By TIOL News service

NEW DELHI , SEP 12, 2016: THIS is a Revenue appeal against the order of the CESTAT.

The adjudicating authority while rejecting the claim reasoned that services in respect of which input duty refund claim was made were included not with effect from 06.10.2007 (when the base notification i.e. 41/2007-ST was issued) but from later dates – substantial amounts claimed were related to Notification No.33/2008-ST dated 07.12.2008.

The CESTAT held that unless there is an express stipulation in the amendment of a legal notification that it would apply for exports prospectively, it is deemed to apply for exports effected in the past as well so long as they are after the base notification.

It is against this order that the Principal Commissioner of Service Tax is in appeal before the Delhi High Court.

The Revenue submitted that both the amending notifications clearly state that the amendment would come into force upon the date of publication in the Official Gazette. Inasmuch as the benefit of refund notifications was only in respect of services made after their publication. Reliance is placed on the decisions in Spice Telecom = 2006-TIOL-146-SC-CUS-LB and Jay Mahakali Rolling Mills = 2007-TIOL-139-SC-CX to emphasize that unless subsequent notification which amends an earlier exemption or inclusion contains a clear phrase pointing to the notification relating back, the courts would give effect to it only from the date of their publication or issuance.

The respondent assessee while supporting the order of the Tribunal placed reliance on the decisions in WNS Global Services (P) Ltd. = 2008-TIOL-228-CESTAT-MUM wherein identical fact situation was involved and the claim was granted and which order was confirmed by the High Court. The decision in Sesa Goa Ltd. = 2013-TIOL-2355-CESTAT-MUM was also relied upon.

The High Court observed –

+ The first notification No.40/2007-ST was issued on 17.09.2007. That notification spelt out four services. It was superseded by Notification No.41/2007-ST on 06.10.2007. Thus the base notification for the first time included 12 services. Subsequent notifications kept adding to the list – these included Notification No.3/2008 (19.02.2008), 17/2008 (01.04.2008) and 33/2008 (07.12.2008).

+ Significantly, both the base notifications superseded the earlier notification and saved only what was “done or omitted to be done before the supersession”. The tenor of the base notification is also discernible by words that “the Central Government on being satisfied that it is necessary in the public interest so to do, hereby exempts the taxable services specified in column (3) of the Schedule (hereinafter referred to as specified services) received by an exporter and used for export of goods (hereinafter referred to as said goods), from the whole of the service tax leviable thereon under section 66 and section 66A of the said Finance Act, subject to the conditions specified in the corresponding entry in column (4) of the Schedule."

+ It is quite apparent that the intent of the notification was only to save firstly what had been done or omitted to be done – in respect of the services that were included and secondly also to grant the benefit of the notifications of included services thereafter as is apparent from the use of the word “hereby”. This view gets support from the subsequent notifications – 17/2008-ST and 33/2008-ST both of which clearly state that they would come into force on the dates of their publication in the official gazette.

In the matter of the decisions cited by the respondent to support the order of the CESTAT, the High Court distinguished the same and noted –

+ The terms of notification in this case are such that it would rule out their clarificatory nature as is contended on behalf of the assessee. To say that notification is clarificatory, there should be something enunciated in the original or base notification itself.

+ Specific services relatable to export were included but not all. Others were included and notified on separate specific dates. In the circumstances, the assessee's contention that the subsequent notifications were merely clarificatory and must be held to relate back or apply from the date the base notification came into force, cannot be accepted. The CESTAT reasoning is, therefore, incorrect.

As for the submission that the adjudicating authority could not have increased the scope of remand, the High Court while negating this contention observed –

+ Having regard to the fact that exemption and refund applications are to be construed strictly and narrowly which has been dealt with [Refer Commissioner of Central Excise, New Delhi vs. Hari Chand ShriGopal -2010-TIOL-95-SC-CX-CB, it cannot be said that the adjudicating authority lacked primary jurisdiction merely because of a circumscribed demand as being contended by the assessee.

Holding that the impugned order cannot be sustained, the Revenue appeal was allowed.

(See 2016-TIOL-2069-HC-DEL-ST)