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Refund of Service Tax (Export of Service)

Sameer (.) (252 Points)

09 March 2010

If a person Exports a service on payment of service tax (and also recovers the service tax from foreign customer/client etc.) (i.e. Value of Service + Service Tax )

a) In above case whether the person is eligible to get refund of service tax which he had already recovered from
(foreign customer/client ).

b) Whether provision of Unjust Enrichment apply to above Refund ? if claimed from department. ?

c) And What about Excise duty (Goods Exported on payment of duty, and the duty is recovered from customer )

In above cases the person who is exporting the services/goods is bringing Foreign Currency (for service tax part also !) and has also deposited the same with the Govt.!

Need your comments.

Regards
Sameer

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4 Replies

Sameer (.) (252 Points)
Replied 11 March 2010

can anybody please reply.. ?

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Jeevesh Mehta (Advocate- Corporate Commercial & Indirect Tax Advisory) (861 Points)
Replied 11 March 2010

Dear Sameer,

Under export of services, an exporter is not liable to pay service tax. In the situation mentioned by you, the exporter has recovered the service tax part from the service receiver abroad and has paid the same to the department. now if he wants to file a refund claim for the ST paid, doctrine of unjust enrichment would deffinatly be applied. But we have seen certain situations where the party has given a declaration/undertaking to the department along with refund claim that they would return back the Service Tax part to the customer abroad as soon as refund is passed by the department.

It is right that the service provider is bringing the foreign currency to the nation but the department can not allow you to take the undue benefit out of it. Department have also said in certain cases that nothing has gone out of your pocket, so whats the need of refund. In case the foreign party demands for the ST part back from you then you can file refund/ rebate along with the undertaking.

You may also refer Notification no. 11/2005 ST which talks about rebate of service tax paid on exports.

Hope this would clarify your doubts.

Regards

Sameer (.) (252 Points)
Replied 12 March 2010

Jeevesh Ji,

Regarding Provisions of Unjust Enrichment.. I rely on the follwing para of Section 11B (of C.E. Act 1944) (Section 11B sub-section 2 (a)

Relevant protion of this section appended below : -

(2) If, on receipt of any such application, the [Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise] is satisfied that the whole or any part of the duty of excise paid by the applicant is refundable, he may make an order accordingly and the amount so determined shall be credited to the Fund : Provided that the amount of duty of excise as determined by the [Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise] under the foregoing provisions of this sub-section shall, instead of being credited to the Fund, be paid to the applicant, if such amount is relatable to - (a) rebate of duty of excise on excisable goods exported out of India or on excisable materials used in the manufacture of goods which are exported out of India;

In above sub section 2 (a) of section 11B of C.E. Act, 1944, there is no such requirement that incidence of duty has to be borne by the Exporter etc. Can you please through some light please.

Regards

Sameer