Part 7: - “Refund on other services”
In continuation of previous articles, elaborating the difficulties in getting the refund claim under different conditions, we in this article are unveiling the problems existing in the Service tax refund mechanism under Conditions relating to Courier Service, Insurance Service and GTA by Road Service under [Section 65 (105) (f)], [Section 65 (105) (d)] and [Section 65 (105) (zzp)] respectively. 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 above mentioned Services and are experiencing vast intricacies in getting such refund orders due to attach conditions thereon. The refunds claimed by the assessees as against their exports are their Statutory Rights but are being refused by the departmental authorities on various arguments which are of no significance and worth less. Such reasons on which the department is refusing the refund claims on the said services are being written out hereunder as follows: -
Johnny-Johnny! Yes papa!
Got the refund?
What’s the reason?
This papa: -
Johnny says: I went to the department to get the refund for the Courier service availed by me in relation to export of goods, but department said: -
Johnny-Johnny go away,
Come again another day.
Your refund order has following Flay: -
The documents submitted by the exporter for the refund claim for Courier services falling under Section 65 (105) (f) of the Finance Act, 1994 are not complying with the conditions prescribed in Notification no. 17/2009-ST dt. 07/07/2009.
We submit that the conditions laid down in the notification are reiterated hereunder:-
Service provided by a courier agency to an exporter in relation to transportation of time sensitive documents, goods or articles relating to export, to a destination outside India.
(i) The receipt issued by the courier agency shall specify the importer-exporter code (IEC) number of the exporter, export invoice number, nature of courier, destination of the courier including name and address of the recipient of the courier; and
(ii) Exporter produces documents relating to the use of courier service to export goods.
The analysis of these conditions makes it clear that these details are to be mentioned on the invoice of the courier agency. We submit that preparation of any invoice of any service is not in the hands of the service recipient. It is the duty of the service provider, courier agency. But normally courier agencies do not take pain to mention these details. They focus mainly on the name and address of the service recipient and the destination of the courier. Further service tax is charged on the invoice. All these details, though not covers everything mentioned in the above column no. 4, are sufficient to prove that the services have been availed by us and the service tax is paid on the invoice. As such, the main conditions for getting refund of service tax are satisfied.
The refund cannot be denied on the ground that the service provider has not raised the proper invoice. This is just a procedural lapse and procedural lapse cannot be the basis for denying the refund claim. We rely on the decisions in the case of COMMISSIONER OF C. EX., MUMBAI Versus MANISH ENGINEERING CORPORATION [2003 (162) E.L.T. 670 (Tri. - Mumbai)] and Bajaj Tempo Ltd. versus Commissioner of C. Ex., and Customs, Pune [1999 (106) ELT 145 (Tribunal)] as already discussed here above.
We further submit that we have fulfilled the substantial condition for the refund i.e. export of goods hence the refund should not be denied. Further we have already certified on the invoice that the specified services have been fully utilized in export of goods. The documents are also authorized. The certification done by the assessee clearly said that the service mentioned in the bill/ invoice / challan issued in their name pertaining to specified service has been received by them and that the said taxable service has been fully utilized in export of goods also the service tax has been paid on the same. In light of the above discussions the refund should be granted to us.
Johnny says: I went to the department next day again with the above submissions and further supporting but department said: -
Johnny-Johnny go away,
Come again another day.
Your refund order has following more flay: -
In respect of refund of service tax paid insurance charges, it is alleged that the document issued by the insurer submitted is a receipt towards open policies hence the same is not a document issued by the insurer for payment of insurance premium specific to export grade covered under the specific Shipping Bill. The copy of document submitted neither mention any amount paid or payable for services rendered nor the document is specific to export goods nor the name of the exporter is found mentioned anywhere in the document. The document pertains to an open policy which cannot be said to be specific to export goods.
The conditions for the insurance are specified in the condition 4 under column 4 is reproduced below-
Exporter shall submit document issued by the insurer, including re-insurer, for payment of insurance premium and the document shall be specific to export goods and shall be in the name of the exporter
We have taken a general insurance policy for the export of goods. The policy has a prescribed period, i.e., as and when we will export the goods during this period, insurance cover will be subject to this policy.
The allegation that the refund of service tax paid on premium of running policy is not allowed is not sustainable on the grounds that it is not feasible neither for the insurance co. nor for the exporters to obtain separate policy per consignment. It is a practice throughout India and all the exporters are following the same. A blanket policy is taken for a large amount. It is specifically for the export of the goods and consignment wise amount is debited in that policy. When the policy comes to an end, it is renewed by the exporter. This is a general practice throughout the country.
However, there is no doubt regarding availment of these services and service provider being a public sector undertaking is duly depositing the service tax. The cover note indicates the details of the policy taken like policy amount and type of policy and nature of goods covered, etc., premium amount and service tax due thereon. Since the insurance policy is taken in respect of export goods and the premium paid has suffered the service tax incidence of which is born by us, the refund should be allowed to us.
Johnny says: I went to the department next day again with the further submissions but department rejected saying: -
Johnny-Johnny go away,
You won’t get refund anyway.
It has following more flay: -
In respect of refund of service tax on goods transported by road, Refund in respect of taxable services wherein service tax has been paid or payable to the service provider and where the person claiming refund is a person liable to pay service tax under section 68 of the Finance Act. Hence refund is not admissible in view of Proviso (c) to paragraph 1 and clause (a) of Paragraph 2 of Notification No. 17/2009-ST.
Johnny’s view: -
The relevant clause is produced below-
2) Notwithstanding anything contained in sub-section (1), in respect of any taxable service notified by the Central Government in the Official Gazette, the service tax thereon shall be paid by such person and in such manner as may be prescribed at the rate specified in section 66 and all the provisions of this chapter shall apply to such person as if he is the person liable for paying the service tax in relation to such service.
This clause says that the service tax has to be paid by the person according to the rate specified in Section 66. This clause will apply on the person who is liable to pay service tax under this Act. This sub-section covers those cases where the service tax is paid by the persons other than service providers. The recipients of services rendered by the goods transport agency are covered by this sub-section.
Further the clause no. (c) of the para 1 of the notification says -
(c) the exporter claiming the exemption has actually paid the service tax on the specified service to its provider;
In the cases other than where the recipient of the service is made liable to pay the service tax, the person paying the service tax to the government exchequer and the person bearing the incidence of that service tax/exporter are two different persons. Out of the services specified in this notification, all the services other than GTA services fall this category where the service tax is paid to the government exchequer by the service provider and the person bearing the incidence of this service tax (i.e. exporter) are two different people. Thus, this condition has been added in order to ensure that the person claiming the refund of service tax has borne the incidence of the same in order to avoid the unjust enrichment. In case of the GTA services, the person paying the service tax and the person who has borne the incidence of this service tax are the same – i.e. exporter. As such, there is no unjust enrichment and this clause is not applicable on us.
Further the clause (a) of the Paragraph 2 of these says-
(a) the person liable to pay service tax under section 68 of the said Act on the specified service provided to the exporter and used for export of the said goods shall not be eligible to claim exemption for the specified service;
Further the above clause says that the service provider (who is liable to pay service tax as per provisions of section 68) providing the specified services to the exporter, will not be able to claim this exemption. The analysis of this clause makes it clear that this clause is applicable where the service provider is liable to pay the service tax [i.e. under section 68(1)], then the service provider will not be able to claim the refund. For eg. if the CHA has provided the services to the exporter, he is the person liable to pay service tax under section 68(1); then he will not be able to claim the refund of the service tax in terms of this provisions. Only exporter can claim the service tax refund. The analysis of this clause (a) makes it clear that this clause is not applicable in the cases where the person is liable to pay the service tax under section 68(2). In other words, where the service recipient is liable to pay the service tax or where the person liable to pay the service tax and the exporter are the same, this clause is not applicable. Thus, this clause is not applicable on us as we are the person liable to pay the service tax and the exporter too.
At end, reaching at the same point from originally started, we submit that the intention of the government is to promote the exports and provide maximum benefits to the exporters only. But such show cause notices / orders have been issued to deprive the exporter from the refund benefits which is not tenable under law.
Fruitless again & again;
Johnny now in grief and pain!
Refund order now a dream;
His efforts have downstream!
In this article our sole endeavor is to picturise the problems faced by assessees in getting the refund order as against the services specified above. To represent the whole situation and to make it somewhat rhythmatic we have graced the article with humorous poems.
This is the last article of the prolonged series of articles restraining various issues/ conditions involved in the refund claim mechanism under services tax law. We hope the series of articles depicted the tangible situations faced by exporters under different services.
We will be back with new articles or their series, on various other current issues prevailing in the Indirect Tax regime. Your valuable comments and suggestions are welcomed on email@example.com.
CA. Pradeep Jain
Visit us at: www.capradeepjain.com