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Whether Refund of Service tax paid on an exempted service permissible?

We are sharing with you an important judgement of Hon’ble CESTAT-Mumbai in the case of Crown Products Pvt. Ltd. Versus CCE, Nashik [2012 (8) TMI 373 - CESTAT, MUMBAI] on following issue:-


Whether the appellants could have paid tax on an exempted services and claimed refund under Notification No. 17/2009-ST dated 7-7-2009, which allows refund of tax paid on services used in or in relation to the export of goods?


The appellant filed refund claim of service tax paid on exempted service and the Revenue contentions - Notification No. 33/2004-ST dated 03.12.2004 exempted GTA services in respect of foods and vegetables unconditionally and, therefore, the appellants are not required to discharge service tax liability and the payment made is under mistake of law. What is deposited with the department cannot be considered as tax but it is a deposit with the Government, hence the appellants claim for refund under Notification No. 17/2009-ST dated. 7-7-2009 is not admissible to them.

The appellant says that this is an export transaction and the objective of the Government is to relieve the burden of taxes in respect of exports so as to make the exports competitive in the international market. That is why Notification No.17/09 was issue so that tax burden could be relieved. Therefore, by asking the appellant to prepare a separate claim under Section 11B in respect of the GTA services, it does not sub-serve the objective of the Government and on this ground alone the order of the appellate authority needs to be set aside.


The Hon’ble CESTAT, Mumbai rejected the contention of the Revenue and held that No clause barring an assessee from paying tax on exempted services and claiming refund thereafter in the Finance Act, 1994 unlike in the case of payment of duty under the Central Excise Act, 1944.

Section 5A (1A) of the Central Excise Act, 1944 read as follows:-

"For the removal of doubts, it is hereby declared that where an exemption under sub-section (1) in respect of any excisable goods from the whole of the duty of excise leviable thereon has been granted absolutely, the manufacture of such excisable goods shall not pay duty of excise on such goods."

The above provision under the Central Excise, prohibiting payment of excise duty in respect of absolutely exempted goods, per se does not apply to service tax.

Therefore, findings of the lower appellate authority that the assessee could not have claimed refund under Notification No. 17/2009-ST is not correct in law & decided in favour of assessee.

Bimal Jain

FCA, ACS, LLB, B.Com (Hons)  


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Bimal Jain
Category Service Tax   Report

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