Legal principle

Where a Customs or Central Excise exemption notification is silent on the meaning of 'export of service', the term must be construed in accordance with section 2(e) of the FTDR Act, 1992 and the FTP governing the EOU, and the Export of Service Rules under the Finance Act, 1994 cannot be imported to deny the benefit.

Court decision

The Tribunal held that 'export of service' in the impugned notifications must be understood in terms of the FTDR Act, 1992 (section 2(e)) and the FTP, not the Finance Act or the Export of Service Rules; since the services were supplied to recipients located outside India, consumed there, and paid for in convertible foreign exchange, the appellants were eligible for the benefit of Notifications 52/2003-Cus and 22/2003-CE. The impugned order was set aside and both appeals were allowed in favour of the appellant.

Facts

M/s Laxai Avanti Life Sciences Pvt Ltd, a 100% EOU doing R&D for biotechnology and pharmaceutical products for export, held a private customs bonded warehouse licence under section 58 and in-bond manufacturing permission under section 65 of the Customs Act, and imported plus locally procured capital goods and raw materials availing Notification No. 52/2003-Cus and No. 22/2003-CE, both dated 31.3.2003. It provided Technical Testing and Analysis (TTA) services to recipients located outside India and received payment in convertible foreign exchange, without performing any service (or part of it) outside India. The department held that under the Export of Service Rules the service had to be performed partly outside India to qualify as export, and since the appellant had done no physical exports, it denied the notification benefit, confirming demands of Customs and Excise duty with penalties by Order-in-Original dated 29.10.2012.

Key provisions

• Section 2(e), The Foreign Trade (Development and Regulation) Act, 1992 — Definitions.
• Section 58, Customs Act, 1962 — Licensing of private warehouses