Bonai Industrial Company Limited Vs Commissioner of CGST & CX, Rourkela Commissionerate (CESTAT Kolkata)
Summary: The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Kolkata, in Bonai Industrial Company Limited Vs Commissioner of CGST & CX, Rourkela Commissionerate, allowed five connected appeals concerning the refund of Swachh Bharat Cess (SBC) and Krishi Kalyan Cess (KKC) paid on taxable services used for the export of goods. The appellants, exporters of iron ore fines, had claimed refund of service tax together with SBC and KKC under Notification No. 41/2012-ST. The original adjudicating authority, after examining the relevant documents and statutory provisions, sanctioned the refund including both cesses. However, the Department challenged the sanction on the ground that SBC and KKC were separate cesses rather than service tax itself. The Commissioner (Appeals) accepted the Department’s contention and denied the refund of the cesses, resulting in the present appeals before the Tribunal.
The appeals involved Bonai Industrial Company Limited, Feegrade & Company Private Limited and Rungta Sons Private Limited. Since all five appeals raised the same legal issue, the Tribunal disposed of them by a common order. The controversy was whether the expression service tax paid on services used for export, appearing in Notification No. 41/2012-ST dated 29 June 2012, covered SBC and KKC, notwithstanding their separate statutory nomenclature. The Department maintained that the notification permitted refund of service tax alone and that cesses levied under separate Finance Acts did not automatically qualify for the refund. The appellants contended that the governing legislation expressly treated the cesses as service tax and extended the relevant refund provisions to those levies.
The appellants relied upon the earlier decision of the Kolkata Bench in MMTC Ltd. Vs Commissioner of CGST & CX, Bhubaneswar Commissionerate, reported as 2023-VIL-1047-CESTAT-KOL-ST, decided through Final Order Nos. 77722-77731/2023 dated 17 October 2023. In that decision, the Tribunal had held that exporters were entitled to refunds of service tax together with SBC and KKC paid on services utilised for export of goods. The appellants submitted that their dispute was identical and that the earlier judgment directly governed the present appeals. The Departmental Representative supported the appellate orders denying the refund but did not establish any material distinction from the earlier decision.
The Tribunal examined the reasoning adopted in MMTC Ltd., particularly Section 119 of the Finance Act, 2015, governing SBC, and Section 161 of the Finance Act, 2016, governing KKC. The earlier decision had observed that subsection (2) of these provisions described the respective cesses as service tax. Further, subsection (5) extended the applicable provisions of the Finance Act, 1994, including those relating to refunds, to the cesses. Consequently, the Tribunal held that the statutory scheme did not permit the cesses to be excluded from refund merely because they were separately designated as SBC and KKC.
The precedent also considered the mechanism for granting refund or rebate under Notification No. 41/2012-ST, issued under Section 93A of the Finance Act, 1994. The notification provided relief in respect of service tax paid on taxable services used for export of goods. Since SBC and KKC had been treated as service tax for the relevant statutory purposes, their refund was considered permissible under the same notification. The Tribunal further examined the Government’s established policy of avoiding the export of taxes. It observed that denying refund of cesses treated by legislation as service tax would undermine that policy and produce an interpretation inconsistent with the statutory provisions.
The earlier judgment additionally considered the subsequent amendments to notifications governing the export of services and supplies to Special Economic Zones. Notification No. 39/2012-ST and Notification No. 12/2013-ST had been amended through notifications issued in 2016 to expressly cover refunds of SBC and KKC. The Tribunal distinguished the position under Notification No. 41/2012-ST, holding that the statutory treatment of SBC and KKC as service tax already supported the refund of those cesses for services used in export of goods. Therefore, a corresponding amendment to Notification No. 41/2012-ST was not considered necessary.
Applying the ratio of MMTC Ltd., the CESTAT Kolkata held that the issue in the five appeals was identical to the issue already decided by the coordinate Bench. The Tribunal accordingly allowed all five appeals with consequential relief, if any, as per law. The order establishes that, for the refund claims considered under Notification No. 41/2012-ST, SBC and KKC could not be excluded merely because they were called cesses. The decision is relevant to legacy service-tax refund disputes concerning exporters of goods, particularly where the Department has distinguished SBC and KKC from service tax despite the express statutory provisions governing their levy and refund.
Cases Discussed
1. MMTC Ltd. Vs Commissioner of CGST & CX, Bhubaneswar Commissionerate (CESTAT Kolkata); 2023-VIL-1047-CESTAT-KOL-ST; Final Order Nos. 77722-77731/2023; 17/10/2023. Directly relied upon by the Tribunal. The earlier decision held that SBC and KKC were refundable together with service tax paid on services used for export of goods under Notification No. 41/2012-ST. It examined Sections 119 and 161 of the Finance Acts, 2015 and 2016, respectively, and the statutory provisions governing refund. The decision is discussed in the TaxGuru article SBC and KKC Qualify as Service Tax for Export Refunds: CESTAT Kolkata.
FULL TEXT OF THE ORDER OF CESTAT KOLKATA
The Appellants are exporters of iron ore fines. They have claimed the refund of Service Tax along with Swatch Bharat Cess (“SBC”) and Krishi Kalyan Cess (“KKC”) paid by them. The refund claim was filed in terms of Notification No.41/2012-ST. The Adjudicating authority after verifying all the documents and citing the relevant statutory provisions granted the refund of Service Tax inclusive of SBC and KKC. Being aggrieved, the Department has filed Appeal before the Commissioner(Appeals) on the ground that the Appellant is not eligible for getting the refund of SBC and KKC since they are not the Service Tax per se, but they are actually cesses paid by the Appellant. The Commissioner(Appeals) has allowed their Appeal. Being aggrieved, the Appellant is before the Tribunal.
2. The Ld.Advocate for the Appellants submits that the issue is no more res integra. An identical issue had come up before this Bench in the case of MMTC Ltd. vs. Commissioner of CGST & CX, Bhubaneswar Commissionerate [2023-VIL-1047-CESTAT-KOL-ST]. This Bench vide Final Order No.77722-77731/2023 dated 17.10.2023 has held that the exporter would be eligible for refund of the Service Tax along with SBC and KKC paid by them for the services utilized by the exporter. Relying on this case law, he submits that in the present case, as the issue is identical prays that the present Appeal may be allowed.
3. The Ld.AR for the Department reiterates the findings of the Ld.Commissioner(Appeals) and justifies the rejection of refund on account of SBC and KKC.
4. Heard both sides and perused the documents and the relied upon case law.
5. It is seen from the decision of this Bench in the case of MMTC Ltd. cited (supra) that the issue is identical. This Bench has held as under:-
“11. Now dealing with the case in hand, we find that Notification No.41/2012-ST is clearly stating grant of refund of service tax paid on services used for export of goods and sub-section (2) of section 119 of Finance Act, 2015 and sub-section (2) of section 161 of the Finance act, 2016 clearly stipulate SBC and KKC as service tax respectively; that sub-section (5) of section 119 of the Finance Act, 2015, and subsection (5) of the section 161 of the Finance Act, 2016 also stipulate that all provisions relates to refund of service tax under Finance Act, 1994 shall be applicable to refund of SBC & KKC. Therefore, we find that the said provisions were not taken into consideration by the authorities below.
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17. We also find that Section 119(1) of the Finance Act, 2015 stipulated that SBC shall be levied from the date as notified by the Central Government and the Central Government issued Notification No.22/2015-ST dated 06.11.2015 under Section 93(1) of the Act and fixed rate of SBC @ 0.5% of the value of taxable services.
18. It is very clear that SBC has been levied as Service Tax only as has been stated to in Section 119(2) of the Finance Act, 2015 and the rate of SBC @ 2% of value of taxable services proposed under the Finance Act, 2015 has been reduced to @ 0.5% of value of taxable services vide Notification issued under Section 93(1) of the Finance Act, 1994 which enables Central Government to grant exemption from Service Tax. Therefore, we are of the considered view that SBC has been given status of Service Tax levied under the Finance Act, 1994 for the purpose of refund/rebate.
19. In view of discussions held above, we also find ample force in the arguments of the Appellant that SBC & KKC though called cess but have been given status of Service Tax as is evident from Section 119(2) & Section 119(5) of the Finance Act, 2015 and Section 16(2) & 161(5) of the Finance Act, 2016 respectively.
20. We find it is settled position that the Government of India has consistently adopted policy not to export taxes. If the contention of the lower adjudicating authority is accepted then refund of SBC & KKC, even if imposed as Service Tax vide Section 119(2) of Finance Act, 2015 and vide Section 161(2) of Finance Act, 2016, shall not be allowed, which will mean that intention of legislation is to export taxes and the stated policy of the Government shall be reversed by such an interpretation. It is settled position of law that any provision of law cannot be interpreted in such a way to make other provisions of law meaningless or to reverse the intention of legislation.
21. We find that Notification No.41/2012-ST dated 29.06.2012 has been issued under Section 93A of the Act which gives Central Government power to grant rebate. The said Notification No.41/2012-ST grants refund of service tax paid on the taxable services used for export of goods by an exporter. Since SBC & KKC, both have been treated as service tax, as discussed above, the rebate of SBC & KKC is allowable under the above Notification.
22. We also find that Notifications No.39/2012-ST dated 20.12.2012 granting refund of service tax paid on services used in providing export of services has been amended vide Notification No.3/2016-ST dated 03.02.2016 and Notification No.29/2016-ST dated 26.05.2016, so as to allow refund of SBC and KKC; similarly, Notification No.12/2013-ST dated 01.07.2013 allowing refund of service tax paid on specified services used in SEZ has also been amended vide Notification No.2/2016-ST dated 03.02.2016 and Notification No.30/2016-ST dated 26.05.2016, so as to allow refund of SBC & KKC, however no such amendment has been made in Notification No.41/2012-ST dated 29.06.2012 because no amendment is required as explained below :-
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27. In view of the above factual & legal position, we set aside the impugned orders and allow all the Appeals with consequential relief, if any.”
[Emphasis supplied]
6. Following the ratio of the above case law, I allow the appeals with consequential relief, if any, as per law.
(Dictated and pronounced in the open Court.)
