Rba Exports Ltd vs Cst Ch - I
- Court
- Customs, Excise and Service Tax Appellate Tribunal
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
CHENNAI
REGIONAL BENCH - COURT No. I
Service Tax Appeal No. 42111 of 2016
(Arising out of Order in Appeal No. 147-150/2016 (CXA-II), dated 29.07.2016 passed by
the Commissioner of Central Excise (Appeals I), 26/1, Mahatma Gandhi Marg,
Nungambakkam, Chennai 600 034).
M/s. RBA Exports Ltd. ...Appellant
Plot No.56-61, EPIP, SIPCOT Industrial Estate
Gummidipoondi 601 201
Versus
Commissioner of GST & Central Excise ...Respondent
Newry Towers, No.2054, I Block
th
II Avenue, 12 Main Road
Anna Nagar, Chennai 600 040
WITH
Service Tax Appeal No. 42112 of 2016
(Arising out of Order in Appeal No. 147-150/2016 (CXA-II), dated 29.07.2016 passed by
the Commissioner of Central Excise (Appeals I), 26/1, Mahatma Gandhi Marg,
Nungambakkam, Chennai 600 034).
M/s. RBA Exports Ltd. ...Appellant
Plot No.56-61, EPIP, SIPCOT Industrial Estate
Gummidipoondi 601 201
Versus
Commissioner of GST & Central Excise ...Respondent
Newry Towers, No.2054, I Block
th
II Avenue, 12 Main Road
Anna Nagar, Chennai 600 040
WITH
2
Service Tax Appeal No. 42113 of 2016
(Arising out of Order in Appeal No. 147-150/2016 (CXA-II), dated 29.07.2016 passed by
the Commissioner of Central Excise (Appeals I), 26/1, Mahatma Gandhi Marg,
Nungambakkam, Chennai 600 034).
M/s. RBA Exports Ltd. ...Appellant
Plot No.56-61, EPIP, SIPCOT Industrial Estate
Gummidipoondi 601 201
Versus
Commissioner of GST & Central Excise ...Respondent
Newry Towers, No.2054, I Block
th
II Avenue, 12 Main Road
Anna Nagar, Chennai 600 040
WITH
Service Tax Appeal No. 42114 of 2016
(Arising out of Order in Appeal No. 147-150/2016 (CXA-II), dated 29.07.2016 passed by
the Commissioner of Central Excise (Appeals I), 26/1, Mahatma Gandhi Marg,
Nungambakkam, Chennai 600 034).
M/s. RBA Exports Ltd. ...Appellant
Plot No.56-61, EPIP, SIPCOT Industrial Estate
Gummidipoondi 601 201
Versus
Commissioner of GST & Central Excise ...Respondent
Newry Towers, No.2054, I Block
th
II Avenue, 12 Main Road
Anna Nagar, Chennai 600 040
WITH
Service Tax Appeal No. 41066 of 2017
(Arising out of Order in Appeal No. 39 to 46/2016 (CXA-II), dated 16.02.2017 passed by
the Commissioner of Central Excise (Appeals I), 26/1, Mahatma Gandhi Marg,
Nungambakkam, Chennai 600 034).
M/s. RBA Exports Ltd. ...Appellant
Plot No.56-61, EPIP, SIPCOT Industrial Estate
Gummidipoondi 601 201
3
Versus
Commissioner of GST & Central Excise ...Respondent
Newry Towers, No.2054, I Block
th
II Avenue, 12 Main Road
Anna Nagar, Chennai 600 040
WITH
Service Tax Appeal No. 41067 of 2017
(Arising out of Order in Appeal No. 39 to 46/2016 (CXA-II), dated 16.02.2017 passed by
the Commissioner of Central Excise (Appeals I), 26/1, Mahatma Gandhi Marg,
Nungambakkam, Chennai 600 034).
M/s. RBA Exports Ltd. ...Appellant
Plot No.56-61, EPIP, SIPCOT Industrial Estate
Gummidipoondi 601 201
Versus
Commissioner of GST & Central Excise ...Respondent
Newry Towers, No.2054, I Block
th
II Avenue, 12 Main Road
Anna Nagar, Chennai 600 040
WITH
Service Tax Appeal No. 41068 of 2017
(Arising out of Order in Appeal No. 39 to 46/2016 (CXA-II), dated 16.02.2017 passed by
the Commissioner of Central Excise (Appeals I), 26/1, Mahatma Gandhi Marg,
Nungambakkam, Chennai 600 034).
M/s. RBA Exports Ltd. ...Appellant
Plot No.56-61, EPIP, SIPCOT Industrial Estate
Gummidipoondi 601 201
Versus
Commissioner of GST & Central Excise ...Respondent
Newry Towers, No.2054, I Block
th
II Avenue, 12 Main Road
Anna Nagar, Chennai 600 040
WITH
4
Service Tax Appeal No. 41069 of 2017
(Arising out of Order in Appeal No. 39 to 46/2016 (CXA-II), dated 16.02.2017 passed by
the Commissioner of Central Excise (Appeals I), 26/1, Mahatma Gandhi Marg,
Nungambakkam, Chennai 600 034).
M/s. RBA Exports Ltd. ...Appellant
Plot No.56-61, EPIP, SIPCOT Industrial Estate
Gummidipoondi 601 201
Versus
Commissioner of GST & Central Excise ...Respondent
Newry Towers, No.2054, I Block
th
II Avenue, 12 Main Road
Anna Nagar, Chennai 600 040
WITH
Service Tax Appeal No. 41070 of 2017
(Arising out of Order in Appeal No. 39 to 46/2016 (CXA-II), dated 16.02.2017 passed by
the Commissioner of Central Excise (Appeals I), 26/1, Mahatma Gandhi Marg,
Nungambakkam, Chennai 600 034).
M/s. RBA Exports Ltd. ...Appellant
Plot No.56-61, EPIP, SIPCOT Industrial Estate
Gummidipoondi 601 201
Versus
Commissioner of GST & Central Excise ...Respondent
Newry Towers, No.2054, I Block
th
II Avenue, 12 Main Road
Anna Nagar, Chennai 600 040
WITH
Service Tax Appeal No. 41071 of 2017
(Arising out of Order in Appeal No. 39 to 46/2016 (CXA-II), dated 16.02.2017 passed by
the Commissioner of Central Excise (Appeals I), 26/1, Mahatma Gandhi Marg,
Nungambakkam, Chennai 600 034).
M/s. RBA Exports Ltd. ...Appellant
Plot No.56-61, EPIP, SIPCOT Industrial Estate
Gummidipoondi 601 201
Versus
5
Commissioner of GST & Central Excise ...Respondent
Newry Towers, No.2054, I Block
th
II Avenue, 12 Main Road
Anna Nagar, Chennai 600 040
WITH
Service Tax Appeal No. 41072 of 2017
(Arising out of Order in Appeal No. 39 to 46/2016 (CXA-II), dated 16.02.2017 passed by
the Commissioner of Central Excise (Appeals I), 26/1, Mahatma Gandhi Marg,
Nungambakkam, Chennai 600 034).
M/s. RBA Exports Ltd. ...Appellant
Plot No.56-61, EPIP, SIPCOT Industrial Estate
Gummidipoondi 601 201
Versus
Commissioner of GST & Central Excise ...Respondent
Newry Towers, No.2054, I Block
th
II Avenue, 12 Main Road
Anna Nagar, Chennai 600 040
AND
Service Tax Appeal No. 41073 of 2017
(Arising out of Order in Appeal No. 39 to 46/2016 (CXA-II), dated 16.02.2017 passed by
the Commissioner of Central Excise (Appeals I), 26/1, Mahatma Gandhi Marg,
Nungambakkam, Chennai 600 034).
M/s. RBA Exports Ltd. ...Appellant
Plot No.56-61, EPIP, SIPCOT Industrial Estate
Gummidipoondi 601 201
Versus
Commissioner of GST & Central Excise ...Respondent
Newry Towers, No.2054, I Block
th
II Avenue, 12 Main Road
Anna Nagar, Chennai 600 040
APPEARANCE:
For the Appellant :Shri G. Shiva Kumar, Advocate for the Appellant
For the Respondent: Shri M. Selvakumar, Authorised Representative
6
CORAM :
HON’BLE MR. AJAYAN T.V. MEMBER (JUDICIAL)
FINAL ORDER Nos.41125 – 41136 /2026
DATE OF HEARING :16.10.2026
DATE OF DECISION: 28.10.2026
Per AJAYAN T.V.
M/s. RBA Exports Ltd., the appellant herein, has
preferred these twelve appeals against two common orders of the
Commissioner of Central Excise (Appeals I), Chennai. Service Tax
Appeal Nos. 42111 to 42114 of 2016 are preferred against Order
in Appeal Nos. 147 to 150/2016 (CXA II) dated 29.07.2016, and
Service Tax Appeal Nos. 41066 to 41073 of 2017 against Order in
Appeal Nos. 39 to 46/2016 (CXA II) dated 16.02.2017 (together,
the impugned orders), to the extent that they uphold the rejection
of rebate of service tax claimed under Notification No. 41/2012-ST
dated 29.06.2012 (the notification). Since the appeals raise a
common question of law on common facts, they were heard
together and are disposed of by this common order.
Relevant Facts
2. The appellant is a manufacturer registered under the Central
Excise Act, 1944 with its factory at the SIPCOT Industrial Estate,
Gummidipoondi. It exports the excisable goods it manufactures
and receives taxable services that are used in the course of such
export, on which it has paid service tax. For each quarter between
July 2012 and June 2015 it filed a claim in Form A-1 before the
jurisdictional Assistant or Deputy Commissioner under paragraph
3 of the notification, seeking rebate of the service tax actually paid
on the specified services on the basis of documents. It is
undisputed that the appellant did not seek rebate under paragraph
2 of the notification on any of the shipping bills concerned.
7
3. The first group of four claims relates to the quarters July to
September 2012, October to December 2012, January to March
2013 and April to June 2013. The appellant claimed Rs.1,00,449/-,
Rs.1,29,356/-, Rs.1,56,744/- and Rs.1,39,911/- respectively,
aggregating Rs.5,26,460/-. By Orders in Original Nos. 311/2015
(RF) on a show cause notice dated 09.09.2014, 313/2015 (RF) on
a show cause notice dated 08.08.2014, 314/2015 (RF) and
312/2015 (RF) on show cause notices dated 14.10.2014, the
refund sanctioning authority rejected Rs.41,902/-, Rs.61,744/-,
Rs.64,878/- and Rs.53,145/- out of these claims, aggregating
Rs.2,21,669/-. The appeals of the appellant were rejected by the
common Order in Appeal dated 29.07.2016, which is assailed in
Service Tax Appeal Nos. 42111 to 42114 of 2016.
4. The second group of eight claims relates to the eight quarters
from July 2013 to June 2015. For the quarter July to September
2013 the appellant claimed Rs.1,98,380/-, of which Rs.1,07,640/-
was rejected by Order in Original No. 038/2016 dated 25.02.2016
on a show cause notice dated 26.06.2015. For the three quarters
from October 2013 to June 2014, the appellant claimed
Rs.1,20,986/-, Rs.1,65,219/- and Rs.1,56,755/-, of which
Rs.82,848/-, Rs.57,560/- and Rs.38,386/- were rejected by
Orders in Original Nos. 65/2016, 66/2016 and 67/2016, all dated
30.03.2016, on show cause notices dated 29.02.2016. For the two
quarters from July to December 2014, the appellant claimed
Rs.2,28,948/- and Rs.2,51,945/-, of which Rs.58,223/- and
Rs.1,07,490/- were rejected by Orders in Original Nos. 119/2016
and 120/2016 dated 20.06.2016, on show cause notices dated
15.04.2016. For the two quarters from January to June 2015, the
appellant claimed Rs.2,74,182/- and Rs.2,17,386/-, of which
Rs.33,950/- and Rs.43,782/- were rejected by Orders in Original
Nos. 161/2016 and 159/2016 dated 29.07.2016, on show cause
notices dated 20.06.2016. The second group thus comprises
claims of Rs.16,13,801/-, out of which Rs.5,29,879/- stands
8
rejected. The appeals against these orders were rejected by the
common Order in Appeal dated 16.02.2017, which is assailed in
Service Tax Appeal Nos. 41066 to 41073 of 2017. Across both
groups, the appellant claimed Rs.21,40,261/-, and the rejection
under challenge is of Rs.7,51,548/-.
5. In each case the show cause notice proposed to reject the claim,
to the extent the documented rebate on a shipping bill did not
exceed the rebate admissible under the Schedule of rates by at
least twenty per cent, on the strength of clause (c) of the proviso
to the opening paragraph of the notification.
6. The refund sanctioning authority verified the claims and found that
each was complete in every respect, that the documents
evidencing payment of service tax on the specified services had
been filed after due certification, that rebate had not already been
received on the shipping bills under the procedure in paragraph 2,
and that the claims were arithmetically accurate. The claims were
nonetheless rejected in part. The authority noted that the rate
fixed in the Schedule of rates for the goods exported was 0.08 per
cent of the FOB value, so that under clause (c) a claim under
paragraph 3 would lie on a shipping bill only where the
documented rebate was at least 0.096 per cent of its FOB value,
that is to say, 0.08 per cent together with twenty per cent of 0.08
per cent. Comparing the claim on each shipping bill with that
threshold, the authority rejected the claims relating to shipping
bills that fell short of it and sanctioned the remainder. The
Commissioner (Appeals) affirmed these findings and rejected the
appeals by the impugned orders. Aggrieved and having preferred
these appeals, the appellant is before this Tribunal.
9
Submissions on behalf of the appellant
7. Shri G. Shiva Kumar, learned Advocate for the appellant, confined
the dispute to a single question. The appellant, he pointed out, did
not seek rebate under paragraph 2 and pursued its claims under
paragraph 3 on the basis of the service tax actually paid. The
Department has accepted that the claims were complete and
arithmetically accurate and that the specified services were used
for export. Yet, by applying clause (c) shipping bill by shipping bill,
it has allowed nothing on the shipping bills that fell below the
threshold, either under paragraph 3 or under paragraph 2. In the
first group of appeals alone, he urged that the show cause notices
and the consequent orders are vitiated because they disclose no
intelligible basis or arithmetical working for the amounts proposed
to be rejected, and that a notice which does not disclose the
factual and numerical basis of the proposed action offends the
principles of natural justice, relying on Gorkha Security Services v.
Government of NCT of Delhi, (2014) 9 SCC 105 : 2014 (8) TMI
1081-Supreme Court .
8. Common to all the appeals, and without prejudice to the first
contention, Ld. Counsel argued that even if the claims under
paragraph 3 were not maintainable, the appellant remains entitled
to rebate under paragraph 2. The Orders in Original themselves
record that no rebate has been granted under paragraph 2, and
the denial of paragraph 3 cannot deprive the exporter of the
alternative relief that paragraph 2 expressly provides where the
conditions of the notification are otherwise met. The use of the
specified services in export is undisputed, and the notification
must therefore be given effect to in favour of the exporter rather
than be defeated by a hyper technical construction. Reliance was
placed on Commissioner of Customs (Preventive), Amritsar v.
Malwa Industries Ltd., 2009 (235) E.L.T. 214 (S.C.) , for the
proposition that a person entitled to the benefit of a notification
cannot be deprived of it by a narrow interpretation, on Bharat
10
Heavy Electricals Ltd. v. Commissioner of C. Ex., Bhopal, 2017
(49) S.T.R. 81 (Tri. Del.) , for a purposive construction of this very
notification, and on the order of the Revisionary Authority in In re
R.N. Bajaj Overseas, 2018 (15) G.S.T.L. 473 (G.O.I.) , as
supporting the grant of rebate under paragraph 2 where export is
established even though the claim was first made under paragraph
3. Ld. Counsel prayed that the appeals be allowed and the rebate
sanctioned with consequential relief, save for an amount of
Rs.741/-denied as ineligible in the OIO No.313/2015(RF) and
upheld in the OIA dated 29.07.2016, which the counsel stated is
being given up as not contested.
Submissions on behalf of the respondent
9. Shri M. Selvakumar, learned Authorised Representative for the
Revenue, reiterated the findings of the lower authorities and
supported the impugned orders.
Analysis
10. This Tribunal has heard both sides and perused the appeal records
and the compilation of authorities filed by the appellant.
11. The following issues arise for determination:
i. Whether the orders in the first group of appeals stand
vitiated for want of disclosure of the arithmetical basis of the
proposed rejection?
ii. Whether the claims under paragraph 3 were rightly rejected
to the extent clause (c) of the proviso was found to apply?
iii. Whether the appellant, having elected paragraph 3, is
entitled in the alternative to rebate at the Schedule rates
under paragraph 2 on the very shipping bills on which its
paragraph 3 claim failed and whether such a claim can be
11
entertained in these proceedings at all when the shipping
bills stand as filed? and
iv. Whether the principle of beneficial or liberal construction of
exemptions alters the answer to the second and third
questions?
A. The challenge founded on natural justice
12. This Tribunal takes up first the objection confined to the first
group of appeals, since it goes to the validity of the proceedings
and would, if it succeeded, dispose of those appeals without more.
In Gorkha Security Services the Hon’ble Supreme Court held, in
paragraph 20, that a show cause notice must state the material or
grounds which in the view of the authority necessitate action and
the particular penalty or action proposed. The notice in that case
had not proposed blacklisting at all, and the blacklisting was set
aside for that reason. The decision is no authority for the
proposition that a notice proposing rejection of a refund on a
stated ground of law is void because it does not set out the
arithmetic that follows mechanically from the claimant’s own
figures.
13. Here the ground was clause (c) of the proviso and the action
proposed was rejection to the extent that clause applied. The
adjudication orders record the method undertaken, namely the
comparison of the documented rebate on each shipping bill
against 0.096 per cent of its FOB value. The figures on which that
comparison rests are the appellant’s own, drawn from the shipping
bill wise particulars it furnished in Form A-1. The appellant
contested the rejection on its merits before the appellate
authority, and it does so again before this Tribunal. It has not
identified a single shipping bill on which the comparison has gone
wrong, nor any prejudice suffered by the absence of a worked
table in the notice. The principles of natural justice are not an
12
empty formality to be invoked in the abstract, and a grievance of
this kind, unaccompanied by any demonstrable prejudice, does
not vitiate the proceedings. This Tribunal is of the considered view
that therefore, the first contention fails.
B. The scheme of the notification and the claims under
paragraph 3
14. The notification was issued under section 93A of the Finance Act,
1994. It grants rebate of service tax paid on taxable services
received by an exporter of goods and used for export, by way of
refund, subject to the extent and manner specified. The opening
paragraph carries a proviso whose clauses (b) and (c), the heart
of the present dispute, read as under.
“(b) the rebate shall be claimed either on the basis of
rates specified in the Schedule of rates annexed to this
notification (hereinafter referred to as the Schedule),
as per the procedure specified in paragraph 2 or on
the basis of documents, as per the procedure specified
in paragraph 3;
(c) the rebate under the procedure specified in
paragraph 3 shall not be claimed wherever the
difference between the amount of rebate under the
procedure specified in paragraph 2 and paragraph 3 is
less than twenty per cent of the rebate available under
the procedure specified in paragraph 2;”
(emphasis supplied)
15. Clause (b) employs the correlative “either ... or”. The two
procedures it names are not stages of one claim but two distinct
routes, each with its own measure of rebate and its own
machinery. Paragraph 2 is a fixed rate route. The exporter
registers its central excise registration number or service tax code
13
and bank account with the customs, and makes a declaration “in
the electronic shipping bill or bill of export ... while presenting the
same to the proper officer of customs” that the rebate is claimed
as a percentage of the declared FOB value at the Schedule rate,
that no further rebate shall be claimed under paragraph 3 or in
any other manner, including on the ground that the rebate
obtained is less than the service tax paid, and that the conditions
of the notification have been fulfilled. The rebate is then calculated
on the FOB value and credited to the exporter’s bank account.
Clause (g) of paragraph 2 adds that a shipping bill on which rebate
has been claimed under that paragraph shall not be used for a
claim on the basis of documents under paragraph 3. Paragraph 3
is a document based route. The claim is filed in Form A-1 before
the jurisdictional Assistant or Deputy Commissioner within one
year of export, with certified invoices evidencing payment of the
tax, and is sanctioned after that officer satisfies himself, among
other things, under clause (k)(iii), that rebate has not already
been received on the shipping bills under paragraph 2. The
declaration in Form A-1 likewise affirms that electronic rebate has
not been received from customs on the shipping bills on which
rebate is claimed.
16. Two features of this design bear directly on the appeals. The first
is that the paragraph 2 route can be taken only at one point of
time and in one manner, namely by a declaration in the electronic
shipping bill when it is presented. The election is exercised
shipping bill by shipping bill, for clause (g) of paragraph 2, clause
(k)(iii) of paragraph 3 and the declaration in Form A-1 all speak of
the shipping bill. A manufacturer exporter is therefore free to take
paragraph 2 on some shipping bills and to reserve others for
paragraph 3. But whichever route it takes for a given shipping bill,
the choice is made when that shipping bill is presented. The
second feature is clause (c). Paragraph 3 is not an open
alternative available at the exporter’s pleasure. It is available only
14
where the documented rebate exceeds the Schedule rebate by
twenty per cent or more. The Schedule rates fix, for each class of
goods, a standard measure of the incidence of tax on the specified
services, and the notification prefers that rebate be taken through
the simple, automated customs route. The document based route,
with the verification it entails, is opened only where the actual
incidence materially exceeds the average, and clause (c) fixes the
margin at twenty per cent. The Revisionary Authority in R.N. Bajaj
Overseas , on which the appellant itself relies, read the scheme in
exactly this manner, observing that “claiming of rebate under Para
2 is encouraged and the rebate of Service Tax under Para 3 is
allowed only when amount of rebate filed under Para 3 on the
basis of actual payment of Service Tax is higher by 20% as
compared to the amount of rebate under Para 2”.
17. Clause (c) is, in this sense, a condition of eligibility for the
paragraph 3 route. It is couched in mandatory and prohibitory
terms (“shall not be claimed”). It is not a direction about the form
or timing of a claim. It defines the class of shipping bills on which
a documentary claim may be made at all. The comparison it
prescribes is also necessarily shipping bill wise, since the Schedule
rebate is computed on the FOB value of each shipping bill under
paragraph 2(e) and the bar in clause (g) of paragraph 2 operates
on each shipping bill. The lower authorities applied it in that
manner. For goods attracting the Schedule rate of 0.08 per cent
during the period in dispute, the arithmetic that the documented
claim must reach 0.096 per cent of the FOB value is
unexceptionable, and the appellant does not dispute it. The claims
to the extent rejected relate to shipping bills that fell short of that
threshold. Their rejection under paragraph 3 is a faithful
application of the notification.
18. Ld. Counsel for the appellant placed reliance on Bharat Heavy
Electricals for a purposive reading of the notification. That decision
15
construed clause (b) of paragraph 3, which provides that the
person liable to pay service tax under section 68 on the taxable
service provided to the exporter shall not be eligible to claim
rebate. Read literally, the clause would have denied rebate
altogether to every exporter who discharges tax on a service such
as goods transport under reverse charge, since such an exporter is
itself the person liable under section 68(2). The Tribunal held that
such a reading would render the notification useless in all reverse
charge cases, which could not have been the intention, and held
the rebate payable to the exporter which had paid the tax and
used the service in export. Two things follow for the present case.
Paragraph 3(b) itself illustrates that the notification attaches
distinct conditions to each route, which reinforces our reading that
paragraphs 2 and 3 are separate avenues rather than
alternatively interchangeable stages for one claim. And Bharat
Heavy Electricals construed a clause whose literal application
would have frustrated the object of the notification for a whole
class of exporters. Clause (c) does nothing of the kind. It does not
deny rebate to anyone. It channels the exporter to the Schedule
route where the documented incidence is not materially higher. Its
plain application advances, rather than defeats, the design of the
scheme.
19. This Tribunal also notices that Notification No. 1/2016-ST dated
03.02.2016 later substituted clause (A)(i) of the Explanation to
refer to services used beyond the factory or other place of
production, omitted clause (B) defining place of removal, and
enhanced the Schedule rates, including the rate of 0.08 per cent
to 0.09 per cent. The amendment postdates the period in dispute
and does not govern it. This Tribunal refers to it only because it
confirms that, even while revisiting the definition of specified
services and the rates, the Central Government left clauses (b)
and (c) of the proviso and the architecture of paragraphs 2 and 3
untouched.
16
C. Whether the appellant can fall back on paragraph 2
20. The principal submission of the Ld. Counsel is that the failure of
the paragraph 3 claim on any shipping bill should be met by the
grant of rebate at the Schedule rate under paragraph 2 on that
shipping bill, since the exporter would in any event have been
entitled to that much. The submission has an evident equitable
appeal, but this Tribunal is unable to accept it, for reasons rooted
in the text and structure of the notification.
21. The declarations in paragraph 2(d) are the very means by which
the paragraph 2 route is taken. They come into operation once the
exporter decides to claim under paragraph 2 on a shipping bill,
and they are made in that shipping bill. A shipping bill presented
without them is a shipping bill on which the exporter has not taken
the paragraph 2 route. The undertaking in paragraph 2(d)(ii) that
no further rebate shall be claimed under paragraph 3, and the bar
in paragraph 2(g), prevent an exporter who has taken the
Schedule rate from returning for more on the documentary route.
The notification contains no reverse bar in paragraph 3, and the
reason is apparent. None is needed. The paragraph 2 route is
open only at the threshold, when the shipping bill is presented.
The paragraph 3 claim is filed after export, within one year. By the
time an exporter files Form A-1, the occasion for invoking
paragraph 2 on those shipping bills has already passed. The
“either ... or” of clause (b), the timing of the paragraph 2
declaration, the bar in paragraph 2(g) and the verification in
paragraph 3(k)(iii) together make the choice of route, for each
shipping bill, a single election made at the time of export and final
once made.
22. The consequence of reading the scheme otherwise is instructive. If
an exporter who has presented its shipping bills without the
paragraph 2 declaration could, after its documentary claim fails
17
under clause (c), be granted the Schedule rate in substitution,
clause (c) would cease to have any operation. Every exporter
could file under paragraph 3 regardless of the margin, secure the
documented amount wherever it crossed the threshold, and fall
back on the Schedule rate wherever it did not. That is precisely
the outcome clause (c) is designed to prevent. The same would
follow if an exporter, whether unaware of the notification or
otherwise, were permitted to seek amendment of its shipping bills
under section 149 of the Customs Act, 1962 after a paragraph 3
claim had been made, so as to insert the paragraph 2 declaration.
That section permits the proper officer to authorise amendment of
a shipping bill after the goods have been exported only on the
basis of documentary evidence which was in existence at the time
of export. Its purpose is to correct a document so that it reflects
what the position at export was in truth. It is not a means of
retrospectively making an election that the exporter did not make,
after the other election has been tried and found wanting.
Ignorance of the notification does not enlarge the exporter’s rights
under it. The appellant does not, in any event, claim to have been
unaware of it. Its own case is that it consciously pursued
paragraph 3 on the basis of actual payment.
23. The order in R.N. Bajaj Overseas does not assist the appellant.
The Revisionary Authority there found, on a fact recorded by the
Commissioner (Appeals) and not disputed by the Revenue, that
the EDI facility in the customs formation was not functional, so
that the exporter had no means of making the paragraph 2
declaration in an electronic shipping bill at all. It held that clause
(c) “is not meant for rejection of the rebate claim of the exporter
when they were not having the option to file rebate under Para 2
at all for no fault on their part”, while accepting in terms that a
paragraph 3 claim “is normally rejectable for non-compliance of
the condition stipulated in Proviso (c) of Notification No. 41/2012-
S.T. when the exporter is in a position to exercise either of the
18
two options freely and effectively”. The decision thus turned on
the impossibility of election. It is not suggested before this
Tribunal that the appellant was unable to make the paragraph 2
declaration on any shipping bill. On the reasoning of R.N. Bajaj
Overseas itself, the appellant falls in the class of exporters whose
paragraph 3 claim is rejectable under clause (c). Moreover, an
order of the Revisionary Authority of the Government of India is
not a precedent binding on this Tribunal, though this Tribunal has
examined its reasoning with care.
24. The submission that the Orders in Original record that no rebate
was granted under paragraph 2 does not secure anything in favour
of the appellant. That recital is the satisfaction which paragraph
3(k)(iii) obliges the sanctioning authority to record, namely that
rebate has not already been received under paragraph 2 on the
shipping bills. It reflects the appellant’s own election and is not an
acknowledgment that paragraph 2 rebate remains to be granted.
D. Beneficial construction
25. The appellant urged that the notification is a beneficial measure
and must be construed liberally. In view of the questions this
argument raises about the line of authority on which it depends,
this Tribunal considers it necessary to examine it with some care.
26. The Constitution Bench in Commissioner of Customs (Import),
Mumbai v. Dilip Kumar and Company, 2018 (361) E.L.T. 577
(S.C.) : (2018) 9 SCC 1 , held that an exemption notification
should be interpreted strictly, that the burden of proving its
applicability lies on the assessee, and that where there is
ambiguity the benefit of it cannot be claimed by the assessee and
must go to the Revenue. Earlier, the Constitution Bench in
Commissioner of Central Excise, New Delhi v. Hari Chand Shri
Gopal, 2010 (260) E.L.T. 3 (S.C.) , had held, in paragraphs 22 to
19
24, that where an exemption is available on compliance with
conditions, the mandatory requirements of those conditions must
be obeyed or fulfilled exactly, and that the doctrine of substantial
compliance cannot be pleaded where “a clear statutory
prerequisite which effectuates the object and the purpose of the
statute has not been met”. The distinction it drew is between
provisions “of substantive character” built in with specific
objectives of policy and those “merely procedural and technical in
their nature”. Dilip Kumar , in paragraphs 46 and 47 of the ELT
citation, also approved the two stage approach traced to Union of
India v. Wood Papers Ltd., 1990 (47) E.L.T. 500 (S.C.) , under
which the question whether a subject falls within an exemption is
construed strictly, but once that hurdle is crossed the exemption
receives a liberal construction. Malwa Industries , in paragraph 20,
is an application of this second stage, for it says that those who
are entitled to the benefit cannot be deprived of it by a narrow
interpretation simpliciter.
27. There is, alongside this, a distinct line of authority which the
Supreme Court restated in Government of Kerala v. Mother
Superior Adoration Convent, 2021 (376) E.L.T. 242 (S.C.) .
Building on Commissioner of Customs (Preventive), Mumbai v. M.
Ambalal and Co., 2010 (260) E.L.T. 487 (S.C. ), and Commissioner
of Central Excise, Surat I v. Favourite Industries, 2012 (278)
E.L.T. 145 (S.C.) , the Court held that even in tax statutes an
exemption that grants an incentive for promoting economic
growth or otherwise has a beneficial purpose is to be construed
liberally, in accordance with its object, and that Dilip Kumar , which
did not refer to this line of authority, had not done away with it
sub silentio. In paragraph 24 the Court said this.
“24. This being the case, it is obvious that the
beneficial purpose of the exemption contained in
Section 3(1)(b) must be given full effect to, the line of
authority being applicable to the facts of these cases
20
being the line of authority which deals with beneficial
exemptions as opposed to exemptions generally in tax
statutes. This being the case, a literal formalistic
interpretation of the statute at hand is to be
eschewed. We must first ask ourselves what is the
object sought to be achieved by the provision, and
construe the statute in accord with such object. And
on the assumption that any ambiguity arises in such
construction, such ambiguity must be in favour of that
which is exempted.”
28. It may be asked whether every exemption in a taxing statute is
not, by its very nature, beneficial, since every exemption relieves
someone of a burden. The answer lies in the passage in Ambalal ,
paragraph 16, which Mother Superior adopted. The Court there
drew a distinction between exemptions generally, which are
strictly interpreted, and “beneficial exemptions having their
purpose as encouragement or promotion of certain activities”,
which are liberally interpreted. The general rule rests on the
premise, explained in Dilip Kumar , that an exemption shifts the
burden of tax to the unexempted class of taxpayers, so that a
claimant must bring itself squarely within it. A beneficial
exemption, in the sense in which Ambalal and Mother Superior use
the expression, is one granted to further an identified public
purpose, such as the promotion of industry in a backward area,
the encouragement of investment, or the relief of religious,
charitable and educational activity. In such a case the object of
the exemption itself supplies the key to its construction. Benefit to
the assessee is common to all exemptions. What sets a beneficial
exemption apart is a purpose beyond the relief itself, which the
legislature or the delegate has chosen to promote. Nor can it be
said that this line of authority is confined to non fiscal enactments.
Ambalal arose under the Customs Act and Favourite Industries
under the Central Excise Act, and the Kerala Building Tax Act
21
considered in Mother Superior is itself a taxing statute. The line of
authority applies to exemptions in fiscal statutes where they bear
the requisite character.
29. This Tribunal is prepared to proceed on the basis that the
notification belongs to this class. A rebate of service tax on
services used for the export of goods serves the settled policy that
taxes are not to be exported, and its purpose is the promotion of
exports. Strictly, it is a rebate and not an exemption, but the
principles of construction are not materially different. Even so, the
beneficial construction does not carry the appellant where it
wishes to go, for three reasons. First, Ambalal itself, in the very
passage relied upon in Mother Superior , begins with the
proposition that the notification has to be read as a whole and that
if any of the conditions laid down in it is not fulfilled, the party is
not entitled nterto its benefit. The liberal construction of a
beneficial exemption is a tool for discerning the reach of the words
used in the light of their object. It is not a licence to disregard a
condition which the delegate has expressly imposed. Secondly,
Mother Superior resolves ambiguity in favour of that which is
exempted. There is no ambiguity in clause (b) or clause (c). The
words “either ... or” and “shall not be claimed wherever the
difference ... is less than twenty per cent” admit of one meaning
only. Thirdly, the object of this notification is not merely to refund
the tax but to do so through a particular scheme, in which the
Schedule route is the rule and the documentary route the
exception. A construction that allows an exporter to try the
exception and then claim the rule after the event does not
advance the object of the notification. It overrides the means the
notification has chosen to achieve it.
30. This Tribunal has also considered the decision in SPI Technologies
India Pvt. Ltd., 2026 (6) TMI 528- CESTAT CHENNAI , where the
Tribunal applied Mother Superior to a rebate under Notification No.
22
12/2005-ST and held that the omission to file a declaration of
inputs on one occasion could not defeat the rebate. The
declaration there was a procedural requirement relating to details
always verifiable from the exporter’s records, and the Tribunal
relied on the distinction drawn in Mangalore Chemicals and
Fertilizers Ltd. v. Deputy Commissioner, 1991 (55) E.L.T. 437
(S.C.), between conditions which are substantive and rest on
considerations of policy and those which belong to the area of
procedure. That very distinction places clause (c) on the opposite
side of the line. It is a substantive condition of eligibility, built in
with a specific policy objective, and the election of route which it
regulates goes to the substance of the scheme. The appellant has
not been denied rebate for a technical lapse. It has been held to
the route it chose, and on the shipping bills in question that route
was closed by the express terms of the notification. Malwa
Industries does not assist it either, for that decision protects one
who is entitled to the benefit. The appellant has not established its
entitlement to the paragraph 3 rebate on these shipping bills, and
it never took the paragraph 2 route on them.
E. Whether rebate under paragraph 2 can be granted in
these proceedings
31. There is a further and independent reason why the alternative
prayer cannot be granted, and it concerns the forum and the
document on which paragraph 2 operates. A paragraph 2 rebate is
founded on the electronic shipping bill. The declaration that sets it
in motion is part of the entry of the export goods made under
section 50 of the Customs Act and self assessed under section 17.
Circular No. 17/2011-Cus dated 08.04.2011, issued on the
introduction of self-assessment in F.No.450/26/2011-Cus. IV,
required the exporter to declare in the shipping bill, at the time of
self assessment, the benefit of exemption notifications claimed,
which underlines that benefits under notifications attach to the
content of the entry itself. The rebate is computed on the declared
23
FOB value and credited to the exporter’s bank account through the
customs system. The appellant’s shipping bills were presented and
self assessed without the paragraph 2 declaration, and that is how
they stand. No amendment of them has been sought or authorised
under section 149, and no proceeding to modify them is before
this Tribunal. What the appellant asks is that the Assistant
Commissioner of Central Excise, while deciding a Form A-1 claim
under paragraph 3, and this Tribunal in appeal from his order,
treat those shipping bills as though they carried a declaration they
do not carry, and grant a rebate which the notification entrusts to
the customs on the strength of that declaration.
32. The Supreme Court held in ITC Ltd. v. Commissioner of Central
Excise, Kolkata IV, 2019 (368) E.L.T. 216 (S.C.) , that refund
proceedings are in the nature of execution, that the officer
processing a refund cannot reassess or adjudicate the conditions
of an exemption, and that a claim for refund cannot be
entertained unless the order of assessment or self assessment is
first modified in accordance with law. In paragraph 47 it held as
under.
“47. When we consider the overall effect of the
provisions prior to amendment and post-amendment
under Finance Act, 2011, we are of the opinion that
the claim for refund cannot be entertained unless the
order of assessment or self-assessment is modified in
accordance with law by taking recourse to the
appropriate proceedings and it would not be within the
ken of Section 27 to set aside the order of self-
assessment and reassess the duty for making refund;
and in case any person is aggrieved by any order
which would include self-assessment, he has to get
the order modified under Section 128 or under other
relevant provisions of the Act.”
24
33. The same principle was applied in Commissioner of Customs,
Central Excise and Service Tax (Appeals II), Hyderabad v.
Standard Consultants Ltd., 2022 (381) E.L.T. 582 (S.C.) , where
refunds allowed by the Tribunal without any challenge to the self
assessment were set aside. It is an expression of the wider
principle of finality stated by the nine Judge Bench in Mafatlal
Industries Ltd. v. Union of India, 1997 (89) E.L.T. 247 (S.C.), in
paragraph 70, that “where a duty has been collected under a
particular order which has become final, the refund of that duty
cannot be claimed unless the order (whether it is an order of
assessment, adjudication or any other order under which the duty
is paid) is set aside according to law”, and restated in proposition
(iv) of paragraph 99.
34. This Tribunal is conscious that a Larger Bench of this Tribunal in
Shree Balaji Warehouse v. Commissioner of Central Excise and
Service Tax, Panchkula, (2023) 11 Centax 184 (Tri. LB) , held by
majority that ITC Ltd. does not apply to refunds of service tax self
assessed in ST-3 returns, because the provisions of sections 17,
27 and 128 of the Customs Act are not in pari materia with the
scheme of assessment and appeal under the Finance Act, 1994.
That decision does not touch the present question. The document
whose content the appellant seeks to have disregarded is not an
ST-3 return. It is a shipping bill, an entry made and self assessed
under the Customs Act itself, to which the reasoning in ITC Ltd .
applies on its own terms. Nor is this a case like Commissioner of
Service Tax v. Hardy Exploration and Production (India) Ltd., 2026
(8) TMI 731 (Mad.) , where the jurisdictional High Court allowed
refund to a service recipient of tax collected without authority of
law, holding that its retention would offend Article 265 of the
Constitution. The service tax paid by the appellant on the specified
services was lawfully leviable. What the appellant claims is a
statutory rebate on conditions, and the question is whether those
25
conditions have been met, not whether the State holds money it
had no authority to collect.
35. This Tribunal makes clear the limits of this conclusion. The
appellant did challenge the Orders in Original rejecting its
paragraph 3 claims, and those challenges are what has been
decided on merits in Part B. The principle in ITC Ltd. and Mafatlal
is not invoked against those claims. It bears only on the
alternative prayer for paragraph 2 rebate, which depends on the
content of shipping bills that the appellant has never sought to
modify in the manner the law provides. Whether any such
modification could now be sought under section 149, and with
what result, is a matter for the proper officer of customs and is
not before this Tribunal, and hence no opinion is expressed on it
beyond what was said in Part C about the nature of the election
under the notification.
36. In conclusion, collating these threads together, this Tribunal holds
that the proceedings in the first group of appeals are not vitiated
by any breach of the principles of natural justice, that the claims
under paragraph 3 were rightly rejected to the extent the
documented rebate on the shipping bills concerned fell below
0.096 per cent of their FOB value, as clause (c) of the proviso
requires, and that the appellant, having elected the documentary
route under paragraph 3 on those shipping bills, is not entitled to
be granted rebate at the Schedule rates under paragraph 2 in
substitution. The notification gave the appellant a choice of route
at the time of export. It exercised that choice. The result on some
of its shipping bills is the consequence of the choice and of the
express condition attached to it, not of any want of beneficence in
the notification or of any error by the lower authorities. The
impugned orders are well founded and call for no interference.
26
37. In view of the aforesaid analysis, Service Tax Appeal Nos. 42111
to 42114 of 2016 and Service Tax Appeal Nos. 41066 to 41073 of
2017 are dismissed. The impugned Orders in Appeal Nos. 147 to
150/2016 (CXA II) dated 29.07.2016 and Nos. 39 to 46/2016
(CXA II) dated 16.02.2017 are upheld.
(Order pronounced in the open court on 28.10.2026)
(AJAYAN T.V)
Member (Judicial)
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