2011 (6) TMI 689 - AT - Service Tax

Recovery of refund granted earlier - freight paid towards transport of goods by road for export - denial on account of nexus - Held that - only from the custodians the empty containers can be obtained and get the goods stuffed and they can be sent either to ICD/CFS back for onward export through gateway port or to the gateway port/airport directly depending on the transport system. Getting empty containers is an indispensable activity in the process of export from the place of removal - the expression used in N/N. 41/2007 in relation to transport of export goods is wide enough to cover event of transport of empty containers from the yard to the factory for stuffing the goods - refund rightly granted - appeal rejected - decided against Revenue.

Summary

Issues:
Refund of Service Tax on freight for transport of goods by road for export; Recovery of erroneously refunded Service Tax; Interpretation of Notification No. 41/2007-S.T.; Eligibility of refund for transportation of empty containers; Applicability of Tribunal decision in Tata Coffee Ltd. case.

Analysis:
The case involved a dispute regarding the refund of Service Tax on freight for the transport of goods by road for export. The respondent, engaged in the manufacture of ceramic tiles, had claimed a refund which was erroneously sanctioned. Subsequently, a show cause notice was issued for recovery under Section 73(1) of the Finance Act. The adjudicating authority confirmed the demand for recovery of Service Tax paid on transportation of empty containers, leading to an appeal before the Commissioner (Appeals) who allowed the appeal in favor of the assessee.

The main contention raised by the Revenue was that the refund on charges for transportation of empty containers was not eligible under Notification No. 41/2007-S.T. as it only exempted transportation of goods for export. The Revenue argued that the exemption notification cannot be stretched beyond its intended scope, citing relevant judgments. On the other hand, the respondent argued that all services were utilized for the transportation of goods for export, emphasizing that no Service Tax should be levied on goods meant for export.

Upon considering the submissions, the Tribunal analyzed the findings of the Commissioner (Appeals) and the interpretation of the relevant notification. The Tribunal noted that the expression "in relation to transport of export goods" in the notification was broad enough to cover the transport of empty containers for stuffing goods, as held in the Tata Coffee Ltd. case. Therefore, the Tribunal upheld the impugned order, stating that it was correct, legal, and in line with the precedent set by the Tata Coffee Ltd. case. Consequently, the appeal filed by the Revenue was rejected.

In conclusion, the Tribunal's decision clarified the eligibility of the refund under the notification and emphasized the broad interpretation of the phrase "in relation to transport of export goods." The judgment highlighted the importance of aligning the interpretation of tax provisions with the underlying purpose of promoting export activities, as evidenced by the Tribunal's reliance on relevant case law to support its decision.