2025 (6) TMI 263 - AT - Service Tax

Refund of service tax paid on services related to the export of iron ore fines - rejection for non-compliance of conditions envisaged in Notification No.41/2007-ST dated 06.10.2007 as amended - non-compliance of condition (iii) in column 4 of entry no.11 of the Schedule appended to Notification No. 03/2008-ST dated 19.02.2008 - HELD THAT - Similar issue has been examined by this Tribunal in the case of S.K.Sarawagi Company Private Limited 2023 (2) TMI 481 - CESTAT KOLKATA wherein this Tribunal has observed Though the above clarification was with respect to Notification No. 5/2006-C.E. (N.T.) but it clearly conveys that in budget 2009 the scheme under Notification No. 41/2007-S.T. was simplified in Notification No. 17/2009-S.T. by providing self certification or Chartered Accountant s certification about co-relation and nexus between input Services the exports. That above logic can be followed for Notification No. 5/2006-C.E. (N.T.) where such simplification of Notification No. 17/2009-S.T. may not be available. Following the decision of the case of S.K.Sarawagi Company Private Limited it is held that in case of bulk cargo the goods are to be aggregated at the port premises even before the shipping documents are prepared. The export invoices are prepared only after the iron ore fines are loaded in the vessel as per the contractual terms and conditions and factors like quality size etc. which are variable. Therefore the compliance of condition No.11 of N/N. 3/2008 dated 19.02.2008 should be ascertained by broadly correlating the evidence of transport and service tax paid on such transport charges and quantity exported. In view of this the appellant has complied with the condition of Notification No.3/2008 dated 19.02.2008. Conclusion - The appellant has complied with the condition of Notification No.3/2008 dated 19.02.2008 thus refund is allowed. The impugned orders are set aside - Appeal allowed.

Summary

The core legal questions considered by the Tribunal in these appeals revolve around the eligibility for refund of service tax paid on services related to the export of iron ore fines. Specifically, the issues include:

(i) Whether the appellants, engaged in export of iron ore fines as bulk cargo, are entitled to refund of service tax paid on port services, technical testing and analysis services, and Goods Transport Agency (GTA) services under Notification No. 41/2007-ST dated 06.10.2007 as amended by Notification No. 03/2008-ST dated 19.02.2008.

(ii) Whether the appellants complied with the mandatory conditions prescribed in the Notification, particularly condition (iii) of entry no. 11 of the Schedule appended to Notification No. 03/2008-ST, which requires the exporter's invoice details to be mentioned on the lorry receipts issued by transporters for transportation of export cargo.

(iii) The extent to which broad correlation between the quantity transported and quantity exported, supported by Chartered Accountant certification, suffices to meet the conditions for refund, especially in the context of bulk cargo where shipping documents are prepared post aggregation of goods at the port.

Regarding the first issue of entitlement to refund under the relevant Notifications, the Tribunal examined the legal framework established by Notification No. 41/2007-ST and its amendment Notification No. 03/2008-ST. These Notifications provide for refund of service tax paid on input services used in relation to export of goods, subject to prescribed conditions to prevent domestic tax from being exported with goods.

The Tribunal relied heavily on precedent decisions, notably the Tribunal's ruling in S.K. Sarawagi Company Private Limited, which addressed similar facts and legal questions. In that case, it was recognized that in the export of bulk cargo such as iron ore fines, goods must be transported in multiple consignments to the port and aggregated there before export invoices are generated. This operational reality means that strict literal compliance with the condition requiring exporter invoice details on lorry receipts may not be feasible.

Further, the Tribunal referenced the decision in Jumbo Mining Ltd. v. CCE, which held that compliance with condition No. 11 of Notification No. 3/2008 should be ascertained by broadly correlating evidence of transport services and service tax paid with the quantity exported, rather than demanding strict one-to-one correspondence on documentation. This approach recognizes the practical difficulties in matching transport documents with export invoices in bulk cargo shipments.

The Tribunal also noted the policy rationale behind the Notifications, as highlighted in East India Minerals Limited v. CCE & ST, emphasizing the government's intent to avoid exporting domestic tax burden along with goods, while allowing reasonable flexibility in documentation requirements.

On the issue of compliance with condition (iii) of entry no. 11, the Tribunal analyzed the appellant's failure to mention exporter invoice details on the lorry receipts. The Revenue contended that this omission was fatal to the refund claim. However, the Tribunal examined Circular No. 120/01/2010-S.T. dated 19.01.2010 issued by the Central Board of Excise & Customs (C.B.E. & C.), which acknowledged difficulties exporters face in establishing strict one-to-one correlation between input services and exports.

The Circular introduced a simplified scheme via Notification No. 17/2009-S.T., allowing exporters or their Chartered Accountants to provide self-certification regarding the nexus between input services and exports. This procedural relaxation was intended to facilitate refund claims by requiring only broad correlation and basic scrutiny by authorities, rather than exhaustive documentary proof.

Applying this principle, the Tribunal held that the appellant's Chartered Accountant's certificate, along with transport bills and challans, sufficiently established a broad correlation between the GTA services utilized and the exports effected. Therefore, the strict requirement of mentioning exporter invoice details on lorry receipts could be relaxed in the context of bulk cargo exports.

In addressing competing arguments, the Tribunal acknowledged the Revenue's insistence on strict compliance with documentary conditions but found no evidence that the Revenue demonstrated the extent of non-correlation or that a liberal view could not be taken. The Tribunal emphasized that the Revenue failed to produce documents to challenge the appellant's broad correlation evidence effectively.

The Tribunal further underscored that the policy behind the Notifications and Circulars is to avoid exporting domestic tax burden and to simplify refund procedures, especially in complex bulk export scenarios. This policy consideration weighed in favor of allowing the refund despite procedural lapses in documentation.

Consequently, the Tribunal concluded that the appellants had complied with the conditions of Notification No. 3/2008-ST to the extent reasonably required under the circumstances. The broad correlation approach, supported by Chartered Accountant certification and transport documents, was sufficient to establish eligibility for refund of service tax paid on GTA and other related services used in the export of iron ore fines.

The impugned orders rejecting the refund claims on grounds of non-compliance with condition (iii) were set aside. The Tribunal restored the earlier Order-in-Original that had allowed the refund and remanded the matter for fresh consideration with consequential relief to the appellants.

Significant holdings from the Tribunal's reasoning include the following verbatim excerpts and principles:

"In case of bulk cargo, the goods are to be aggregated at the port premises even before the shipping documents are prepared. The export invoices are prepared only after the iron ore fines are loaded in the vessel as per the contractual terms and conditions and factors, like quality, size, etc., which are variable. Therefore, the compliance of condition No.11 of Notification No.3/2008 dated 19.02.2008 should be ascertained by broadly correlating the evidence of transport and service tax paid on such transport charges and quantity exported."

"The policy of the government is not to export domestic tax along with export of such goods."

"Self-certification of the exporter or a Chartered Accountant, if given, is sufficient to sanction refund."

"The departmental officers are only required to make a basic scrutiny of the documents and, if found in order, sanction the refund within one month."

"Compliance of condition No. (iii) should be ascertained by broadly correlating the evidence relating to transport and service tax paid on such transport charges and the quantity exported."

The core principles established by the Tribunal are:

1. In exports of bulk cargo, strict literal compliance with documentary conditions requiring exporter invoice details on transport documents may be relaxed, provided broad correlation between input services and exports is demonstrated.

2. Chartered Accountant certification or self-certification by the exporter suffices to establish the nexus between input services and exports for refund claims under Notification No. 41/2007-ST and its amendments.

3. The policy objective of the Notifications is to prevent export of domestic tax burden while facilitating exporters through simplified procedural requirements.

4. Refund claims should be adjudicated on a broad correlation basis with reasonable opportunity to the appellants, rather than on rigid documentary technicalities.

On the final determinations, the Tribunal allowed the appeals, set aside the impugned orders rejecting the refund claims, restored the original order granting refund, and directed consequential relief to the appellants.