Service Tax refund on transportation charges cannot be denied for non-production of lorry receipts

Raj Petro Specialties Ltd Vs Commissioner of GST & Central Excise (CESTAT Chennai) 

Introduction: This article delves into a significant order by CESTAT Chennai in the case of Raj Petro Specialties Ltd vs. Commissioner of GST & Central Excise. The dispute revolves around the rejection of a service tax refund claim for transportation charges due to the non-production of lorry receipts. CESTAT Chennai, considering a Chartered Accountant’s certificate, challenges the procedural infraction and allows the service tax refund.

Detailed Analysis: The appellant, engaged in manufacturing goods under Chapter 27 of CETA, 1985, exported their products and sought a service tax refund under Notification No.17/2009-ST. While certain services were approved for refund, transportation charges from the factory to the port faced rejection. The rejection was upheld by the Commissioner (Appeals), prompting the appellant to appeal before CESTAT Chennai.

The heart of the matter lies in the conditions specified under Sl.No.6 of the Notification. The appellant failed to produce lorry receipts detailing the invoice/shipping bill information, a procedural requirement under the notification. Instead, they submitted a Chartered Accountant’s certificate, certifying the correlation between transportation charges and shipping bills.

The appellant relied on a Board’s circular (No.120/01/2010 -ST) to argue that a one-to-one correlation could be established through a Chartered Accountant certificate. However, the adjudicating authority rejected this argument, prioritizing the notification over the circular. The appellant contested, emphasizing the binding nature of the Board’s circular and its issuance to address challenges faced by exporters in obtaining lorry receipts.

The show cause notice itself provided details of transportation charges, and the appellant argued that, since the department did not dispute these payments, rejecting the refund claim based on the non-production of lorry receipts amounted to a procedural infraction.

CESTAT Chennai, after considering the evidence and facts, held that the rejection of the refund claim on procedural grounds was unjustified. The non-production of lorry receipts was deemed a procedural infraction, and the appellant’s substantive right to claim a refund could not be denied. The order set aside the impugned decision, allowing the appeals with consequential relief.

Conclusion: CESTAT Chennai’s decision sets a precedent by allowing a service tax refund based on a Chartered Accountant’s certificate in lieu of lorry receipts, emphasizing the procedural nature of the infraction. This ruling highlights the importance of substantive rights over procedural lapses, providing clarity on the admissibility of refund claims. The case underscores the need for a balanced approach in considering procedural compliance, especially when alternative evidence, such as a CA’s certificate, establishes the correlation between services availed and charges paid.

FULL TEXT OF THE CESTAT CHENNAI ORDER

Brief facts are that the appellant is engaged in the manufacture of goods falling under Chapter 27 of CETA, 1985. They exported their goods and utilized certain services and claimed refund of service tax paid under the Notification No.17/2009-ST dt. 7.7.2009. The authorities below sanctioned the refund claim in respect of certain services however, rejected the refund claim in respect of transportation charges claimed by the appellant from the factory to the port utilized for export of goods. Against such order, the appellant filed appeals before Commissioner (Appeals) who vide order impugned herein upheld the rejection of refund claim. Aggrieved, the appellant is now before the Tribunal.

2. Ld. Counsel Sri Bharat R. Srinvas appeared and argued the matter. It is submitted that as per Notification No.17/2009-ST dt. 7.7.2009 the table provides the conditions to be satisfied. As per Sl.No.6 of the Table the following conditions have to be satisfied:

TABLE

3. The appellant was not able to furnish lorry receipts giving the details of Invoice/Shipping bill issued by the However, they had furnished Chartered Accountant’s certificate relating to shipping bills for the transportation services availed by them for export of the goods.

4. Ld. Counsel adverted to the Board’s circular No.120/01/2010 -ST dt. 19.1.2020 to argue that one-to-one correlation of the services availed can be established by producing a Chartered Accountant certificate. In the present case, the appellant has furnished Chartered Accountant certificate wherein the shipping bills as well as transportation charges have been given in detail. The adjudicating authority has refused to apply Board’s circular and has held that the notification prevails over the Board’s circular. It is submitted that the Board’s circular is binding on the department. The said clarification is issued due to the difficulties faced by the exporters in obtaining lorry receipts from transporters and for complying with the conditions of the notification strictly.

5. Ld. counsel also adverted to the Annexure to the show cause notice and submitted that in the SCN itself the department has given the details of the transportation charges. When the department does not dispute the utilization of the services or the payment of transportation charges, the refund claim ought not to have been denied on a procedural aspect of not producing the lorry receipts. It is submitted that in the appellant’s own case for an earlier period, the Commissioner (Appeals) on identical issue had held that the infraction being procedural in nature, the refund claim cannot be rejected.

6. Ld. A.R Sri M. Ambe appeared and argued for the Department. The condition of the notification was asserted by the Ld. A.R to argue that as the lorry receipts have not been produced by the appellant, refund has been rightly rejected. The findings by the original authority was reiterated by the Ld.A.R.

7. Heard both sides.

8. The issue that arises for consideration is whether the rejection of refund claim by the authorities below for the reason that the appellant has not complied with the condition in Notification No.17/2009-ST dt. 7.7.2009 is legal and proper.

9. From the facts narrated above, we find that the department has given the details of the transportation charges in the SCN The appellant has also furnished a Chartered Accountant certificate certifying the correlation with the transportation charges as well as the shipping bills. There is no dispute that these charges were paid by the appellant for export of goods. The non-production of lorry receipts is only a procedural infraction for which the substantive right of refund claim cannot be rejected.

10. In the appellant’s own case, the Commissioner (Appeals) for a different period has allowed the refund claim observing that the non- production of lorry receipt is a procedural infraction and that when the appellant as furnished Charted Accountant certificate, the same has to be accepted. The department cannot take a different view in similar situation of the same appellant for a different period.

11. After appreciating the facts and evidence placed before us, we are of the considered opinion that the rejection of refund claim on procedural grounds cannot be justified. We hold that the appellant is eligible for refund. The impugned order is set aside and the appeals are allowed with consequential relief, if any.

(Dictated and pronounced in court)