Custom, Excise & Service Tax Tribunal
M/S Shree Rajasthan Syntex Ltd vs Cce, Jaipur-Ii on 18 July, 2016
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
West Block No. 2, R.K. Puram, New Delhi 110 066.
Date of Hearing: 1.6.2016
Date of Pronouncement: 18.7.2016
Appeal No. ST/329/2010-CU(DB)
(Arising out of Order-in-Appeal No. 345(KKG)ST/JPR-II/2009 dated 13.11.2009 passed by the Commissioner (Appeals), Customs & Central Excise, Jaipur-II)
For Approval & Signature :
Honble Mr. S.K. Mohanty, Member (Judicial)
Honble Mr. R.K. Singh, Member (Technical)
1.
Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2.
Whether it would be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3.
Whether their Lordships wish to see the fair copy of the order?
4.
Whether order is to be circulated to the Department Authorities?
M/s Shree Rajasthan Syntex Ltd. Appellant
Vs.
CCE, Jaipur-II Respondent
Appearance Shri Narendra Singhvi, Advocate - for the appellant Shri Yogesh Agarwal, D.R. - for the respondent CORAM: Honble Mr. S.K. Mohanty, Member (Judicial) Honble Mr. R.K. Singh, Member (Technical) Final Order No. 52478/2016 Per R.K. Singh:
Appeal has been filed against order-in-appeal dated 3.11.2009 which upheld the order-in-original dated 31.3.2009 in terms of which the refund claim amounting to Rs.11,18,403/- filed by the appellant in terms of Notification No. 41/2007-ST dated 6.10.2007 was rejected on the ground that the appellant had availed drawback in respect of goods exported under Customs, Central Excise Duties and Service Tax Drawback Rules, 1995 (hereinafter referred to as Drawback Rules) and that certain charges paid by the appellant in respect of services received were not covered under the scope of specified services under the notification.
2. Ld. Advocate for the appellant pleaded/contended as under :
(i) The appeal is confined only to the extent the refund claim was rejected on the ground that the exports were made under claim of Drawback and that the following charges paid by the appellant in respect of services received were not covered under the scope of specified services under the said notification.
S.No. Description Amount of refund involved
1. Terminal handling charges 52,170/-
2. Charges for transportation of empty containers from port to the factory 76,347/-
3. Charges recovered by Customs House Agent 30,883/-
Total 1,59,400/-
(ii) The refund relating to terminal handling charges has been allowed by CESTAT in terms of the following judgements:
(i) SRF Limited Vs. Commissioner 2015 (40) STR 980 (Tri.-Del.)
(ii) Commissioner Vs. Adani Enterprises Limited 2014 (35) STR 741 (Guj.)
(iii) Khemchand Handicrafts Vs. Commissioner 2016-TIOL-1251-CESTAT-DEL.
(iii) The refund related to transportation of empty containers from port to the factory is permitted by CESTAT in the case of Vippy Industries Vs. Commissioner 2013 (32) STR 238 (Tri.-Del.)
(iv) The ground for rejection of refund claim of charges recovered by CHA is baseless. The appellant paid various charges to the CHA, including agency charges, buffer yard charges, private movement charges, documentation charges etc. The CHA charged and recovered service tax on the agency charges of which refund was claimed by the appellant. However, the impugned proceedings rejected the refund claim on the ground that the buffer yard charges, private movement charges, documentation charges (for short other charges) are not covered under CHA services. The understanding of the Commissioner (Appeals) is factually incorrect as the refund claim of the appellant is limited to service tax charged on the agency charges only, as is clear from invoices enclosed at page No. 96-99 of the appeal memo. The service provider (CHA) has not charged and the appellant has not claimed any refund of service tax on other charges. In any case, the said charges form integral part of CHA services rendered and even in case if CHA had charges service tax thereon, the refund thereof would be admissible to the appellant. Reliance is placed on the decision of the Honble Tribunal in Commissioner Vs. Spentex Industries Ltd. 2014 (35) STR 562 (Tri.-Mum)
(v) As regards the rejection of the refund claim on the ground that the exports were made under claim of drawback and thereby violated Condition No. 1(e) of the Notification No. 41/2007-ST; the Drawback Rules provide for drawback in the form of rebate of tax paid on taxable services used as input services in manufacture of export goods as per Rule 2(a) of the Drawback Rules.
(vi) Only with effect from 13.7.2006, Rule 3(2) (ea) was included in the Drawback Rules which reads as under:
(ea) The average amount of tax paid on taxable services which are used as input services for the manufacturing or processing or for containing or packing the export goods.
(vii) It cited the Boards Circular No. 19/2006-Cus. dated 13.7.2006 in this regard to assert that with effect from 13.7.2006, drawback rates also take into account the incidence of service tax paid on taxable services which are used as input services in the manufacturing or processing of export goods in terms of Rule 3(2)(ea) of Drawback Rules. It also cited Section 93A read with Section 94(2)(hh) of the Finance Act, 1994 which empowers the Central Government to grant rebate and frame rules to provide for rebate of service tax paid or payable on the taxable services used as input services in the manufacturing or processing of goods exported out of India.
(viii) That the condition No. (e) was omitted from the notification vide Notification No. 41/2007 shows that the intention was always to give refund of such services even when the exports were made under claim of drawback.
3. Ld. DR, on the other hand, stated that the issue is no longer in dispute and has been settled against the appellant by CESTAT in the case of Bharat Art and Crafts Vs, CCE, Jaipur-II - 2016-TIOL-800-CESTAT-DEL.
4. We have considered the contentions of both sides. As regards the terminal handling charges, we find that refund of service tax in relation thereto has been allowed by judgements of CESTAT in the case of SRF Ltd. (supra). Similarly, the issue of refund in respect of service tax paid in respect of transportation of empty containers from port to the factory has been analysed and such refund allowed by CESTAT in the case of Vippy Industries (supra). We find that with regard to CHA charges the appellant has clearly mentioned that the CHA has not charged and the appellant has not claimed any refund of service tax on other charges and CHA service was covered as specified services under Notification No. 41/2007-ST and such refund have been permitted by CESTAT in the case of Spentex Industries (supra).
5. Coming to the ground of rejection viz. that the exports were made under claim of drawback, it is seen that Condition No. 1(e) of Notification No. 41/2007 reads as under:
(e) The said goods have been exported without availing drawback of Service Tax paid on the specified services under the Customs, Central Excise Duties and Service Tax Drawback Rules, 1995.
This issue came up for consideration of CESTAT in the case of Bharat Art and Crafts (supra) in which CESTAT analysed an issue and observed as under :
2. As regards the appeals of M/s Bharat Arts & Crafts and M/s Bothra International are concerned, ld. Consultant for the appellant concedes that they exported goods under claim of drawback under Customs, Central Excise Duties and Service Tax Drawback Rules, 1995 but contended that drawback did not include the service tax paid on the impugned input services because as per the Drawback Rules, the average amount of tax paid on taxable services which are used as input services for the manufacturing or processing or for containing or packing the export goods are taken into account while fixing the all industry drawback rates as is evident from Rule 3(2)(ea) of the Customs Central Excise Duties and Service Tax Drawback Rules, 1995 and the impugned services these services were used after clearance of the goods from the factory. In this regard, it is useful to reproduce below the provision of the said Rule. Rule 3(2)(ea): In determining the amount or rate of drawback under this Rule, the Central Govt. shall have regard to the average amount of tax paid on taxable services which are used as input services for the manufacturing or processing or for containing or packing the export goods. It is evident from the above quoted Rule that it merely makes it mandatory for the Central Government to have regard to the average amount of tax paid on taxable services which are used as input services for the manufacturing or processing or for containing or packing the export goods. It by no means implies that Central Government is forbidden to have regard to other input services like the ones involved in these appeals while fixing the all industry rates of drawback. Notification No. 41/2007-ST contained a proviso during the relevant period which stated that the said goods have been exported without availing drawback of service tax paid on the specified services under the Customs, Central Excise Duties and Service Tax Drawback Rules, 1995. There is no doubt that the impugned services were input services. If the contention of the appellant that these services were not included in fixing the all industry rates of drawback was true then there was no need to incorporate the said proviso in Notification No. 41/2007-ST as the said proviso would in that case be redundant. There is natural presumption that legislature would not incorporate redundant provisions in law. Further if the said proviso did not affect that eligibility of the exporters for refund under Notification No. 41/2007-ST then there was no need for the Govt. to delete the said proviso vide Notification No. 33/2008-ST dated 7.12.2008. There is nothing in Notification No. 33/2008-ST dated 7.12.2008 which expressly or impliedly gave it retrospective effect. It is thus clear that when the goods were exported under claim of drawback, the impugned refund claims would not be admissible by virtue of proviso (e) to Notification No. 41/2007-ST. It has been so held by CESTAT also in the case of Rajasthan Textile Mills Vs. CCE, Jaipur 2015 (37) STR 410 (Tri.-Del.) = 2014-TIOL-1544-CESTAT-DEL. CBEC circular dated 13.7.2006 (supra) issued in the wake of insertion of Rule 3(2)(ea) in the Drawback Rules does in no way alter the legal position analysed in the above reproduced para; indeed CBEC circular cannot change the legal position.
The reference to Section 93A and 94 of the Finance Act in no way adversely impinges upon the analysis contained in para 2 (reproduced above) of CESTAT judgement in the case of Bharat Art and Crafts (supra). Section 93A deals with grant of rebate of service tax paid on taxable services which are used as input services for the manufacturing or processing of such goods or for providing any taxable services while in the present case the issue is interpretation of an exemption notification (No. 41/2007-ST) which is operationalised by way of refund. The said notification does not have any relation to Section 93A nor was it issued in terms of the said section. Similarly Section 94 deals with the rule making power of the Central Government. Reference has also been made to Section 94(2)(hh) to contend that it restricts the power of the Central Government to frame rules to provide for rebate of service tax paid or payable on the taxable services used as input service in manufacturing or processing of goods exported out of India under Section 93A. Needless of say that in the present case rule making power of the Central Government is not an issue (the issue here is only interpretation of an exemption notification No. 41/2007-ST) although it may be added that sub-section 2 of Section 94 clearly states that what is stated in sub section 2 is without prejudice to generality of the power to make rules for carrying out the provisions of this Chapter under Section 94(1). As stated earlier the only issue involved in this case is interpretation of exemption notification and Supreme Court in the case of CC Vs. Honda Siel 2015 (323) ELT 644 (SC) clearly held that it is trite that exemption notifications are to be construed strictly and even if there is any doubt same is to be given in favour of the department.
6. In the light of the foregoing analysis, we find that the analysis and conclusion drawn on this issue in terms of para 2 (reproduced above) of the judgement of CESTAT in the case of Bharat Art and Crafts (supra) remain valid and there is nothing in the pleadings/contentions of the appellant which in any way adversely affects the efficacy of the said analysis. Thus the exemption Notification No. 41/2007-ST is rendered inapplicable in the case of such exports where the appellant claimed drawback under the Drawback Rules.
7. In the light of the foregoing analysis, we do not find any infirmity in the impugned order and therefore the appeal is dismissed.
(Pronounced in open Court on 18.7.2016) (S.K. Mohanty) Member (Judicial) (R.K. Singh) Member (Technical) RM 10