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2017 (10) TMI 405

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 free shops, where it was held that the Duty Free Shop which is Customs Bonded Warehouse is considered by the Department as a space outside India. - Clause (5) of the Place of Provision of Services Rules, 2012 notified by N/N. 28/2012-S.T., dated 20-6-2012, w.e.f. 1st July, 2012, leaves no doubt that the place of provision of services relating to immovable property in the instant case is the place where the immovable property in this case Customs Bonded warehouse (Duty-Free Shop) is located, 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 f .....

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sioner (A.R.) for the Appellants Shri. A.R. Krishnan, CA with Shri. Girish Raman, Advocate for the Respondent ORDER Per : Ramesh Nair 1. These are appeals filed by the Commissioner of Service Tax-VII, Mumbai, against Orders-in-Appeal passed by the Commissioner (Appeals), dismissing the Department's Appeals against the Orders-in-Original, sanctioning refund / rebate of the 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. 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 Service Tax paid on the rent paid by them to the Airport Authorities for running their duty free shops situated in the departure lounge of various airports. 4. The Assistant Commissioner sanctioned refund of the Service Tax on such rent paid after having satisfied about the fulfilment of all the condition .....

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at 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 crossed the custom frontier of India and hence the sale of the same cannot be termed as taking out of India to a place outside India in as much as the goods were never in India. Thus, the refund sanctioning authority failed to appreciate that the goods which have not completed the act of importation cannot be exported. Further, reliance is placed on the case of Flemingo Duty Free Shops Pvt. Ltd. V/S State of Karnataka reported at 2009 (248) E.L.T. 69 (Kar.) also in their support. ssuming but not accepting 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 .....

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from Bonded Warehouse. Respondent was considered as exporter, goods as export goods within the meaning assigned in Section 2(18) to 2(20) of the Customs Act, 1962. Goods were treated as imported goods 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 no Customs duty was levied on the same when cleared out of warehouse; > the respondent would be considered as an exporter and, the goods sold at the departure duty free shops to be export goods, within the meaning assigned in section 2(18) to (20) of the Customs Act; > the goods were brought from foreign countries into India and warehoused as imported goods in terms of Chapter IX of the Customs Act, hence the same shall have to be treated as imported goods under Customs Act; > the rentin .....

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taken under the CENVAT Credit Rules, 2004;...." On perusal of the Notification, it is clear that the Notification provides for rebate of service tax paid on taxable services which are received by an exporter. In the situation at hand, the claimants are selling their goods from their duty free shops to the passengers, in India. With the event of sale the ownership of goods changes and it is no more with the claimant. Subsequent movement of the goods by the new owner does not make the duty free shop exporter and therefore they do not seem to be eligible for refund under Notification No.41/2012-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 input service tax were not loaded on to the sale price of the goods. Thus, if the input service tax .....

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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 286 of the Constitution of India and the judgment in Hotel Ashoka Vs Asstt. Commissioner of Commercial Taxes, 2012 (276) ELT 433 (SC), which was also rendered in the case of 'similar duty free shops'. On the basis of the said judgment, the Duty Free Shop which is Customs Bonded Warehouse is considered by the Department as a space outside India. The said judgment was rendered by the Hon ble Supreme Court after taking into consideration Article 286 of the Constitution of India, which reads 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 .....

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dia 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 goods had crossed the customs frontiers. 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 or purchase takes place when the goods are being imported in India or they are being exported from India, no State can impose any tax thereon. 23. Looking to the aforestated legal position, it cannot be disputed that the goods sold at the duty free shops, owned by the appellant, would be said to have .....

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nts, 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 immovable property is located or intended to be located. 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. 14. 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. Section 13(4) reads as under- 13(4) The place of supply of services supplied directly in relation 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 immov .....

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he Service Tax has been collected on the rent so paid for the duty-free shops. This Service Tax collected is in the nature of tax collected without authority of law. The Respondent would therefore be 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 collected without authority of law. 22. We have gone through the detailed findings of the Commissioner (Appeals). Considering the payment of Service Tax on rent amount paid to Airport Authority for the duty free shops. After following due procedure, the Assistant Commissioner, sanctioned the refund of service tax paid on the rent paid for running the duty free shops situated in the departure lounge of the International airports. 23. The Commissioner (Appeals) has recorded clear finding that the en .....

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Public Notice No. 154/2004 dated 22.07.2004 issued by the Customs, Chennai and Standing Order No. 3/2008 dated 03.03.2008 issued by the Mumbai, Customs which have considered the sale voucher issued by Duty free shop to be a shipping bill u/s 69, which substantiates that the goods sold at the duty free shops have to be considered as exports. It is not the case of the Department that the sales are to passengers travelling on domestic flights. The Commissioner (Appeal) has also recorded that it is admitted by the department in para 11(c) of the grounds of appeal that the goods were physically taken 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 direct nexus with the export sale being made by the Respondent. 25. Thus, we do not find any error in .....

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e would not disentitle the tax payer from claiming refund as held by the Hon'ble Bombay High Court in the case of Uttam Steel Ltd. v. Union of India - 2003 (158) E.L.T. 274. The Hon'ble High Court in the said decision while considering the rebate of duty under Rule 12 of the Central Excise Rules on export of goods had held as follows: 41. As stated hereinabove, right to rebate of duty accrues under Rule 12 on export of goods. That right is not obliterated if the application for rebate of duty is not filed within the period of limitation prescribed under Section 11B. In fact, Rule 12 of the Excise Rules empowers the Excise Authorities to grant rebate of duty even if some of the procedural requirements are not fulfilled. Even proviso(a) to Section 11B(2) clearly provides that in the case of rebate of duty, the rebated will be granted to the exporter even if the duty element is passed on by the exporter. Thus, under Section 11B, the amount of Excise duty is refunded to the exporter even if the duty element is passed on by the exporter." (ii) Convergys India Services P. Ltd. v. Commissioner of Service Tax, New Delhi - 2012 (25) S.T.R. 251; (iii) Balkrishna Textiles P. Ltd. .....

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