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Commissioner, Service Tax-VII Versus M/s. Flemingo Duty Free Shop Pvt Ltd

2017 (10) TMI 405 - CESTAT MUMBAI

Refund/Rebate claim - POPOS Rules - Service Tax paid on the rent paid by the Respondent to the Airport Authorities, for running their duty free shops situated in the departure lounge of various airports - N/N. 41/2012-ST dated 29.06.2012 - Held that: - The Department heavily relies on Article 286 of the Constitution of India and the judgment in Hotel Ashoka vs Asstt. Commissioner of Commercial Taxes, [2012 (2) TMI 62 - Supreme Court of India], which was also rendered in the case of similar duty .....

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which admittedly is beyond customs barriers in non-taxable territory. - In the case of rent paid for the space of duty free shops, the place of provision of services is thus the place where duty free shop is located, which is admittedly beyond Customs Frontiers - Even in the Integrated Goods And Services Tax Act, 2017,as per Section 13(4) the place of supply of services remains the place where immovable property is located. - There is no dispute that the duty-free shops, whether in arriv .....

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al of Customs Bonded Warehouse (Duty Free Shop), whether it be in the arrival lounge or in the departure lounge. The levy of Service Tax paid by the Respondent is therefore not authorised by law in view of provisions of Finance Act, 1994 read with Article 286 of the Constitution of India. - Eligibility for refund - Held that: - There is no dispute on the fact that it is not possible to carry on the export sales at the Duty Free Shop at the departure terminals, without having a space there, w .....

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rt invoices issued to the international passengers, which is also countersigned by the Customs Officers. No duty or taxes are charged or recovered in the said export invoice. Hence, no incidence of tax or duty has been passed on to their buyer international passengers. - Refund/ Rebate allowed - appeal dismissed - decided against Revenue. - ST/87234, 87235, 87236, 87237, 87238, 87239, 87240 and 87241 /16 - A/89737-89744/17/STB - Dated:- 28-9-2017 - Mr Ramesh Nair, Member (Judicial) And Mr. R .....

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he rent paid by the Respondent to the Airport Authorities, for running their duty free shops situated in the departure lounge of various airports. 2. In the instant case, the Respondent operates duty free shops in the departure and arrival modules at various International Airports. These duty free shops are beyond Customs Barriers, and are Bonded Warehouses. 3. Refund claims were filed by the Respondent claiming the benefit of Notification No. 41/2012-ST dated 29.06.2012 seeking refund of Servic .....

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ed under section 84 of the Finance Act, 1994 and separate appeals were filed by the Department before the Commissioner (Appeals) on the following grounds, as quoted in Order-in-Appeal- The Refund sanctioning authority has erred 'in interpreting the Standing Order No. 03/2008 dated 3.3.2008 issued under F. No. Air Cus/67-01/2008 by the Commissioner of Custom Mumbai, in as much as the said Standing Order pertains to instructions on sale of non-duty paid goods by Duty Free shops (DFS) to only i .....

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d in interpreting the same as sale by Duty Free Shop to international passengers in the departure lounge. Export under the Customs Act, 1962 means physical export of the goods out of the country. The Refund sanctioning authority did not appreciate the fact that such sale of goods took place in Indian Territory and only then the goods were physically taken out of India and that too by individual international passengers. By no stretch of imagination can it be construed that the Duty Free Shop has .....

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India in the case of Hotel Ashoka V/s Assistant Commr. Of Commercial Taxes as reported in 2012 (276) E.L.T. 433 (S.C.). The Hon ble Supreme Court of India in the aforesaid judgment has clearly held that when any transaction takes place outside the customs frontiers of India, the transaction would be said to have taken place outside India. Hence, the Refund Sanctioning Authority erred in not appreciating the fact that the goods sold to international passenger in the departure lounge had never cro .....

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cepting the fact that the transactions did happen in the Indian Territory, the Refund sanctioning authority has not appreciated the fact that the Duty Free Shop has sold the non-duty paid goods, which has been warehoused and has not been imported into India, to international passengers while still in the Indian Territory. By no stretch of imagination, the same can be considered as physical export of goods. It is only the individual passengers who would take the goods outside India and not the Du .....

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eciated the fact that the impugned goods are not manufactured in India. They are imported, warehoused and finally sold in departure lounge of airports. Hence, the sale of duty free goods in departure lounge does not satisfy the definition of exports. Assuming for the sake of discussion but not accepting the fact that the goods sold to individual passenger in the international departure lounge corresponds to export, even then the Refund Sanctioning Authority has not appreciated the fact that the .....

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ty has not appreciated the fact that at the point of sale of non-duty paid goods to the individual international passenger, the Duty Free Shop has recovered all the duty / tax it has incurred in the course of sale of the goods. Thus, in the instant case. there also arises a question of unjust enrichment in as much as the price of sold goods also include the expenditure incurred in owning and maintaining the duty free shops. Hence, the respondent has by issuance of invoice for sale of goods has a .....

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s for warehousing under Chapter IX of Customs Act. Direct nexus was found of renting space with the export sales of Respondent. Doctrine of unjust enrichment was considered inapplicable in case of export of goods. As quoted in the Department's Appeals, the Commissioner (Appeals), inter-alia, observed that; > as per section 71 of the Customs Act, since the goods were not cleared for home consumption, the goods that were sold at the duty free shop could be regarded as 'exports' as n .....

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g of airport premises at the departure module has a direct nexus with the export sale being made by the respondent as it is not possible to carry on the export sales at the Duty Free Shop at the departure terminals, without taking the duty free shops on rent from the Airport Authority of India; > there is no application of doctrine of unjust enrichment in case of export of goods. 7. Chief Commissioner of Service Tax reviewed these Orders-in-Appeal under Section 86 (2A) of the Finance Act, 199 .....

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not legal, proper and hence, the same is fit to be contested by filing appeal before the Customs, Excise & Service Tax Appellate Tribunal, Mumbai under Section 86 (2A) of the Finance Act, 1994 (32 of 1994) on the following grounds: 2.1 The refund has been granted under Notification No.41/2012-ST dated 29.06.2012 which reads... the Central Government, on being satisfied that it is necessary in the public Interest so to do, hereby grants rebate of service tax paid (hereinafter referred to as r .....

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e place of removal, for the export of said goods; (ii) in the case of goods other than (i) above, taxable services used for the export of said goods; but shall not include any service mentioned in sub-clauses (A), (B), (BA) and (C) of clause (I) of rule (2) of the CENVAT Credit Rules, 2004; .. .....(d) no CENVAT credit of service tax paid on the specified services used for export of goods has been taken under the CENVAT Credit Rules, 2004;...." On perusal of the Notification, it is clear th .....

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2012-ST dated 29.06.2012. In view of the above, it appears that the Commissioner (Appeals), has erred in determining the goods sold at departure terminals situated at the Airports as export. 2.2. Also, since they are selling, the goods to their buyers it is most likely that they would have loaded their input costs on the sale price of the goods, which is a common business practice. No evidence has been discussed about the same by the Learned Commissioner (Appeals) to the effect that such cost of .....

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ort are liable to sales tax /Vat under the Karnataka value added Tax Act. The Hon'ble Supreme Court found that the goods kept in the bonded warehouse had not crossed the customs frontier of India, since they were not brought into India after clearance from Customs. Therefore, it was held that before the goods were imported into country they had been sold at the duty free shops and hence no sales tax was leviable, The Court observed as follows:- 18. It is an admitted fact that the goods which .....

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be said that the said goods had crossed the customs frontiers. The goods are not cleared from the customs till they are brought in India by crossing the customs frontiers. When the goods are lying in the bonded warehouses, they are deemed to have been kept outside the customs frontiers of the country and as stated by the learned senior counsel appearing for the appellant, the appellant was selling the goods from the duty free shops owned by it at Bengaluru International Airport before the said .....

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ns the department's contention that the goods, in fact are moving from a foreign country to another foreign country and, not from Indian territory to a foreign country and therefore doesn't fit in the definition of export provided under section 2(18) of the Custom Act, 1962. 9. We heard both sides at length and carefully perused the documents available on record, the statutory provisions with Rules, and have considered the rival submissions. 10. The Department heavily relies on Article 2 .....

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as under- 286. Restrictions as to imposition of tax on the sale or purchase of goods.-(1) No law of a State shall impose, or authorise the imposition of, a tax on the supply of goods or of services or both, where such supply takes place- (a) outside the State; or (b) in the course of the import of the goods or services or both into, or export of the goods or services or both out of, the territory of India. (2) Parliament may by law formulate principles for determining when a supply of goods or o .....

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context of section 2(18) of the Custom Act, 1962 (c) Whether conditions of Notification No.41/2012-ST dated 29.06.2012 for seeking rebate / refund were satisfied (d) Whether the bar of unjust enrichment is applicable (e) Whether the impugned Orders-in-Appeal are legal and proper 11. On the first issue, it is seen that in terms of Article 286(1) of the Constitution of India, no Tax can be imposed on the supply of goods and/or services, where such supply takes place- (i) outside the State; or (ii) .....

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ntries by the appellant had been kept in bonded warehouses and they were transferred to duty free shops situated at International Airport of Bengaluru as and when the stock of goods lying at the duty free shops was exhausted. It is also an admitted fact that the appellant had executed bonds and the goods, which had been brought from foreign countries, had been kept in bonded warehouses by the appellant. When the goods are kept in the bonded warehouses, it cannot be said that the said goods had c .....

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tiers. 19. Thus, before the goods were imported in the country, they had been sold at the duty free shops of the appellant. 20. In view of the aforestated factual position and in the light of the legal position stated hereinabove, it is very clear that no tax on the sale or purchase of goods can be imposed by any State when the transaction of sale or purchase takes place in the course of import of goods into or export of the goods out of the territory of India. Thus, if any transaction of sale o .....

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customs frontiers of India i.e. they are not within the customs frontiers of India. 24. If this is the factual and legal position, in our opinion, looking to the provisions of Article 286 of the Constitution, the State of Karnataka has no right to tax any such transaction which takes place at the duty free shops owned by the appellant which are not within the customs frontiers of India. 30. They again submitted that in the course of import means the transaction ought to have taken place beyond t .....

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dia. In other words, it cannot be said that the goods are imported into the territory of India till the goods or the documents of title to the goods are brought into India. Admittedly, in the instant case, the goods had not been brought into the customs frontiers of India before the transaction of sales had taken place and, therefore, in our opinion, the transactions had taken place beyond or outside the custom frontiers of India. 13. The position in the matter of Service Tax is not different. C .....

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rvices relating to immovable property. - The place of provision of services provided directly in relation to an immovable property, including services provided in this regard by experts and estate agents, provision of hotel accommodation by a hotel, inn, guest house, club or campsite, by whatever, name called, grant of rights to use immovable property, services for carrying out or co-ordination of construction work, including architects or interior decorators, shall be the place where the immova .....

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elation to an immovable property, including services supplied in this regard by experts and estate agents, supply of accommodation by a hotel, inn, guest house, club or camposite, by whatever name called, grant of rights to use immovable property, services for carrying out or co-ordination of construction work, including that of architects or interior decorators, shall be the place where the immovable property is located or intended to be located. 15. Section 66B of the Finance Act, 1994, permit .....

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provided in the taxable territory by one person to another and collected in such manner as may be prescribed. 16. The Service provided by way of rent of place where immovable property i.e. duty free shop is located, admittedly being beyond Customs Frontiers and not within taxable territory, Service Tax cannot be charged on such rentals. Even in the new GST regime there is no departure from this legal position. 17. Further, Section 65-B, clearly interprets the words taxable service and taxable te .....

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unge, of the International Airports are beyond the customs frontiers. Thus, they are outside the taxable territory and thus in non-taxable territory. The Grounds taken in the Appeal also show that the department deems these duty free shops in foreign territory. Since, the rent is paid for the rental space in arrival or departure lounge area in non-taxable territory, the same therefore is not a taxable service. 19. Therefore, no Service Tax is chargeable at the first instance on rent for rental o .....

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entitled for seeking refund of such tax collected without authority of law for non-taxable services. 21. However, the Respondent has sought refund of Service Tax paid only so far as the duty free shops at the departure lounge is concerned by claiming benefit of Notification No.41/2012-ST dated 29.06.2012 for seeking rebate / refund. The lower authorities have found them eligible for such refund in the context of the said Notification. The issue was not examined in the context of refund of tax co .....

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tire movement and sale of articles at the duty free shops of the respondent happen under customs supervision and control and in accordance with Chapter IX of the Customs Act dealing with Warehousing of goods". The respondent files a bill of entry for warehousing treating the duty free goods imported by it to be imported goods as per procedure prescribed in Customs Act for bringing goods into duty free shop. Thus, the Respondent can be deemed as importer for Section 58 of the Act which allow .....

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dispute regarding the fact that the respondent has claimed rebate of service tax paid only on the rentals of its duty free shops located at the departure terminals from where goods are sold to international passengers going abroad. There is no dispute that the dutiable goods were not cleared for home consumption on payment of any duty from such duty free shops. The sale of goods at the duty free shops can only be regarded as cleared for exports u/s. 69 of the Act. It is further not disputed tha .....

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oods sold at the duty free shops are cleared for home consumption or for removal to another warehouse or are removed as otherwise provided by the Act. It therefore follows that the goods that are sold at the duty free shop can only be regarded as 'exports' as no customs duty is levied on the same, when cleared out of the warehouse. Further, the Commissioner (Appeal) has also relied upon a Public Notice No. 154/2004 dated 22.07.2004 issued by the Customs, Chennai and Standing Order No. 3/ .....

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en out of India by the individual international passengers. Therefore, there is no reason to disturb the findings to deny refund to the Respondent. 24. There is no dispute on the fact that it is not possible to carry on the export sales at the Duty Free Shop at the departure terminals, without having a space there, which can only be possible by taking the duty free shops on rent from Airport Authority of India. In view of the above, the renting of airport premises at the departure module has a d .....

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ppeals) even on the issue of inapplicability of the bar of unjust enrichment. The Commissioner (Appeals) has examined the export invoices issued to the international passengers, which is also countersigned by the Customs Officers. No duty or taxes are charged or recovered in the said export invoice. Hence, no incidence of tax or duty has been passed on to their buyer international passengers. 27. We agree with the contention of the Respondent, appreciated by the Commissioner (Appeal) that the Du .....

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have been relied upon by the Commissioner (Appeals) to hold that the doctrine of unjust enrichment does not arise in case of Export transactions as per clause (a) of proviso to Section 11B(2) of Central Excise Act, 1944 as applicable to Service Tax vide Section 83 of Finance Act, 1994. The refund is claimed pursuant to Section 93A of the Finance Act, 1994 (the law governing service tax) read with Notification no. 41/2012 ST dated 29.6.2012. The following precedents are rightly relied upon- (i) V .....

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