Lupin Limited Vs Commissioner of Central Goods & Service Tax & Central Excise (CESTAT Delhi)
CESTAT Delhi held that general principles of interpretation of the exemption notification that it has to be construed strictly shall not really apply to the SEZ units which are otherwise exempted from the liability of the various duties under the main statute itself.
Facts- The present appeal arises out of the remand proceedings. Earlier this Tribunal by order dated 09.12.2019 was pleased to remand the matter to the original authority to verify the date on which the appellant, SEZ unit made the payment of service tax and whether the impugned claims are within the time limit and if not whether the delay could be condoned.
Having reconsidered the two issues, the adjudicating authority vide order dated 29.05.2020 rejected the applications claiming refund of service tax paid on input services as barred by limitation. Being aggrieved, the appellant filed the appeal, however it was rejected by the Commissioner (Appeals) vide order dated 16.09.2020. Hence the appellant has filed the present appeal before this Tribunal.
Conclusion- Held that the general principles of interpretation of the exemption notification that it has to be construed strictly shall not really apply to the SEZ units which are otherwise exempted from the liability of the various duties under the main statute itself. The avowed object of providing such exemptions has to be the guiding principle for the applicability and the interpretation of the Notification to the SEZ units.
It is evident that the appellant fulfilled the criterias of eligibility to claim refund of the service tax paid on input services in terms of the Notification No 12/2013-ST. Infact it is not the case of the revenue that the appellant is not eligible to make such claims. Their only objection is to the claim being filed beyond the period of one year as per the notification. We are of the considered opinion that once the appellant is found to be eligible to claim the refund, the substantive conditions are complied with and the condition of time limit for making the claim under the notification being only a procedural requirement, needs to be construed liberally.
FULL TEXT OF THE CESTAT DELHI ORDER
The present appeal arises out of the remand proceedings. Earlier this Tribunal by order dated 09.12.2019 was pleased to remand the matter to the original authority to verify the date on which the appellant, SEZ unit made the payment of service tax and whether the impugned claims are within the time limit and if not whether the delay could be condoned.
2. Having reconsidered the two issues, the adjudicating authority vide order dated 29.05.2020 rejected the applications claiming refund of service tax paid on input services as barred by limitation. Being aggrieved, the appellant filed the appeal, however it was rejected by the Commissioner (Appeals) vide order dated 16.09.2020. Hence the appellant has filed the present appeal before this Tribunal.
3. Briefly stated, the appellant is engaged in the manufacture and export of pharmaceutical products at their unit in SEZ, Pithampur, having Letter of Approval (LA) for undertaking authorised operations within SEZ at Pithampur. The head office of the appellant is in Mumbai which has been registered as Input Service Distributor (ISD). Under Notification No. 12/2013-ST dated 01.07.2013, the appellant filed two applications in Form A-4 claiming refund of service tax paid on input services received in SEZ unit, i.e.
i) on 10.10.2017 for a sum of Rs 17,61,17,668/ for the period January 2017 to March 2017 and
ii) on 28.03.2018 for a sum of Rs 95,02,081/ for the period April 2017 to June 2017.
4. The adjudicating authority vide order dated 12.03.2019 sanctioned the refund of Rs. 12,39,33,099/- for the period January 2017 to March 2017 and rejected the remaining claim of Rs. 5,21,62,728/- being time barred. Similarly, for the period April 2017 to June 2017 the adjudicating authority sanctioned the refund of 44,64,081/- towards service tax paid on the specified services used for authorised operations in SEZ and rejected the refund of Rs.50,15,384/- being time barred vide order dated 15.05.2019. The appeal filed by the Appellant before the Commissioner (Appeals) also met the same fate as per the order dated 18.6.2019.
5. We have heard the Learned Counsel for the appellant and also the authorised representative of the revenue and have perused the records. The basic question that arises in the present case is whether the claim for refund of service tax paid on input services has been filed within the time limit in terms of para 3 (III) (e) of the Notification No. 12/2013-ST dated 01.07.2013 and if the same is hit by latches, is the appellant entitle to condonation of delay.
6. The main argument of the learned Counsel for the Appellant is that SEZ Act, 2005 being a special statute prevails over any other Act. Referring to series of judgements, he submitted that for calculating the time limit of one year in terms of the Notification No. 12/2013-ST dated 01.07.2013, the date of ISD invoice should be considered, as the SEZ unit comes to know of the tax pertaining to Table II services only after receiving the said ISD invoices.
a) SRF Ltd., vs. Commissioner of Cus., C. Ex., & S.t. LTU, New Delhi 2022 (64) GSTL 489 (Tri. Del.)
b) Wabco India Ptd vs. Commissioner -2021 (54) GSTL 37 (Tri.Chen)
c) DLF Assets Pvt. Ltd. Vs. Commissioner, Service Tax, Delhi-I 2021 (45) GSTL 176 (Tri. Del.)
d) GMR aerospace Engineering Ltd., vs. Union of India 2019 (31) GSTL 596
e) ATC Tyres Pvt. Ltd., vs. Commissioner of GST & CE, Trirunelveli 2021-VIL-106-CESTAT-CHE-ST
f) CCE vs. Reliance Industries Ltd.-2019-TIOL-1754-CESTAT-AHM
g) Himatsingka Linens vs. CCE -2019-TIOL-508-CESTAT-BANG
h) Commissioner of Central Excise and Service Tax, Rajkot vs. Reliance Industries Ltd.,-2022-TIOL-19-CESTAT-AHM
i) Government of Kerala vs. Mother Superior adoration convent 2021-TIOL-156-SC-MISC
j) Commissioner of Central Excise and Service Tax, Rajkot vs. Reliance Industries Ltd. -2022-TIOL-19-CESTAT-AHM
7. In rebuttal, the main thrust of the Learned Authorised Representative was on the scope of remand as the matter was remanded by this Tribunal on limited issue to ascertain the time limit after verifying the date of payment of service tax and in the event of any delay, whether the same could be condoned. Referring to the decisions in J.J. Meridian Industries Ltd. Vs. CCE – 2015 (325) ELT 417 (SC), and Commissioner of C. Ex. Trichy Vs. Rukmani Pakkwell Traders -2004 (165) ELT 481 (SC), he relied on the general principles of interpretation of the exemption notification, to say that it has to be construed strictly and also pleaded the doctrine of approbation and reprobation. On the issue of delay, he submitted that it is a matter of discretion and the Tribunal should not interfere unless the order is arbitrary, capricious or unjust and relied on Sonali Steels & Alloys (P) Ltd., Vs. Union of India -2000 (123) ELT 493 (Mad.), Goyal Traders Vs. Commr. of C. Ex., & Cus. Ahmedabad -2001 (136) ELT 1401 (Tri. Mumbai) and Bombay Pharma Products Vs. Collector of Customs, Bombay – 1988 (34) ELT 691 (Tri.). In the written submissions filed by the revenue, it is submitted that the impugned notification having been declared as non-existent in the case of GMR (supra) and in SRF (supra), the present appeal needs to be dismissed.
8. Before examining the case on merits, we need to peruse the observations made by the Tribunal while remanding the matter to the adjudicating authority. Para 6 of the order dated 09.12.2019 is in following terms:
“6. The bare perusal makes it clear that the relevant date from which is to reckon the period of limitation is the end of the month in which the SEZ Unit paid the Service Tax. It is the case of the appellant that from the date of the payment of service tax by him his refund claim is well within the period of limitation. From the order under challenge, it is clear that date of invoice to the ISD of appellant SEZ is taken as the starting point for the period of limitation. The date of payment of Service Tax is, however, not available on the record. It is not possible for us to verify as to whether the date of invoice and date of payment of service tax are same or not. In the given circumstances, we deem it appropriate that matter be remanded back to the original adjudicating authority to verify as to what is the date on which the appellant, the SEZ Unit made the payment of service tax and then to adjudicate as to whether the impugned claims are within the time limit or not”.
9. The adjudicating authority while considering the matter on remand, misconstrued the observations of this Tribunal and the submissions of the appellant that the date of invoice to the ISD has been wrongly taken as the relevant date for computing the period of one year and on the issue of condonation of delay the order of the adjudicating authority is silent. We feel that the adjudicating authority dealt with the matter with very closed mind and misconstrued the argument made by the appellant with reference to the applicability of the notification which have been noted in Para 17.6 of the earlier OIO dated 12.03.2019 which is quoted below:-
“17.6. I find that it is the contention of the claimant that the limitation is applicable only in refund claim pertaining to ISD credits, payment to the service provider is made by the ISD and not the SEZ unit, time limitation of one year period would not apply in case of refund claim filed for ISD credits. From the plain reading of the above clause, I find that for deciding the time limit, the month in which actual payment of service tax has been made by the SEZ unit to the registered service provider is to be seen. There is nothing in the above clause which suggests that time limit of one year will not apply to an ISD. The above said notification lists out certain conditions subject to which refund of service tax would be available.”
Thus, what falls from above is that the appellant referred to the applicability of limitation only to a case where payment was required to be made by the SEZ unit to the service provider but where payment was made by the ISD to the service provider, the time limit of one year would not apply. The adjudicating authority fell in error in arriving at the conclusion that under Para 3(III)(e) of the Notification the relevant date should be the actual payment by the ISD to the service provider and neither the date of invoice of ISD nor the date of payment by the SEZ unit to its Head office, i.e. ISD can be taken note of. Therefore, the adjudicating authority proceeded to justify its earlier order by quoting the paras from there and concluded:
“14.6. In view of the above reproduced paras of the two original adjudication orders, I find it pertinent to mention that the date of actual payment of service tax by the ISD to the service providers was and is available on record. Therefore, in accordance with Para 3(III)(e) of Notification No. 12/2013-ST dated 01.07.2013 time limit of one year was calculated from the end of the month in which actual payment of service tax was made by the ISD to the registered service provider. I find that ISD had made payment of service tax amount of Rs. 5,21,60,728/- (Rs.5,20,63,537/- + Rs. 97,191/-) to the service providers on various dates prior to 01.10.2016 whereas, the claim applicable was made on 10.10.2017. Therefore, there is no doubt in my mind that the claim of Rs. 5,21,60,728/- (Rs.5,20,63,537/- + Rs.97,191/-) is time barred in view of para 3(III)(e) of Notification No. 12/2013-ST dated 01.07.2013 which prescribes time limit of one year from the end of the month in which actual payment of service tax was made by such Developer or SEZ Unit to the registered service provider. Accordingly, claim of Rs. 5,21,60,728/- (Rs.5,20,63,537/- + Rs. 97,191/-) is liable to be rejected. I find it pertinent to mention that the claimant vide letter dated 17.05.2018 had already withdrawn the claim of Rs. 97,191/- on account of being time barred. I find that the claimant during the course of personal hearing held on 18.03.2020 has submitted that the said claim of Rs. 97,191/- stands withdrawn and it was mistakenly included in the appeal before the Hon’ble CESTAT. It is strange that if the refund claim of Rs. 97,191/- out of the claim of Rs. 5,21,60,728/- is admittedly time barred in claimant’s own view then how the remaining amount can be within the time limit on the same criteria of the date of payment by ISD to the service providers”.
10. The condonation of delay was rejected as according to the adjudicating authority no new grounds have been presented by the claimant for reconsideration. This reasoning of the Adjudicating Authority seems to be unreasonable as there cannot be any new grounds for the condonation of delay, as on today. The grounds on which a party may seek condonation of delay cannot change with the passage of time, however, the same needs to be examined in the light of the law prevalent on the point, particularly in the facts of the present case where we are dealing with the special statute of beneficial nature. The Adjudicating Authority took a very conservative approach in taking the view against the condonation of delay.
11. The Commissioner (Appeals) in a very routine manner reaffirmed the findings of the adjudicating authority both on the applicability of the limitation as well as on the condonation of delay by the impugned order. Hence the appellant has challenged the said order in the present appeal before this Tribunal.
12. We are conscious of the scope of the remand order and the order passed in the present case on 19.12.2019, however keeping in view the law as enunciated by the various decisions of the High Court and the Tribunal, we find that the issue is no longer res-integra and the present controversy stands settled.
13. Before referring to the case laws we would like to refer to the relevant provisions of the Notification under consideration:-
“3. This exemption shall be given effect to in the following manner:
I The SEZ Unit or the Developer shall get an approval by the Approval Committee of the list of the services as are required for the authorised operations (referred to as the ‘specified services’ elsewhere in the notification) on which the SEZ Unit or Developer wish to claim exemption from service tax.
II The ab-initio exemption on the specified services received by the SEZ Unit or the Developer and used exclusively for the authorised operation shall be allowed subject to the following procedure and conditions, namely:-
(a) the SEZ Unit or the Developer shall furnish a declaration in Form A-1, verified by the Specified Officer of the SEZ, along with the list of specified services in terms of condition (I);
(b) on the basis of declaration made in Form A-1, an authorisation shall be issued by the jurisdictional Deputy Commissioner of Central Excise or Assistant Commissioner of Central Excise, as the case may be to the SEZ Unit or the Developer, in Form A-2;
(c) the SEZ Unit or the Developer shall provide a copy of said authorisation to the provider of specified services. On the basis of the said authorisation, the service provider shall provide the specified services to the SEZ Unit or the Developer without payment of service tax;
(d) the SEZ Unit or the Developer shall furnish to the jurisdictional Superintendent of Central Excise a quarterly statement, in Form A-3, furnishing the details of specified services received by it without payment of service tax;
(e) the SEZ Unit or the Developer shall furnish an undertaking, in Form A-1, that in case the specified services on which exemption has been claimed are not exclusively used for authorised operation or were found not to have been used exclusively for authorised operation, it shall pay to the government an amount that is claimed by way of exemption from service tax and cesses along with interest as applicable on delayed payment of service tax under the provisions of the said Act read with the rules made thereunder.
III The refund of service tax on (i) the specified services that are not exclusively used for authorised operation, or (ii) the specified services on which ab-initio exemption is admissible but not claimed, shall be allowed subject to the following procedure and conditions, namely:-
(a) the service tax paid on the specified services that are common to the authorised operation in an SEZ and the operation in domestic tariff area [DTA unit(s)] shall be distributed amongst the SEZ Unit or the Developer and the DTA unit (s) in the manner as prescribed in rule 7 of the Cenvat Credit Rules. For the purpose of distribution, the turnover of the SEZ Unit or the Developer shall be taken as the turnover of authorised operation during the relevant period.
(b) the SEZ Unit or the Developer shall be entitled to refund of the service tax paid on (i) the specified services on which ab-initio exemption is admissible but not claimed, and (ii) the amount distributed to it in terms of clause (a).
(c) the SEZ Unit or Developer who is registered as an assessee under the Central Excise Act, 1944 (1 of 1944) or the rules made thereunder, or the said Act or the rules made thereunder, shall file the claim for refund to the jurisdictional Deputy Commissioner of Central Excise or Assistant Commissioner of Central Excise, the as the case may be, in Form A-4;
(d) the amount indicated in the invoice, bill or, as the case may be, challan, on the basis of which this refund is being claimed, including the service tax payable thereon shall have been paid to the person liable to pay the service tax thereon, or as the case may be, the amount of service tax payable under reverse charge shall have been paid under the provisions of the said Act;
(e) the claim for refund shall be filed within one year from the end of the month in which actual payment of service tax was made by such Developer or SEZ Unit to the registered service provider or such extended period as the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be, shall permit;
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9
FORM A-4
[Refer condition at S.No.3 (III)(c)]
Application for claiming refund of service tax paid on specified services used for authorised operations in SEZ under Notification No. 12/2013-ST dated 01.07.2013
TABLE –I
