By TIOL News Service

NEW DELHI, FEB 27, 2018: THE appellants exported goods and filed refund claims under Notification No. 41/2007-ST dt. 06.10.2007 in respect of the service tax paid on various services used in the export of goods.

Refunds were disallowed on the ground that the goods have been exported under drawback claim and hence in terms of the proviso 1(e) of the Notification No. 41/2007-ST , refund is not allowable.

The appellants are before the CESTAT and submit that the condition regarding availment of drawback stands deleted vide Notification No. 33/2008-ST w.e.f. 07.12.2008 and there can be no objection to grant of refund subsequent to that date. Inasmuch as by this notification, in paragraph 1, in the proviso, sub-paragraph (e) was omitted.

It is further contended that the amendment is to be considered as clarificatory in nature and benefit of refund should be extended even to the period prior to the amendment. Reliance is placed on the decision in Orient Craft Limited - 2017-TIOL-2196-Tri-CHD in which the refund claim under Notification No. 41/2007 has been allowed even in respect of cases where drawback has been claimed. In this case, the Single Member Bench had referred to the clarification given by Directorate of Drawback, Ministry of Finance in which it is stated that the refund claim cannot be denied simply on the basis that the drawback has been claimed, since in terms of the Drawback Rules, it is granted only in respect of input services used in the manufacture of goods and the services which were used by the appellants for export of the goods does not form part of the drawback claim.

The AR, while contesting the submissions made by the appellant pointed out that the said decision has been passed by a Single Member Bench and refunds cannot be allowed in view of the decision in Rajasthan Textile Mills & Others - 2016-TIOL-1228-CESTAT-DEL.

The Bench observed -

++ We note that the refund claims in question cover the period partly prior to 07.12.2008 and part of the claims are for the period subsequent to the date. After the amendment of Notification No. 41/2007 by Notification No. 33/2008, the condition regarding drawback availment has been deleted and there can be no objection to grant of such refund subsequent to that date if otherwise allowable.

++ For the period prior to such amendment by Notification No. 33/2008, the condition under Notification is very clear to the effect that the refund under the Notification cannot be paid if said goods have been exported under claim of drawback of service tax paid. After referring to the decision of the Division Bench in the case of Rajasthan Textile Mills (supra), we note that such refund claims cannot be sanctioned.

++ By following the decision of the Division Bench of the Tribunal (supra), we are of the view that refund for the period prior to the amendment by Notification No. 33/2008 cannot be sanctioned and we order so.

Nonetheless, the cases were remanded to the adjudicating authority for purposes of bifurcating the refund and considering the refund for the period subsequent to the date of such amendment.

(See 2018-TIOL-671-CESTAT-DEL)