Custom, Excise & Service Tax Tribunal
M/S Zodiac Clothing Co. Ltd vs Commissioner Of Central Excise, ... on 18 July, 2014
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. IV Appeal No. ST/470/11 (Arising out of Order-in-Appeal No. M-I/AV/146/2011 dated 21.3.2011 passed by the Commissioner of Central Excise (Appeals), Mumbai-I). For approval and signature: Honble Shri Anil Choudhary, 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 : Yes 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? ====================================================== M/s Zodiac Clothing Co. Ltd. Appellant Vs. Commissioner of Central Excise, Mumbai-I Respondent Appearance: Shri R.V. Shetty, Advocate for Appellant Shri B.K. Iyer, Supdt. (AR) for Respondent CORAM: SHRI ANIL CHOUDHARY, MEMBER (JUDICIAL) Date of Hearing: 18.07.2014 Date of Decision: 18.07.2014 ORDER NO. Per: Shri Anil Choudhary
The appellant, M/s Zodiac Clothing Co. Ltd., is a manufacturer and exporter of garment. The final product of the appellant is not taxable under the provisions of Central Excise Act, 1944. The appellant availed the services of agents outside India, who are engaged for procuring purchase orders for the purpose of export and paid commission to such agents, who procured orders for it. On such commission paid, the appellant, as provided under the provisions of Section 65 of the Finance Act, 1994 read with Rule 2(1)(d)iv) of the Service Tax Rules, 1994, deposited the Service Tax on Reverse Charge Mechanism. It is further contended by the appellant that a representation was made by the Garment Industry as a whole and in pursuance thereto vide OM F.No. 354/107/2005/TRU dated 9.8.2005, Ministry of Finance, Department of Revenue clarified that where services are rendered outside India by a person/entity not resident in India for export of goods from India, in terms of Rule 5 of the Cenvat Credit Rules, 2994, the following option are available: -
* taking input credit on the service tax and using it towards discharge of duty on final products cleared for home consumption.
* taking input credit on the service tax and using it towards discharge of duty on service tax on output service.
* If for any reason, such adjustment as above is not possible, refund of service tax on input services may be claimed.
2. Accordingly, the appellant made claim for refund of Service Tax vide its application for refund dated 19.6.2006 claiming refund of Rs.8,74,799/- for the period Sept. 2005 to March, 2006. It is also contended by the appellant relying on the ruling of the Hon'ble Bombay High Court in the case of India National Shipowners Association Vs. Union of India 2009 (13) STR 235 (Bom), wherein the Hon'ble High Court has held that no Service Tax is payable on reverse charge basis prior to the date when Section 66A was not in statute. The said decision of the Hon'ble High Court was affirmed by the Hon'ble Supreme Court.
3. In response to the application for refund, a show-cause notice dated 9.11.2006 was issued calling upon the appellant to explain as to why his claim of refund should not be rejected as the said service availed by the appellant does not qualify as input service as per definition under the Rule 2(l) of the Cenvat Credit Rules, 2004. Thereafter, vide Order-in-Original dated 31.10.2007, the refund claim was rejected upholding the proposal in the show-cause notice. Being aggrieved the appellant moved before the Commissioner (Appeals), who vide the impugned order dated 21.5.2011 was pleased to uphold the rejection of the refund claim. The ground stated by the appellate Commissioner rejecting the appeal is that the appellant have taken a new ground, being relying on the ruling of Hon'ble Bombay High Court in the case of Indian National Shipowners Association (supra). It is further observed in the appellate order that though the refund claim was made on 19.6.2006, the appellant has take a new ground in its appeal, which was filed on 30.1.2008. Thus, claim of refund is technically filed on 30.1.2008 and the same is time barred. Being aggrieved the appellant is in appeal before this Tribunal.
4. The appellant states that the very show-cause notice is bad and illegal in terms of the directions of the Ministry of Finance issued in its Circular dated 9.8.2005. In view of this Circular, there is no scope for getting into the definition of input service and the Revenue have totally misconceived in issuing the show-cause notice dated 9.11.2006. Thus, the whole proceedings are vitiated and the impugned order is fit to be set aside. Accordingly, the appellant pleads to allow the appeal.
5. The learned Supdt. (AR) appearing for the Revenue relies on the impugned order. On a query from the Bench that if there was any scope to issue show-cause notice on the ground stated therein in view of the OM dated 9.8.2005 of the Ministry of Finance, no cogent answer was put by the Revenue.
5. Having considered the rival contentions, I find that the show-cause notice itself is vitiated and completely misconceived in the facts and circumstances of the case. Thus, the appeal is allowed and impugned order is set aside. I direct the adjudicating authority to issue refund to the appellant within a period of 30 days from production of a copy of this order along with interest as per rules.
(Dictated and pronounced in Court) (Anil Choudhary) Member (Judicial) Sinha 4