appeal No.70026-70027 of 2019
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provided from outside India and received in India under
the Finance Act, 1994
(b) Section 67 of the Act, in as much as, they did not compute
the value of taxable services under the category of
"Business Auxiliary Services " on the basis of gross amount
paid as commission to the "Foreign Service Providers as
agency commission.
(c) Section 68 of the Act read with rule 6 of Service Tax Rules
1994, in as much. as they did not pay the service tax due
thereon within prescribed time and the rate specified in
Section 66/66B of the Act ibid on the said gross amount
paid as commission to the "Foreign Service Providers" as
agency commission
(d) Contravened the provisions of Notifications, in as much as,
they did not comply with conditions laid down under para
(a)(i),(b),(c),(d),(e),(f) and column 4(i) and (ii) of
Notification No.18/2009-ST dated 7th July, 2009 and
Notification No. 42/2012-ST dated 29.06.2012"
2.6 The said show cause notices were adjudicated as per the
Order-in-Originals dated 25.10.2013 and 26.03.2015.
2.7 Aggrieved appellants filed appeal before Commissioner
(Appeals), by the impugned two orders Commissioner (Appeals)
has been partially allowed the appeals of the appellants, by
setting aside all the penalties imposed upon the appellants and
also limiting the demand only in respect of those shipping bills
where there was miss-match of the return period.
2.8 Aggrieved appellants have filed these two appeals.
3.1 We have heard Shri Vikas Garg learned Chartered
Accountant appearing for the appellants and Shri Manish Raj
learned Authorised Representative appearing for the revenue.
3.2 Arguing for the appellant learned Chartered Accountant
submits that-
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the main contention for allowing the commission under this
notification is that export orders should have been
procured through the commission agents to whom and the
relevant details indicated on the shipping bills filled by the
appellant at the time of exportation.
The next condition is that the return should have been
filled in the form of EXP-2 and EXP-4 indicating the details
of shipping bills and the payment made to the commission
agents was nothing but a procedural requirement to
operate the said notification. Admittedly, in certain cases,
as per the agreement with the commission agents the
payments were made subsequent to the return period and
appellants have indicated those shipping bills against
which payments were made in the subsequent return
period in that period as a mandatory condition of the
notification had been complied with, the substantial benefit
admissible to them under this notification should not have
been denied as has been held by the judiciary in series of
decisions.
3.3 Learned Authorised Representative reiterates the findings
recorded in the orders of the lower authorities.
4.1 We have considered the impugned orders along with the
submissions made in appeal and during the course of argument.
4.2 Commissioner (Appeals) has in the impugned order dated
26.03.2018 observed as follows:-
"7. It is observed that dates of submission of two claims
in Form Exp-4 are in dispute. While appellant has claimed
to have submitted the claims on 15.10.2012 and
15.4.2013 respectively, the adjudicating authority has held
that claims were filed on 16.10.2012 and 16.4.2013 based
on the dates which they were diarized. The appellant,
however, has produced copies of claims bearing receipt
acknowledgements on 15.10.2012 and 15.4.2013. In this
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regard, a letter C.No.247/ST/Appl/Alld/2015 dated
21.3.2018 was sent to the Assistant Commissioner, CGST,
Div-I, Kanpur enclosing copies of above referred receipt
acknowledgements with a request to inform this office if
same are not found to be in order. No response has been
received from the department. Therefore, submission
dates are taken as 15.10.2012 and 15.4.2013 respectively.
The position in respect of the claims filed by the
appellant for exemption from service tax is as under:
Date of Form EXP- Export period required to Export period
submission 2/EXP- be covered by due date of actually covered in
3/Exp-4 15.10.2012/ 15.4.2013 the claim
15.10.2012 EXP-2 & 01.4.2012 to 30.9.2012 05.10.2011 to
EXP-4 11.6.2012
15.4.2013 EXP-4 01.10.2012 to 31.3.2013 19.7.2012 to
22.01.2013
8. It is observed as per the caption appearing in the Table-
A of EXP-2 under Notification No. 18/2009-ST dated
07.07.2009 which reads as "Details of goods exported
(on which exemption of service tax availed) during
the six months ending on.........." the return has to be
filed in respect of goods exported under exemption during
the period specified in the return and not in respect of
those exported earlier or later. The notification prescribed
a condition for claiming the exemption, which is, that
details of exports be filed in the specific format every six
months of financial year within 15 days of completion of 06
months.
9. From the details tabulated above it is apparent that
appellant's claims in respect or exemption from the
payment of service tax relating to shipping bills listed in
the claims are time barred except for the period 01.4.2012
to 11.6.2012 in the claim filed by the appellant on
15.10.2012 and except for the period 01.10.2012 to
22.01.2013 in the claim filed on 15.4.2013.
10. Reliance is placed on the following Case Laws :-
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(i) S.B. Logistics Vs. Commissioner of C.EX., Cus, & S.T.,
Belgaum 2016(41) S.T.R. (Tri.-Bang.) - Relevant portion of
Para 2.2 of the case is reproduced below :-
".........................................Further, the exporter is also
required to file the returns in Form EXP-2 every six months
of the financial year within 15 days of the completion of
the said six months. goods. The EXP-2 returns relates to
the fact of actual export of the goods................................"
(ii) D.D. International Vs. Commissioner of Service Tax,
Delhi 2016 (41)S.T.R. 868 (Tri.- Del.) Relevant portion of
Para 3 of the case is reproduced below:-
3. We have considered the contentions of the appellant.
We find that condition (c) contained in the proviso to the
Notification No. 18/2009-ST read as under :-
"(c) the exporter availing the exemption shall file the
return in Form EXP-2 every six months of the financial
year, within fifteen days of the completion of the said six
months."
It is evident that the said condition is a condition of
exemption notification and therefore nop-fulfillment
thereof prima facie disentitles the appellant to the benefit
of the said notification.
11. So far as the applicability of Point of Taxation Rules,
2011 is concerned, it is not at all relevant because the
proforma prescribed under the relevant notification leaves
no room for doubt that what is required to be declared is
related to goods exported during the previous 06 months
and not related to any other parameter such as payment
of Commission etc.
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12. So far as non-filing of declaration under EXP-3 is
concerned, it is observed that same was filed under
Notification No. 42/2012-ST on 11.9.2012 in respect of
services of a Commission agent located outside India
whereas earlier virtually the same declaration in Form EXP-
1 had been filed on 25.4.2011 vide Notification No.
18/2009-ST dated 07.07.2009 in respect of services of
GTA and Commission agent.
13. Since the above referred declaration is indicative of
only intent to avail exemption which in any case was filed
in pursuance of original notification, non-filing of same
under amended notification can be said to be a minor
procedural violation which shall not vitiate the claim. In
this regard, I rely upon following decisions:-
(i) In case of Coromandel Stampings & Stones Ltd. Versus
C.C.E. & S.T., HYDERABAD- 11 reported at 2016 (043)
STR 0221 (Tri. Hyd observed that even non-filing of EXP-1
would not debar the assessee from the substantive benefit
if the fact of export has been established. The relevant
para 5 of the judgment is as under-
5. It is submitted by the learned Consultant
appearing for the appellant, that all the conditions, except
the condition that the appellant has to intimate the
concerned Asst./Dy. Commissioner by filing Form-EXP-1
was not complied. So also, appellant failed to submit the
return in Form EXP-2 as stipulated in sub-clause (c) of the
conditions stated in the Notification. Needless to say that
exemption/refund/rebate etc. are export oriented
schemes. If the fact of export has been established, refund
is not to be denied on merely technical interpretation of
procedures. In Suksha International v. UOI -
1989(01)LCX0044 the Hon'ble Apex Court has observed
that an interpretation unduly restricting the scope of
beneficial provision is to be avoided, so that it may not
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take a way with one hand, what the policy gives with the
other. The Hon'ble Apex Court in Mangalore Chemicals and
Fertilizers Ltd. v. Dy. Commissioner, 1991(08)LCX0031
while drawing a distinction between procedural condition of
a technical nature and substantive condition, held that
procedural conditions of technical nature can be condoned.
The procedures prescribed in the notification are to
facilitate verification of the claims. Since there is no
dispute with regard to the export made or the service tax
paid, the non-fulfillment of the conditions in my view is
condonable. Following the judgments laid in the above
cases, I am of the view that the non-fulfillment of the
conditions is only a procedural lapse and can be condoned.
In view thereof, I hold that the appellants are eligible for
refund.
(ii) In another case of Radiant Textiles Itd. Versus
Commissioner of C. Ex., Chandigarh-II reported at 2017
(047) STR 0195 (Tri. Chan.) the CESTAT Chandigarh has
observed that substantive benefit cannot be denied on
account of technical lapses. The relevant para 9 of the
judgment is as under-
9. "The facts of the case are not disputed that the
appellant is receiving service of overseas commission
agent and paying commission to the said agent. The
benefit of notification has been denied due to reason that
the appellant has not produce BRC and have not filed
original copy of invoices and the return form the EXP-1 and
EXP-2. In fact, the basic of requirement of notification has
not been disputed by the Revenue, therefore, substantive
benefit cannot be denied on account of technical lapses
has held by the Hon'ble High Court of Bombay in the case
of Union of India v. Farheen Texturisers (supra). Further
by the Hon'ble High Court of Allahabad in the case of f.S.
Gupta & Sons (supra) the payment made to the overseas
Service Tax Appeal No.70026-70027 of 2019
17
commission agent not in disputed. The appellant has filed
all the shipping bills and copy of invoices issued by the
overseas agent. These facts have not been disputed by the
Revenue. In that circumstance, I hold that the appellant
has complied with the condition of the notification. Further,
I observed that the Commission paid to the overseas
commission agent is less than 1% of the FOB value of the
exported goods. Therefore, the appellant is entitled for
benefit under Notification No. 18/2009-S.T. Consequently,
no Service Tax can be demanded under the category of
"Business Auxiliary Services' under reverse charge
mechanism".
4.3 The only dispute before us is whether the benefit of
exemption under notification no.18/2009-ST dated 07.07.2009
after subsequent notification no.42/2012-ST dated 29.06.2012
could have been allowed to the appellant in the cases where
they have indicated the shipping bills in Exp-2 and Exp-4 filed for
the subsequent period. Conditions of notification are reproduced
below:-
"Sr Description of the Taxable Conditions
No Service
1 2 3
1 Service provided by a (1) The exporter shall declare the
commission agent located amount of commission paid or payable
outside India and engaged to the commission agent in the
under a contract or agreement shipping bill or bill of export, as the
or any other document by the case may be.
exporter in India, to act on
(2) The exemption shall be limited to
behalf of the exporter, to
the service tax calculated on a value of
cause sale of goods exported
ten per cent of the free on board value
by him.
of export goods for which the said
service has been used.
(3) The exemption shall not be
available on the export of canalized
item, project export, or export
financed under lines of credit extended
by the Government of India or EXIM
Bank, or export made by Indian
partner in a company with equity
participation in an overseas joint
venture or wholly owned subsidiary.
(4) The exporter shall submit with the
half-yearly return after certification of
the same as specified in clause (g) of
Service Tax Appeal No.70026-70027 of 2019
18
the proviso-
(i) the original documents showing
actual payment of commission to the
commission agent; and
(ii) a copy of the agreement or
contract entered into between the
commission agent located outside
India and the exporter in relation to
sale of export goods outside India:
Provided that-
(a) the exemption shall be available to an exporter who,-
(i) informs the Assistant Commissioner of Central Excise or
the Deputy Commissioner of Central Excise, as the case
may be, having jurisdiction over the factory or the
regional office or the head office, as the case may be, in
Form EXP3 appended to this notification, before availing
the said exemption;
(ii) is registered with an export promotion council sponsored
by the Ministry of Commerce or the Ministry of Textiles,
as the case may be;
(iii) is a holder of Import-Export Code Number;
(iv) is registered under section 69 of the said Act;
(v) is liable to pay service tax under sub-section (2) of
section 68 of said Act, read with item (G) of sub-clause
(i) of clause (d) ofsub-rule (1) of rule 2 of the Service
Tax Rules,1994, for the specified service;
(b) the invoice, bill or challan, or any other document by
whatever name called issued by the service provider to the
exporter, onwhich the exporter intends to avail exemption,
shall be issued in the name of the exporter.
(c) the exporter availing the exemption shall file the return in
Form EXP4, every six months of the financial year, within
fifteen days of the completion of the said six months;
(d) the exporter shall submit with the half yearly return, after
certification, the documents in original specified in clause
(b) and the certified copies of the documents specified in
column (3) of the said Table;
Service Tax Appeal No.70026-70027 of 2019
19
(e) the documents enclosed with the return shall contain a
certification from the exporter or the authorised person, to
the effect that specified service to which the document
pertains, has been received and used for export of goods by
mentioning the specific shipping bill number on the said
document.
(f) where the exporter is an individual or a proprietorship
concern or an HUF or a partnership firm, the documents
enclosed with the return shall be certified by the exporter
himself and where the exporter is any other person, the
documents enclosed with the return shall be certified by the
person authorised by the Board of Directors or any other
competent person;
(g) where the amount of commission charged in respect of the
specified service exceeds ten per cent. of the free on board
value of the export then, the service tax shall be paid within
the period specified under rule 6 of the Service Tax Rules,
1994, on such amount, which is in excess of the said ten
per cent;"
4.4 We find that the conditions of notification could be
classified under the category of mandatory and procedural
conditions. As per the mandatory conditions of this notification
the exemption should have been claimed by the appellant by
way of indication of details of the commission paid or being paid
on the shipping bills filed by the appellant. Conditions specified
in column 4 of the table in notification are mandatory whereas
those specified are procedural in nature. Appellant has complied
with the conditions as specified in column 4 and hence is eligible
to benefit of this notification. It is settled law that an exemption
notification should at the stage of entry to be interpreted in a
very strict manner but once it is held that the appellant falls
within the parameters of the notification, the notification should
be interpreted regularly so as not to disallow the substantial
benefits of notification for certain procedural irregularities.
Reference is made through the decision of Hon'ble Supreme
Service Tax Appeal No.70026-70027 of 2019
20
Court in the case of M/s Dilip Kumar & Company 2018 (361) ELT
577 (SC) wherein following has been held:-
"27. Now coming to the other aspect, as we presently
discuss, even with regard to exemption clauses or
exemption notifications issued under a taxing statute, this
Court in some cases has taken the view that the ambiguity
in an exemption notification should be construed in favour
of the subject. In subsequent cases, this Court diluted the
principle saying that mandatory requirements of
exemption clause should be interpreted strictly and the
directory conditions of such exemption notification can be
condoned if there is sufficient compliance with the main
requirements. This, however, did not in any manner tinker
with the view that an ambiguous exemption clause should
be interpreted favouring the revenue. Here again this
Court applied different tests when considering the
ambiguity of the exemption notification which requires
strict construction and after doing so at the stage of
applying the notification, it came to the conclusion that
one has to consider liberally.
28. .....
29. .....
30. ....
31. The aforesaid placitum is suggestive of the fact that
the Courts utilized the rule of strict interpretation in order
to decipher the intention of the Legislature and thereafter
provide appropriate interpretation for the exemption
provided under the provisions of the Act which was neither
too narrow nor too broad. It may be noted that the
majority did not take a narrow view as to what strict
interpretation would literally mean; rather they combined
Service Tax Appeal No.70026-70027 of 2019
21
legislative intent to ascertain the meaning of the statute in
accordance with the objective intent of the Legislature.
32. ....
33. ....
34. .....
35. In the judgment of two Learned Judges in Union of
India v. Wood Papers Limited, (1990) 4 SCC 256 = 1990
(47) E.L.T. 500 (S.C.) [hereinafter referred as Wood
Papers Ltd. case‟ for brevity], a distinction between stage
of finding out the eligibility to seek exemption and stage of
applying the nature of exemption was made. Relying on
the decision in Collector of Central Excise v. Parle Exports
(P) Ltd., (1989) 1 SCC 345, it was held "Do not extend or
widen the ambit at the stage of applicability. But once that
hurdle is crossed, construe it liberally". The reasoning for
arriving at such conclusion is found in para 4 of Wood
Papers Ltd. case (supra), which reads -
"... Literally exemption is freedom from liability, tax or
duty. Fiscally, it may assume varying shapes, specially,
in a growing economy. For instance tax holiday to new
units, concessional rate of tax to goods or persons for
limited period or with the specific objective, etc. That is
why its construction, unlike charging provision, has to
be tested on different touchstone. In fact, an
exemption provision is like an exception and on normal
principle of construction or interpretation of statutes it
is construed strictly either because of legislative
intention or on economic justification of inequitable
burden or progressive approach of fiscal provisions
intended to augment State revenue. But once
exception or exemption becomes applicable no rule or
principles requires it to be construed strictly. Truly
Service Tax Appeal No.70026-70027 of 2019
22
speaking liberal and strict construction of an exemption
provision are to be invoked at different stages of
interpreting it. When the question is whether a subject
falls in the notification or in the exemption clause then
it being in nature of exception is to be construed
strictly and against the subject, but once ambiguity or
doubt about applicability is lifted and the subject falls in
the notification then full play should be given to it and
it calls for a wider and liberal construction...‟‟
(emphasis supplied)
36. In Mangalore Chemicals & Fertilizers Ltd. v. Dy.
Commissioner of Commercial Taxes, (1992) Supp. 1 SCC
21 [hereinafter referred as „Mangalore Chemicals case‟ for
brevity], the facts of the case were that the State
Government issued a notification in exercise of power
under Section 8A of the Karnataka Sales Tax Act, 1957,
providing certain incentives to entrepreneurs starting new
industries in the State pursuant to State‟s policy for "rapid
industrialization". The notification contains a package of
reliefs and incentives including one concerning relief from
payment of sales tax with which the case was concerned.
There was no dispute that the appellant was entitled to the
benefit of the Notification dated June 30, 1969. There was
also no dispute that the refunds were eligible to be
adjusted against sales tax payable for respective years.
The only controversy was whether the appellant, not
having actually secured the "prior permission" would be
entitled to adjustment having regard to the words of the
Notification of August 11, 1975, that "until permission of
renewal is granted by the Deputy Commissioner of
Commercial Taxes, the new industry should not be allowed
to adjust the refunds". The contention of the appellants
therein was that the permission for the three years had
been sought well before the commencement of the
respective years but had been withheld for reasons which
Service Tax Appeal No.70026-70027 of 2019
23
were demonstrably extraneous. Therefore, contention was
that if, in these circumstances, the Deputy Commissioner
could withold the permission.
37. This Court while accepting the interpretation provided
by the appellant, observed on the aspect of strict
construction of a provision concerning exemptions as
follows :
"... There is support of judicial opinion to the view that
exemptions from taxation have a tendency to increase
the burden on the other unexempted class of taxpayers
and should be construed against the subject in case of
ambiguity. It is an equally well-known principle that a
person who claims an exemption has to establish his
case.
... The choice between a strict and a liberal
construction arises only in case of doubt in regard to
the intention of the legislature manifest on the
statutory language. Indeed, the need to resort to any
interpretative process arises only where the meaning is
not manifest on the plain words of the statute. If the
words are plain and clear and directly convey the
meaning, there is no need for any interpretation. It
appears to us the true rule of construction of a
provision as to exemption is the one stated by this
Court in Union of India v. Wood Papers Ltd. [(1990) 4
SCC 256 = 1990 SCC (Tax) 422 = JT (1991) SC 151]."
Three important aspects which comes out of the discussion
are the recognition of horizontal equity by this Court as a
consideration for application of strict interpretation,
subjugation of strict interpretation to the plain meaning
rule and interpretation in favour of exclusion in light of
ambiguity.
Service Tax Appeal No.70026-70027 of 2019
24
38. We will now consider another Constitution Bench
decision in Commissioner of Central Excise, New Delhi v.
Hari Chand Shri Gopal, (2011) 1 SCC 236 = 2010 (260)
E.L.T. 3 (S.C.) [hereinafter referred as „Hari Chand case‟
for brevity]. We need not refer to the facts of the case
which gave rise to the questions for consideration before
the Constitutional Bench. K.S. Radhakrishnan, J., who
wrote the unanimous opinion for the Constitution Bench,
framed the question, viz., whether manufacturer of a
specified final product falling under Schedule to the Central
Excise Tariff Act, 1985 is eligible to get the benefit of
exemption of remission of Excise duty on specified
intermediate goods as per the Central Government
Notification dated 11-8-1994, if captively consumed for the
manufacture of final product on the ground that the
records kept by it at the recipient end would indicate its
"intended use" and "substantial compliance" with
procedure set out in Chapter 10 of the Central Excise
Rules, 1944, for consideration? The Constitution Bench
answering the said question concluded that a manufacturer
qualified to seek exemption was required to comply with
the preconditions for claiming exemption and therefore is
not exempt or absolved from following the statutory
requirements as contained in the Rules. The Constitution
Bench then considered and reiterated the settled principles
qua the test of construction of exemption clause, the
mandatory requirements to be complied with and the
distinction between the eligibility criteria with reference to
the conditions which need to be strictly complied with and
the conditions which need to be substantially complied
with. The Constitution Bench followed the ratio in Hansraj
Gordhandas case (supra), to reiterate the law on the
aspect of interpretation of exemption clause in para 29 as
follows -
Service Tax Appeal No.70026-70027 of 2019
25
"The law is well-settled that a person who claims
exemption or concession has to establish that he is entitled
to that exemption or concession. A provision providing for
an exemption, concession or exception, as the case may
be, has to be construed strictly with certain exceptions
depending upon the settings on which the provision has
been placed in the statute and the object and purpose to
be achieved. If exemption is available on complying with
certain conditions, the conditions have to be complied
with. The mandatory requirements of those conditions
must be obeyed or fulfilled exactly, thought at times, some
latitude can be shown, if there is failure to comply with
some requirements which are directory in nature, the non-
compliance of which would not affect the essence or
substance of the notification granting exemption."
39. The Constitution Bench then considered the doctrine
of substantial compliance and "intended use". The relevant
portions of the observations in paras 31 to 34 are in the
following terms -
"31. Of course, some of the provisions of an
exemption notification may be directory in nature and
some are mandatory in nature. A distinction between
the provisions of a statute which are of substantive
character and were built in with certain specific
objectives of policy, on the one hand, and those which
are merely procedural and technical in there nature, on
the other, must be kept clearly distinguished...
Doctrine of substantial compliance and "intended use"
32. The doctrine of substantial compliance is a judicial
invention, equitable in nature, designed to avoid
hardship in cases where a party does all that can
reasonably be expected of it, but failed or faulted in
some minor or inconsequent aspects which cannot be
Service Tax Appeal No.70026-70027 of 2019
26
described as the "essence" or the "substance" of the
requirements. Like the concept of "reasonableness",
the acceptance or otherwise of a plea of "substantial
compliance" depends upon the facts and circumstances
of each case and the purpose and object to be achieved
and the context of the pre-requisites which are
essential to achieve the object and purpose of the rule
or the regulation. Such a defence cannot be pleased if
a clear statutory pre-requisite which effectuates the
object and the purpose of the statute has not been
met. Certainly, it means that the Court should
determine whether the statute has been followed
sufficiently so as to carry out the intent for which the
statute was enacted and not a mirror image type of
strict compliance. Substantial compliance means
"actual compliance in respect to the substance
essential to every reasonable objective of the statute"
and the Court should determine whether the statute
has been followed sufficiently so as to carry out the
intent of the statute and accomplish the reasonable
objectives for which it was passed.
33. A fiscal statute generally seeks to preserve the
need to comply strictly with regulatory requirements
that are important, especially when a party seeks the
benefits of an exemption clause that are important.
Substantial compliance with an enactment is insisted,
where mandatory and directory requirements are
lumped together, for in such a case, if mandatory
requirements are complied with, it will be proper to say
that the enactment has been substantially complied
with notwithstanding the non-compliance of directory
requirements. In cases where substantial compliance
has been found, there has been actual compliance with
the statute, albeit procedurally faulty. The doctrine of
substantial compliance seeks to preserve the need to
Service Tax Appeal No.70026-70027 of 2019
27
comply strictly with the conditions or requirements that
are important to invoke a tax or duty exemption and to
forgive non-compliance for either unimportant and
tangential requirements or requirements that are so
confusingly or incorrectly written that an earnest effort
at compliance should be accepted.
34. The test for determining the applicability of the
substantial compliance doctrine has been the subject of
a myriad of cases and quite often, the critical question
to be examined is whether the requirements relate to
the "substance" or "essence" of the statute, if so, strict
adherence to those requirements is a precondition to
give effect to that doctrine. On the other hand, if the
requirements are procedural or directory in that they
are not of the "essence" of the thing to be done but are
given with a view to the orderly conduct of business,
they may be fulfilled by substantial, if not strict
compliance. In other words, a mere attempted
compliance may not be sufficient, but actual
compliance with those factors which are considered as
essential."
40. .....
41. .....
42. .....
43. .....
44. In Hansraj Gordhandas case (supra), the
Constitutional Bench unanimously pointed out that an
exemption from taxation is to be allowed based wholly by
the language of the notification and exemption cannot be
gathered by necessary implication or by construction of
words; in other words, one has to look to the language
Service Tax Appeal No.70026-70027 of 2019
28
alone and the object and purpose for granting exemption is
irrelevant and immaterial.
45. In Parle Exports case (supra), a Bench of two-Judges
of this Court considered the question whether non-
alcoholic beverage base like Gold spot base, Limca base
and Thumps Up base, were exempted from payment of
duty under the Central Government notification of March,
1975. While considering the issue, this Court pointed out
the strict interpretation to be followed in interpretation of a
notification for exemption. These observations are made in
para 17 of the judgment, which read as follows :
"How then should the Courts proceed? The expressions
in the Schedule and in the notification for exemption
should be understood by the language employed
therein bearing in mind the context in which the
expressions occur. The words used in the provision,
imposing taxes or granting exemption should be
understood in the same way in which these are
understood in ordinary parlance in the area in which
the law is in force or by the people who ordinarily deal
with them. It is, however, necessary to bear in mind
certain principles. The notification in this case was
issued under Rule 8 of the Central Excise Rules and
should be read along with the Act. The notification
must be read as a whole in the context of the other
relevant provisions. When a notification is issued in
accordance with power conferred by the statute, it has
statutory force and validity and, therefore, the
exemption under the notification is as if it were
contained in the Act itself. See in this connection the
observations of this Court in Orient Weaving Mills (P)
Ltd. v. Union of India, 1962 Supp 3 SCR 481 = AIR
1963 SC 98. See also Kailash Nath v. State of U.P., AIR
1957 SC 790. The principle is well-settled that when
Service Tax Appeal No.70026-70027 of 2019
29
two views of a notification are possible, it should be
construed in favour of the subject as notification is part
of a fiscal enactment. But in this connection, it is well
to remember the observations of the Judicial
Committee in Coroline M. Armytage v. Frederick
Wilkinson, (1878) 3 AC 355, that it is only, however, in
the event of there being a real difficulty in ascertaining
the meaning of a particular enactment that the
question of strictness or of liberality of construction
arises. The Judicial Committee reiterated in the said
decision at page 369 of the report that in a taxing Act
provisions enacting an exception to the general rule of
taxation are to be construed strictly against those who
invoke its benefit. While interpreting an exemption
clause, liberal interpretation should be imparted to the
language thereof, provided no violence is done to the
language employed. It must, however, be borne in
mind that absurd results of construction should be
avoided."
In the above passage, no doubt this Court observed that
"when two views of a notification are possible, it should be
construed in favour of the subject as notification is part of
fiscal document". This observation may appear to support
the view that ambiguity in a notification for exemption
must be interpreted to benefit the subject/assessee. A
careful reading of the entire para, as extracted
hereinabove would, however, suggest that an exception to
the general rule of tax has to be construed strictly against
those who invoke for their benefit. This was explained in a
subsequent decision in Wood Papers Ltd. case (supra). In
para 6, it was observed as follows :
"... In Collector of Central Excise v. Parle Exports (P)
Ltd., (1989) 1 SCC 345, this Court while accepting that
exemption clause should be construed liberally applied
Service Tax Appeal No.70026-70027 of 2019
30
rigorous test for determining if expensive items like
Gold Spot base or Limca base of Thums Up base were
covered in the expression food products and food
preparations used in Item No. 68 of First Schedule of
Central Excises and Salt Act and held „that it should not
be in consonance with spirit and the reason of law to
give exemption for non-alcoholic beverage basis under
the notification in question‟. Rationale or ratio is same.
Do not extend or widen the ambit at stage of
applicability. But once that hurdle is crossed construe it
liberally. Since the respondent did not fall in the first
clause of the notification there was no question of
giving the clause a liberal construction and hold that
production of goods by respondent mentioned in the
notification were entitled to benefit."
46. The above decision, which is also a decision of two-
Judge Bench of this Court, for the first time took a view
that liberal and strict construction of exemption provisions
are to be invoked at different stages of interpreting it. The
question whether a subject falls in the notification or in the
exemption clause, has to be strictly construed. When once
the ambiguity or doubt is resolved by interpreting the
applicability of exemption clause strictly, the Court may
construe the notification by giving full play bestowing
wider and liberal construction. The ratio of Parle Exports
case (supra) deduced as follows :
"Do not extend or widen the ambit at stage of applicability.
But once that hurdle is crossed, construe it liberally".
47. We do not find any strong and compelling reasons to
differ, taking a contra view, from this. We respectfully
record our concurrence to this view which has been
subsequently, elaborated by the Constitution Bench in Hari
Chand case (supra).
Service Tax Appeal No.70026-70027 of 2019
31
48. .....
49. .....
50. In Tata Iron & Steel Co. Ltd. v. State of Jharkhand,
(2005) 4 SCC 272, which is another two-Judge Bench
decision, this Court laid down that eligibility clause in
relation to exemption notification must be given strict
meaning and in para 44, it was further held -
"The principle that in the event a provision of fiscal
statute is obscure such construction which favours the
assessee may be adopted, would have no application to
construction of an exemption notification, as in such a
case it is for the assessee to show that he comes within
the purview of exemption (See Novopan India Ltd. v.
CCE and Customs)."
51. In Hari Chand case (supra), as already discussed, the
question was whether a person claiming exemption is
required to comply with the procedure strictly to avail the
benefit. The question posed and decided was indeed
different. The said decision, which we have already
discussed supra, however, indicates that while construing
an exemption notification, the Court has to distinguish
the conditions which require strict compliance, the
non-compliance of which would render the assessee
ineligible to claim exemption and those which
require substantial compliance to be entitled for
exemption. We are pointing out this aspect to dispel any
doubt about the legal position as explored in this decision.
......"
4.5 In the present case the only dispute which is to decide
upon is whether the substantial benefit of the exemption should
have been denied to the appellant for the reason that they have
made payment to the commission agent as per there
Service Tax Appeal No.70026-70027 of 2019
32
agreements with the commission agents subsequent to the
period of the prescribed period of return. In case of Radiant
Textiles Ltd. [2017 (47) STR 195 9T-Chand)], interpreting
Notification No 18/2009-ST dated 07.07.2009 Chandigarh bench
has observed as follows:
"9.The facts of the case are not disputed that the
appellant is receiving service of overseas commission
agent and paying commission to the said agent. The
benefit of notification has been denied due to reason that
the appellant has not produce BRC and have not filed
original copy of invoices and the return form the EXP-1 and
EXP-2. In fact, the basic of requirement of notification has
not been disputed by the Revenue, therefore, substantive
benefit cannot be denied on account of technical lapses
has held by the Hon‟ble High Court of Bombay in the case
of Union of India v. Farheen Texturisers (supra). Further
by the Hon‟ble High Court of Allahabad in the case of J.S.
Gupta & Sons (supra) the payment made to the overseas
commission agent not in disputed. The appellant has filed
all the shipping bills and copy of invoices issued by the
overseas agent. These fact has not been disputed by the
Revenue. In that circumstance, I hold that the appellant
has complied with the condition of the notification. Further,
I observed that the Commissioner paid to the overseas
commission agent is less than 1% of the FOB value of the
exported goods. Therefore, the appellant is entitled for
benefit under Notification No. 18/2009-S.T. Consequently,
no Service Tax can be demanded under the category of
„Business Auxiliary Services‟ under reverse charge
mechanism."
From the above it is evident that the requirement of filing the
EXP-1 and EXP-2 return has been held to be procedural
requirement and not a mandatory requirement for determining
eligibility to the exemption claimed by the appellant. Even in the
Service Tax Appeal No.70026-70027 of 2019
33
impugned order Commissioner (Appeal) has held that filing of
EXP-3 return was procedural requirement and should not come
in way of appellant claiming the benefit of exemption under
Notification No 42/2012-ST. That being so in our view merely
delay in indicating the shipping bills in EXP-4 return cannot be
reason for denial of the said exemption.
4.6 In case of HEG Ltd. [(2019) (29) G.S.T.L. 730 (Tri. -
Del.)], Delhi bench has observed as follows:
"6.1 The benefit of exemption Notification No. 18/2009-S.T.
and 42/2012-S.T. has been denied to the exporter by the
Department only on the ground of procedural lapse.
Apparently and admittedly there is no dispute as far as the
compliance of all other conditions of the notification
concerned. Hence the narrow compass of the adjudication is
as to :
6.2 Whether the procedural compliance of filing EXP-2/EXP-
4 beyond 15 days from the 15 days of completion of six
months is sufficient to deny the benefit arising out of said
notification.
6.3 We are of the opinion that it has been the settled
principle of law that substantial benefit of a notification
cannot be denied on account of the procedural lapses or
infractions. The issue stands already decided in favour of the
appellant in the case of M/s. Metro & Metro v. Commissioner
of Central Excise & Service Tax, Kanpur [2018 (12) TMI 257-
CESTAT Allahabad].
"6. We find that an identical issue was considered by the
Tribunal in the case of Coromandel Stamping & Stones
Limited v. CCE & ST, Hyderabad-II reported at 2016 (43)
S.T.R. 221 (Tri. - Hyd.). It was observed that non-filing of
Service Tax Appeal No.70026-70027 of 2019
34
EXP-1 and EXP- 2 as required under exemption Notification
No. 18/2009-S.T. is only a procedural lapse will not result in
denial of substantive benefit otherwise available in terms of
notification. To the same effect is another decision of the
Tribunal in the case of Radiant Textile Ltd. v. Commissioner
of Central Excise, Chandigarh-II reported at [2017 (47)
S.T.R. 195 (Tri. - Chan.)"
In another case of Praj Industries Ltd. v. Commissioner of
Central Excise, Pune-II [2017 (3) G.S.T.L. 341 (Tri. - Mum.)
has held as under;
"3. Reading of the notification shows that the above
conditions are regulatory in nature and not mandatory to
avail the exemption. If the procedure prescribed is not
fulfilled there would be no consequence of denial of the
benefit of the notification. It is stated that taxing the goods
denying the notification benefit shall make the export goods
non-competitive in the global trade, which is contrary to
basic principle of WTO. Accordingly, looking to the gravity of
the conditions as well as the WTO agreement, it would not be
reasonable to dismiss the appeal."
7. In view of the above observations and finding, we are of
the opinion that mere procedural lapse which admittedly is
on account of non-availability of shipping bills that too due to
delay on the part of customs cannot be the ground to deny
the substantial benefit of the notification. Though one copy of
such shipping bill remains with the exporter which could have
been annexed with EXP-4 to be filed within time. But delay of
15 days then the prescribed time limit is opined to be
insignificant to deny the benefit of the notification especially
when all other conditions of the notification are duly complied
with by the appellant. The possibility of bona fide belief, that
customs copy of shipping bill only has to be annexed, also
cannot be ruled out. The delay does not appear to be arising
out of mala fide intent. As a result of entire above discussion
Service Tax Appeal No.70026-70027 of 2019
35
we do not find order under challenge as reasonable and
justifiable and accordingly, we set aside the same.
Consequently, appeal stands allowed with consequential
benefit if any."
4.7 In case of HEG Ltd. [(2023) 7 Centax 93 (Tri.-Del)], Delhi
bench has observed as follows:
"24. We now refer to the other conditions envisaged in the
said notification. The exporter had to file the half yearly
return within 15 days of the completion of the said six
months. The notification also required the appellant enclose
documents as indicated in the Table A and Table B of the
return EXP-2. We note that the details of the shipping bills or
bill of export is required is to be given, while filing the return
in the EXP-2 format. When the return itself requires the
details, there is no requirement for the show cause notice to
specify in the said details, as has been submitted by the
learned counsel for the appellant.
25. One of the other conditions in the notification indicates
that the exporter has to inform the jurisdictional Assistant
Commissioner by filing the form EXP-1 before availing the
exemption under the said notification. It is observed that the
appellant was very prompt in filing this intimation format
before availing the exemption. The appellant undertook to
comply with all the conditions mentioned therein, including
filing of half yearly returns within the specified period.
However, when it came to the actual filing the said return for
compliance verification by the department, the appellant did
not show the much-needed promptness. We find that the
department had issued several reminders for filing the said
return, but the appellant did not feel it necessary to respond
to these letters. Our attention was drawn to the earlier
decision of this Tribunal in the Appellant's own case HEG Ltd.
v. Commissioner of Customs, Central Excise & Service Tax,
Bhopal [2019] (7) TMI 773-CESTAT, New Delhi]. The benefit
Service Tax Appeal No.70026-70027 of 2019
36
of the exemption notification was extended to the appellant
despite their delay in filing the required returns. The Tribunal
opined that the mere procedural lapse which admittedly is on
account of non availability of shipping bills due to delay on
the part of Customs cannot be the ground to deny the
substantial benefit of the notification. As has been observed
previously, the appellant was very prompt when seeking the
exemption under the said notifications, but did not show
similar promptness while filing returns. It is also seen that
while filing the returns, the appellant did not take due care to
file the data/documents as required, despite having
undertaken to file the same. The appellant can be excused
once for not having complied with the provisions of the
notification for which the Tribunal has allowed the benefit.
But it cannot be the case for the appellant to seek the
indulgence of this Tribunal to overlook such lapses
repeatedly.
26. We take note of the case of Commissioner of Customs
(Imports), Mumbai v. Dilipkumar & Co. 2018 (361) E.L.T.
577 (SC)/[2018] 95 taxmann.com 327 (SC)/[2018] 69 GST
239 (SC) the Supreme Court held as follows:
.....
27. It is seen that the above decision, as relied upon by the learned authorised representative, the Supreme Court is categorical in holding that an exemption notification should be interpreted strictly and the burden of proving applicability would be on the assessee to show that his case comes within the parameters of the exemption clause or exemption notification. As already held above, we find that the appellant has complied with the notification condition as enumerated in column 4 of the aforesaid table. In view of the same, we set aside the demand of duty and interest upheld in the impugned order."
Service Tax Appeal No.70026-70027 of 2019 37 4.8 Order of Commissioner (Appeals) to that extent, it disallows the benefit of exemption, for this reason cannot be upheld. Accordingly, the impugned order is set aside to that extent.
5.1 Appeals are allowed.
(Dictated and pronounced in open court) (P.K. CHOUDHARY) MEMBER (JUDICIAL) (SANJIV SRIVASTAVA) MEMBER (TECHNICAL) akp