By Puloma Dalal, Jayesh Gogri, Chartered Accountants
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Liberal interpretation to be given to notification no. 41/2007-ST dated 06/10/2007 which grants refund of CENVAT Credit on input services used while exporting goods. The revenue authorities cannot be allowed to approbate and reprobate on the same issue with reference to different assessees.
Facts:
The department rejected refund claim of CENVAT credit in respect of input services; viz. inland haulage charges, terminal handling charges, bill of lading charges, processing fee, terminal services, movement charges in port etc. used for export of goods vide Notification No.41/2007-ST dated 06/10/2007. The appellants contended that the service recipient cannot change the classification of the service provided by the service provider. Further, as long as the description of service is covered within the said notification, refund should be available. Further, the appellants referred to the Larger Bench decision in case of Western Agencies 2011 (22) STR 305 (Tri.-LB) and contended that all services rendered within the port area would be considered as port services. The department contested that though the opening paragraph expressly did not mention about classification under the Finance Act, 1994, it is obvious that the description should match with classification of service and that in the present case, the services were not port services since prior to amendment made by the Finance Act, 2010, only services which were performed in the port area by a person authorised by port authorities, were classifiable as port services. Further, the decision of the Larger Bench in case of Western Agencies (supra) is stayed by the Madras High Court and therefore, the judgment could not be relied upon.
Held:
The classification of services cannot be changed by service recipient. There is a serious lacuna in the said notification and missing words cannot be supplied by anyone interpreting the provisions.
The expression “port services”, though was available, the draftman did not insert such expression in the notification and therefore, the expression actually used should be interpreted. The Government intended to include all services rendered in port area as “port services” as is evident from amendment through the Finance Act, 2010. Though the amendment was prospective, the Notification No.41/2007-ST dated 06/10/2007 being beneficial notification for granting refund of tax when the goods are exported, liberal interpretation should be given. Revenue advanced arguments with respect to interpretation of “port services” prior to the introduction of the Finance Act, 2010, which were exactly opposite to the arguments canvassed in case of Western Agencies Pvt. Ltd. which cannot be allowed and therefore, the appeals were allowed.
