Service Tax Exemption Allowed Due to Substantial Compliance Despite Procedural Lapses

Acme Forgings Vs Commissioner of Central Excise and Service Tax (CESTAT Chandigarh)

In the case of Acme Forgings vs Commissioner of Central Excise and Service Tax, the appellant, an exporter registered under Service Tax, claimed exemption under Notification No. 42/2012-Service Tax dated 29.06.2012 and filed EXP-4 returns. The Revenue alleged non-compliance with several conditions of the notification, including failure to submit Form EXP-3 prior to availing exemption, non-submission of invoices, lack of original documents, and absence of certifications confirming that taxable services were received and used for export. Based on these allegations, a Show Cause Notice dated 10.06.2015 was issued, and the demand was confirmed by the original authority and upheld on appeal.

The appellant contended that they had exported goods and received services from an overseas commission agent against 52 export invoices, paid commission, and obtained bank realization certificates. They argued that the conditions under the notification were procedural and not mandatory, and that substantive benefits should not be denied for procedural lapses. Supporting documents, including bank certificates, invoice statements, account statements, and a Chartered Accountant’s certificate confirming commission payments, were submitted.

Upon hearing both sides and examining the records, the Tribunal found that the export of goods and realization of proceeds were undisputed. It was also established that commission payments to the foreign agent were duly made and certified. The Tribunal noted that Form EXP-3 had been filed and submitted to the appellate authority, and that original invoices, certifications of service usage for export, bank advices, and agreements with the overseas agent were provided. It also found that the commission paid was below 10% of the FOB value, contrary to the allegation in the Show Cause Notice.