Case Law Details
Neeraj Insulation Contractors Vs Commissioner of C.E. & S.T. (CESTAT Ahmedabad)
Background of the Dispute
The appellant provided hot and cold insulation work and other associated services during the financial years 2013-14 and 2014-15 to ONGC Petro Additions Limited on account of Samsung Engineering Co. Ltd., both being SEZ units at Dahej. The services were rendered without payment of service tax by claiming exemption under Notification No. 40/2012-ST dated 20.06.2012 and Notification No. 12/2013-ST dated 01.07.2013.
A show cause notice dated 29.05.2017 proposed recovery of service tax by denying the exemption on the ground that the services had been provided without proper authorization in Forms A-1 and A-2. The appellant submitted a detailed reply along with documentary evidence, including the contract, letter of intent, inspection reports, invoices, Forms A-1 and A-2, and relied upon various judicial precedents. Despite these submissions, the adjudicating authority confirmed the demand, and the Commissioner (Appeals) also rejected the appeal on the ground that proper authorization under Form A-2 was not available. Consequently, the appellant approached the Tribunal.
Appellant’s Contentions
The appellant submitted that it was undisputed that the services were provided to and consumed by SEZ units for authorised operations. It relied upon Section 26(1)(e) of the SEZ Act, 2005, which grants exemption from service tax for taxable services provided to an SEZ developer or unit, and Section 51, which gives the SEZ Act overriding effect over other laws.
It was further argued that even if service tax were payable, the SEZ recipient would be entitled to a refund, rendering the entire exercise revenue neutral. The appellant also contended that the issue involved interpretation of the exemption notifications and that it had acted under a bona fide belief that no service tax was payable on services supplied to SEZ units. It therefore challenged the invocation of the extended period of limitation and relied upon several judicial decisions in support of its case.
Tribunal’s Findings
The Tribunal observed that there was no dispute that the appellant had provided services to an SEZ unit. It noted that the exemption had been denied solely because Forms A-1 and A-2 had allegedly not been submitted. However, the Tribunal found that the appellant had produced these forms during the reply to the show cause notice, yet the adjudicating authority still denied the exemption.
The Tribunal held that even if Forms A-1 and A-2 had not been submitted at the relevant time, the exemption could not be denied once the forms were subsequently produced. It further observed that earlier Tribunal decisions had consistently held that where the provision of services to an SEZ unit is undisputed, the substantive benefit of exemption cannot be denied merely because of non-submission of Forms A-1 and A-2. The Tribunal treated these forms as procedural requirements and held that failure to submit them initially could not defeat the statutory exemption.
The Tribunal also reiterated that, under the SEZ Act, services supplied to SEZ units are otherwise not taxable and that the provisions of the SEZ Act override other enactments. Therefore, denial of exemption in the present case was held to be unjustified.
Final Decision
The Tribunal held that the appellant was not liable to pay service tax on services admittedly provided to SEZ units. It concluded that the demand was unsustainable, set aside the impugned order, and allowed the appeal.
FULL TEXT OF THE CESTAT AHMEDABAD ORDER
The fact of the case is that the Appellant during the period 2013-14 & 2014-15 performed services of Hot and Cold insulation work and other associated services to ONGC Petro Additions Limited on account of M/s Samsung Engineering Co Ltd, both of which companies are SEZ Units in Dahej, SEZ without payment of service tax and claimed exemption under Notification No.40/2012-ST dated 20.06.2012 & Notification No. 12/2013-DT dated 01.07.13.
1.1 The SCN dated 29.05.2017 issued to the Appellant demanding service tax by denying the benefit of Notification No. 40/2012-ST dated 20.06.2012 & Notification No. 12/2013-ST dated 01.07.13 on the ground that the Appellant provided services to M/s Samsung Engineering Co Ltd, Dahej, SEZ without proper authorization from competent authority in Form No.A-1/A-2.
1.2 The Appellant filed detailed reply dated 18.07.2017 along with documentary evidence like copy of contract dated 21.11.2013 between M/s Samsung Engineering Co Ltd, Dahej, SEZ and Appellant, copy of letter of intent dated 21.03.2013, copy of inspection report in respect of work performed by the Appellant, copy of invoices, Form No.A-1 issued by ONGC Petro Additions Limited describing the services to be availed under Notification No.40/2012 dated 20.06.2012 including the details of DTA Service Provider, Form No.A-2 certified by Deputy Commissioner of Central Excise andCustoms and relied upon judgments of various Tribunals and High Courts and Supreme Court.
1.3 The Adjudicating Authority confirmed the demand of service tax vide OIO dated 17.01.2018 without considering above documentary evidence and relied upon judgments.
1.4 The Appellant filed the Appeal before Hon’ble Commissioner (Appeals) on various grounds.
1.5 The Appellate Authority also rejected the Appeal of the Appellant on the ground that the Appellant provided services to M/s. Samsung Engineering Company Limited, Dahej, SEZ without cover of proper authorization in Form No.A-2. Therefore, the present appeal is filed by the appellant
2. Shri Mrugesh Pandya, Learned Counsel appearing on behalf of the appellant submits that it is undisputed fact that the services were not only provided by appellant to SEZ unit during the material period but also the services were duly consumed by Special Economic Zone unit. He submits that this fact has not been disputed even in the show cause notice. He further submits that the entrepreneur (domestic unit) shall be entitled to exemption from the service tax under Chapter-V of the Finance Act, 1994 on taxable services provided to a developer or unit to carry on the authorized operations in a Special Economic Zone as per Section 26(1)(e) of the SEZ Act,2005, that Section 51 of the SEZ Act,2005 has overriding effect over any other law time being in force. Therefore, in any case demand of service provided to SEZ is not sustainable. He further submits that even if the appellant is liable to paythe service tax the recipient of service in SEZ is eligible for refund. Therefore, the payment of service tax and subsequent refund will make the situation revenue neutral, for this reason also demand will not sustain. He placed reliance on the judgment of Ultratech Cements Ltd. Versus Commr. of C. Ex. & S.T. Tiruchirapalli- 2016(343) E.L.T. 164 (Tri. Chennai). He further submits that issue pertains to interpretation of Notification No.40/2012-S.T. dated 20.06.2012 and Notification No.12/2013-S.T. dated 01.07.2013. The appellant provided services to SEZ unit under the bonafide belief that no service tax payment is required as the supplies made to SEZ unit. Accordingly, there is no malafide intention to evade the payment of service tax during the material period. Therefore, the show cause notice issued for extended period is patently time barred. He placed reliance on the following judgments:-
- CESTAT Order dated 14.05.2024 in the case of ArdexEndura India Pvt. Ltd.
- Commissioner Versus FEDCO Paints and Contracts 2018 (10) G.S.T.L. J207 (S.C.).
- Commissioner of Service Tax, Mumbai-I Versus FEDCO Paints and Contracts 2017 (3) G.S.T.L. 364 (Tri. – Mumbai).)
- Deloitte Haskins & Sells Versus C.C.E & ST. – Vadodara-I-2023 (10) TMI 741 – CESTAT AHMEDABAD.
- Barclays Global Service Centre Pvt. Ltd. Versus Commr. of Central Tax, Pune-I- 2018 (362) E.LT. 889 (Tri-Mumbai)
- ZydusHospira Oncology Pvt. Ltd. Versus Commr of C. Ex., Ahmedabad – 2013 (30) S.T.R. 487 (Tri. Ahmd.).
- Eclerx Services Ltd. Versus Commissioner of CGST & C Ex., Navi Mumbai 2023 (72) G.S.T.L. 99 (Tri.-Mumbai).
- Commissioner of CGST, Navi Mumbai Versus Eclerx Services Ltd. 2023 (72) GS.T.L. 4 (S.C.).
- GMR Aerospace Engineering Ltd. Versus Union of India – 2019 (31) GSTL. 596 (Α.Ρ.).
- Union of India Versus GMR Aerospace Engineering Ltd. (2023) 6 Centax 155(S.C.).
3. Shri Sanjay Kumar, Learned Superintendent (AR) appearing on behalf of the Revenue, reiterates the findings of the impugned order.
4. We have carefully considered the submission made by both the sides and perused the records. We find that there is no dispute that the appellant have provided the services in the SEZ unit. Therefore, eligible for exemption from payment of service tax under Notification (supra). The lower authorities have denied the exemption only on the ground that the appellantfailed to submit form A-1 and A-2. We find that during the reply to show cause notice the appellant have submitted form No. A-1 and A-2, despite that the adjudicating authority has confirmed the demand denying the exemption.
We are of the view that even though, the appellant have not submitted the form No.A-1 and A-2 at the relevant time but at later date the exemption cannot be denied. Moreover, this Tribunal has taken a view in various judgments cited by the appellant that so long provision of service in SEZ unit is not disputed the substantial benefit of exemption cannot be denied merely fornon submission of form A-1 and A-2. This Tribunal has taken a view that in such situation form A-1 and A-2 is procedural requirement and for which the exemption cannot be denied. This Tribunal has also taken a view since, as per the SEZ Act the supply of service to SEZ is otherwise not taxable and the provision of SEZ Act override any other Act, the denial of exemption in the present case is not justified.
5. Accordingly, we are of the view that appellant are not required to pay service tax in respect of service admittedly, provided to SEZ unit. Therefore, the demand is not sustainable. Hence, the impugned order is set aside and appeal is allowed.
(Pronounced in the open court on 15.10.2024)
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