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R. Kumar, B.Com. MBA (Finance)


Notification No. 12/2005-ST was issued on 19.04.2005. The notification stated that there will be granted rebate of the whole of the duty paid on excisable inputs or the whole of the service tax and cess paid on all taxable input services used in providing taxable service exported out of India (to countries other than Nepal and Bhutan), “subject to the conditions, limitations and procedures specified” therein. Paragraph 3 prescribed the procedure. This paragraph is reproduced as under:-

3.1 Filing of declaration. – The provider of taxable service to be exported shall, prior to date of export of taxable service, file a declaration with the jurisdictional Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise, as the case may be, describing the taxable service intended to be exported with,-


description, quantity, value, rate of duty and the amount of duty payable on inputs actually required to be used in providing taxable service to be exported;


description, value and the amount of service tax and cess payable on input services actually required to be used in providing taxable service to be exported.

 Same can be explained with the help of example:-

Let’s take an example of bicycles manufacturer-exporter. The point of time when the export of bicycles is made is clearly demarcated and known. The export order is executed; the bicycles are manufactured and packed. They are ready for export. The process of export commences with the filing of the shipping bill.

The exporter can now comply with the procedure laid down in paragraph 3 of the notification prior to that date. The export is of physical goods; each export is under a separate shipping bill and it is easy to determine the point of time of commencement and termination of the export. Even in the case of a 100% export-oriented unit, every shipping bill is a separate export. It is also in such a case possible to describe, quantify and value the rate of duty and the amount of duty payable on inputs actually utilised in such exports under clause (a) of paragraph 3.1 of the notification. A one-to-one matching of such inputs with the exported products is possible without much of a problem. The inputs in the example given above would be steel, aluminium, rubber, plastic etc., and it is possible to even standardise, by adopting suitable costing methods, and determine the quantity, value, rate etc., of these inputs required to manufacture a single unit of bicycle. By a process of multiplication depending upon the number of bicycles exported, it is possible to determine the figures for the entire lot of bicycles kept ready for export.


Wipro Ltd. versus Union of India (Delhi High Court) – CEAC NO. 16 OF 2012, Date of Pronouncement – 13.02.2013

The services rendered by the Wipro in its BPO centre are considered exported. Thus every phone call is an export of taxable service. But the bills and invoices in respect of the input-services would in the normal course be received by the BPO centre only at regular intervals, say once in a month or fifteen days etc., depending upon the arrangement which it has with those service-providers. In a call centre where there are hundreds of employees attending to calls from abroad at any given point of time, it is next to impossible to anticipate the date of export and with precision demarcate the point of time prior to the export and also determine the point of time when the export may be said to have been completed. What can be the determining factor? Is each call to be considered as an independent export of taxable services? Is the total number of calls attended to on any particular day to be considered as the export of taxable services? Or is the BPO centre to reckon the calls on a monthly basis? It needs also to be remembered that there is no way of anticipating any call or the number of calls the call centre would be required to attend on a single day, so that the BPO centre can comply with the requirement of filing a declaration “prior” to the date of export of taxable service. The very bedrock of the business is the attending of calls and given that they are received on a continuous basis, it is difficult to conceive of any possibility as to how the BPO center could not only determine the date of export but also anticipate the call so that the declaration could be filed “prior” to the date of export. In addition to this practically impossible situation, the Wipro is also required by the procedure laid out in paragraph 3 of the notification to describe, value and specify the amount of service tax and cess payable on input services actually required to be used in providing taxable service to be exported. With the possible exception of the description, unable to appreciate how the service-exporter will be in a position to value and specify the amount of service tax/cess payable on the input services actually required to be used in providing the exported service.

Tribunal Observations:-

All the lower authorities, including the CESTAT, are unanimous in their view that the requirement, though one of procedure, is nevertheless inflexible as it is conceived with a view to preventing the evasion of service tax and dispensing with the same would deprive the service tax authorities from carrying out the necessary preventive and audit-checks. The correctness of this view, as a broad proposition, need not be decided in this case. An estimate is ruled out by the use of the word “actually required”; and unless what was actually required is known, it is impossible to value and specify the amount of service tax or cess payable on the input services. That will be known only when the bill or invoice for the input-services is received by the Wipro. The bill or invoice is received after the calls are attended to. Thus, it seems that in the very nature of things, and considering the peculiar features of the BPO’s business, it is difficult to comply with the requirement “prior” to the date of the export.

This decision rests on the facts of the case and on the peculiar nature of the business of the assessee and the broader question whether the requirement of para 3 of the Notification No.12/2005-ST dated 19/04/2005 is merely procedural and hence directory or is substantive and hence mandatory was not decided.

Final Verdict/Judgement:-

Tribunal allows the appeal and directed to the respondent to allow the rebate claims.


Sometime question arises whether service provider should pay the service tax and claim rebate of the same under Notification No. 11/2005 or it should make claim of service tax in form of rebate of service tax paid on input services and/or credit of excise duty paid on inputs used for providing taxable exported services under Notification No.12/2005 or refund of service tax paid on input services and/or credit of excise duty paid on inputs used for providing taxable services or manufacture of final product which is exported under  Notification No. 5/2006.

It is advised not to firstly pay service tax on export of services and then claim rebate under Notification No.11/2005. However, if the exporter of taxable service has paid service tax on the taxable service exported to the Government then the only option available would be to claim rebate under Notification No.11/2005.

The next question arises is whether it should apply for rebate under Notification No. 12/2005 or refund under Notification No.5/2006. In case, the provider of output service is to discharge service tax liability then the better option would be to claim refund under Notification No. 5/2006 dated 14.03.2006. This happen on account of the fact that as per Notification No. 5/2006 the provider of output service can firstly utilize the CENVAT Credit towards payment of output tax liability and subsequently claim the refund of the balance CENVAT Credit available with him. Whereas under Notification No.12/2005 this facility has not been provided and there is a condition that the CENVAT Credit in respect of inputs or input services should not have been availed.

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June 2024