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Johnny and Service Tax Refund Part - II
                                                                                       By: -                          
CA. Pradeep Jain
Siddharth Rutiya
Visit us at : www.capradeepjain.com
In continuation of previous article, elaborating the difficulties in getting the refund claim under GTA service, we in this article are unveiling the problems existing in the Service tax refund mechanism under Port Services (Section 65[105][zn]). This complete scenario is being elaborated with the means of humorous poems and conversation between Johnny (an assessee) and his father but the main motive is to bring out the problems faced by exporters.
Johnny and Jill went up the hill, to get the refund order
Johnny came back with a lack
And Jill came hopeless after.

Presently, assesses are claiming refund orders under Port Services are experiencing vast intricacies in getting refunds. The refunds claimed by the assessees as against their exports are their Rights but are being refused by the departmental authorities on various arguments which are of no significance and worth less. The various reasons on which the department is refusing these refund claims on the said services are highlighted as under: -
Johnny-Johnny!  Yes papa!
Got the refund?
No Papa,
Telling lies?
 No Papa,
What’s the reason?
This papa: -
Johnny says: I went to the department to get the refund for Port service but department said: -
Johnny-Johnny go away,
Come again another day.
Your refund order has following Flay: -
The refund claimed by you is regarding port charges of ICD and as per the law refund is allowed for “Service provided by a port or any person authorised by the port in respect of the export of said goods”. Further the port charges of ICD are not eligible for refund as they aren’t covered under the said service as because of the definition of Port. The definition of port reads as under: -
“"port" has the meaning assigned to it in clause (q) of section 2 of the Major Port Trust Act, 1963”.
And Major Port Trust Act, 1963 defines the term port as: -
“"Port" means any major port to which this Act applies within such limits as may, from time to time, be defined by the Central Government for the purposes of this Act”
The analysis of these definitions of “port” as given here above doesn’t include ICD and henceforth the refund order is not to be allowed.
Johnny’s View: -
I told that ultimately the goods are to be exported through port only and as such the refund should be granted to us. We have also given the list of the shipping bills along with the ports. But you (the department) do not agree. You say that the goods are exported through ICD and not through the port and as such service tax claimed by you are not port charges. Hence the refund cannot be granted to me.
Johnny says: I went to the department next day again with the corrections but department said: -
Johnny-Johnny go away,
Come again another day.
Your refund order has following more flay: -
I had availed duty drawback in respect of shipping bills in terms of Customs, Central Excise Duties and Service Tax Drawback Rules, 1995.
Johnny’s View: -
But my contention was that we are also claiming rebate claim. We pay the duty on FOB value of goods. The rebate claim is given to us by the department on FOB value as reduced by Port charges, Outward Freight, CHA Charges and Insurance charges. Henceforth, the value under consideration for Rebate claim doesn’t includes these values and no rebate is given on it.
On the other hand Drawback as given under Customs, Central Excise Duties and Service Tax Drawback Rules, 1995 is limited to the scope of duty/tax paid on inputs and input services. Thus, here again the department is taking contention that Drawback will not be allowed on such Port charges as these are not input services and have been availed after the manufacture of final product.
The Department is taking two way contention one while giving rebate they are denying the same on Port Charges alleging that these aren’t includible in transaction value and on the second part they are disallowing the refund of service tax alleging the Drawback has been claimed and drawback rates includes these input services. Thus, if Department is taking two way contentions.
But the department said that the value under Central Excise is different from the value under drawback rules. The drawback is sanctioned on FOB value and as such these input services are included while fixing the drawback rates. The department said that if we are taking two stands then you are also taking two stands in replying the same. When we sanction rebate claim then you say that these are includible in transaction value and rebate should be sanctioned on FOB value but when claiming refund you say that these are not input services and as such these are not included in fixing drawback rates.
Johnny says: I went to the department next day again with the further corrections but department rejected saying: -
Johnny-Johnny go away,
You won’t get refund anyway.
It has following more flay: -
The service tax invoice issued to you is being issued by the shipper and not by the Port authorities. These shippers are being registered under Business Auxiliary Services or Business Support Services. These services aren’t specified under the list of services eligible for refund against export. Thus, the refund order is disallowed on such ground.
Jonny told them that the port authorities do not bill us directly but it is billed to shippers and they bill to us. But the nature of expenses clearly tells that these are incurred at the port. The terminal handling charges and other related charges are clearly incurred at port.
Fruitless again & again;
Johnny now in grief and pain!
Refund order now a dream;
His efforts have downstream!
Although the article is ornamented with humorous poems but the key motive is to bring into light the intricacies involved in the refund orders. With this entertaining and rhythmical article we summarize that the present situation and mental state of assesses alleging refunds against export of goods is alike to the situation of Johnny as pointed out in the poem.
There are a number of services on which the refund is allowed. The assessee is facing difficulty in almost all of those services. Due to the large number of services we were not able to cover all the services in this article and hence we will be bringing further articles on the different services covered therein. Keep visiting for the next article……..

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Pradeep Jain
Category Service Tax   Report

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