Is refund of Service Tax under Notification 17/2010-ST allowed if drawback is claimed?
A netizen sent us this:
Vide Notification No 68/2011 Cus (NT) dated 22.9.2011, new drawback rates have been notified. The Drawback schedule has two rates, one when CENVAT facility has not been availed and the other when CENVAT facility has been availed. While explaining the provisions of this Notification, vide Circular No 42/2011 –Cus Dated 22.9.2011, the Board has clarified that:
2. As in previous years, the drawback rates have been determined on the basis of certain broad parameters including, inter alia , the prevailing prices of inputs, Standard Input Output Norms (SION), share of imports in the total consumption of inputs, FOB value of export goods and the applied rates of duty. The incidence of duty on HSD/Furnace Oil has been factored in the drawback calculations. The incidence of service tax paid on taxable services which are used as input services in the manufacturing or processing of export goods has also been factored. The Commissioners may ensure that the exporters do not avail of the refund of this tax through any other mechanism while claiming the All Industry Rates of duty drawback.
As can be seen from the highlighted portion above, the incidence of service tax paid on taxable services used as input services has also been factored in the drawback rates.
There is a separate Notification (No 17/2009 ST dated 7th July 2009) which allows refund of service tax on certain services used in respect of goods exported. Now, the question is whether the exporter can avail drawback and also simultaneously avail the refund of service tax under Notification 17/2009 ST. Since Notification 68/2011 Cus(NT) does not prohibit the availment of refund under No 17/2009 ST, the same should be allowed. Also there is no restriction in Notification 17/2009 ST with regard to availment of drawback. Hence both drawback and refund should be admissible.
It will be interesting to note that the previous version of Notification No 17/2009 ST , i.e., 41/2007 ST dated 6.10.2007 had this condition:
Provided the said goods have been exported without availing drawback of service tax paid on the specified services under the Customs, Central Excise Duties and Service Tax Drawback Rules, 1995;
However, this condition was omitted vide Notification No 33/2008 ST Dated 7.12.2008.
Since there is a possibility of disallowing refund under Notification No 17/2009 ST, when drawback is also claimed by taking recourse to the Circular No 42/2011 Cus, a clarification by the Board on this issue will help the exporters.