Classification of service cannot be changed in the hands of the recipient

CESTAT, NEW DELHI BENCH

Max India Ltd.

Versus

Commissioner of Central Excise, Chandigarh

FINAL ORDER NOS. 771-772/2012-SM-(BR)(PB)
APPEAL NOS. ST/1337-1338/2011-SM (BR)

JUNE  5, 2012

ORDER

1. The appellants are manufacturers of excisable goods. They export goods manufactured by them. They take benefit of Cenvat Credit Rules, 2004, for taking credit of input services used in exporting goods. For the periods April, 09 to June, 09 and July, 09 to Sep., 09 they filed a refund claim in respect of input credit on services utilized for export of goods as per provisions of Notification 41/2007-S.T., dated 6-10-2007. Their claim was sanctioned in respect of a few input services but amounts of Rs. 65020/- and Rs. 3738/- were rejected. The two appeals being decided are in respect of such credit for the two different quarters as stated above.

2. Refund is rejected in respect of the following services :

3. Aggrieved by the order of the lower authorities rejecting refunds of Service tax credit for such charges amounting to Rs. 65020/- and Rs. 3738/- the appellants have filed this appeal.

4. The Counsel for appellant submits that these amounts are refundable to them as per provisions of entry at S. No. 2 and S. No. 6 of the Table to the Notification No. 41/2007-S.T. Before recording further submissions in this regard it is necessary to reproduce the relevant portions of the Notification as below :

In exercise of the powers conferred by sub-section (1) of section 93 of the Finance Act, 1994 (32 of 1994) and in supersession of the Notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 40/2007-Service Tax, dated the 17th September, 2007 which was published in the Gazette of India, Extraordinary, vide number G.S.R. 601(E), dated the 17th September, 2007, except as respects things done or omitted to be done before such supersession, 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 :

5. The first argument is that the impugned services were provided by M/s. MSC Mediterranean Shipping Company, Ludhiana, who were registered for rendering Port Services and were issuing bills for service rendered classifying the same as Port services. So it is argued that the classification of service cannot be changed at recipient’s end.

6. The next argument of the appellant is that the opening paragraph of the Notification does not make any reference to Column (2) in the Table. So while granting refund under the said exemption it cannot be insisted that the service should fall under the classification indicated in Column (2) of the Table. All what is required is that the services should fit into the description given in Column (3). They contend that there cannot be any dispute that the input services in question where used for exported goods.

7. The next argument is that as per the decision of the Larger Bench of the Tribunal in the case of Western Agencies(P.) Ltd. v. CCE [2011] 31 STT 498  all services rendered within the port area are to be considered as port services classifiable in entry at Section 65(105)(zn). So if the ratio of the said decision is adopted then also they are eligible for the refund of the impugned amounts.

8. The Ld. AR for Revenue argues that refund can be claimed only for services which are classifiable under taxable service in section 65(105)(zn) specified under S. No. 2 of the Table in the Notification. Though Column Number (2) is not mentioned in the opening paragraph it is obvious that the description of the service as indicated in Column (3) matches the classification in Column (2) and therefore it is implied that refund is to be granted only for port services classifiable under entry 65(105)(zn). It is the contention of the AR that the impugned services are not so classifiable. The contention is that only those services which are done in the port area by persons authorized by Port Authorities were classifiable under the said heading prior to 1-7-2010 when the entry itself was amended.

9. The ld A. R. also contests that the decision of the Larger Bench of the Tribunal in Western Agencies(P.) Ltd. (supra) has been stayed by Hon’ble Madras High Court as reported in 2011 (24) S.T.R. J50 (Mad.) and hence reliance cannot be placed on the said judgment.

10. I have considered argument on both sides.

11. The first argument that classification of service cannot be changed in the hands of the recipient, by itself is good enough to allow this appeal. Further I note that there is no reference in the opening paragraph to the classification as indicated in column (2) of the Table in the Notification. This appears to be a serious lacuna. But such missing words cannot be supplied by anyone interpreting the provisions. Secondly the description in Column (3) of the Table is “Services provided for export of said goods”. The expression “port services” was known to the persons drafting the notification because such expression is used in taxable entry. That has not been used. So the situation has to be judged with reference to the expression actually used. Further the Government has amended by Finance Act, 2010 the definitions in section 65(105)(zn) to cover any service rendered in port area which shows the intention of the Government in this regard. While such amendments may operate only prospectively to cause liabilities to assessees, in the case of a beneficial Notification like 41/2007-S.T. for granting refund of tax incidence on goods exported, the matter needs to be interpreted more liberally. I also note that the argument raised by Revenue in para 8 above is diametrically opposite to the argument canvassed by Revenue in the case of Western Agencies(P.) Ltd. (supra). Revenue cannot be allowed to approbate and reprobate on the same issue though with reference to different parties.

12. Having regard to all the facts and legal position as above I hold that the appellants are eligible for refunds of the impugned credit.

13. The appeals are allowed accordingly.

NF