Delhi CESTAT held that the ab initio exemption provided under the SEZ provisions, having overriding effect on the service tax provision. Under such position of law, a notification under service tax cannot restrict or provide a time limit for grant of refund to the SEZ unit and developer.
FULL TEXT OF THE CESTAT JUDGEMENT
The issue in these appeals is the same and they are taken up together for hearing and disposal.
2. Heard the parties.
3. The issue in these appeals is whether the appellant-assessee a developer in the SEZ, who are fully exempt from payment of service tax under Section 26 (1)(e) read with 51 of SEZ Act, 2005, and whether denial of refund of service tax on the ground of limitation is justified.
4. To grant exemption to the units and developers in the SEZ Notification No. 40/2012-ST, which have been subsequently substituted by Notification No. 12/2013-ST dated 01.07.2013. As per the notification, under Section 93(1) of Finance Act, the Central Government have granted exemption from payment of service tax leviable under Section 66B of the Finance Act on services received by a unit located in a SEZ (hereinafter either SEZ unit or Developer) and used for the authorised operation from the whole of service tax, education cess and secondary and higher education cess leviable thereof. This exemption is provided by way of refund of service tax on the specified services received by the SEZ unit or developer and used for the authorised operation. It is further provided in clause (2) of the notification, that whether the specified services are received by the unit or by developer, are used exclusively for the authorised operation, the person liable to pay service tax has the option not to pay service tax ab initio subject to the condition and procedure as prescribed. Further, provides for refund of service tax on the specified services that are not exclusively used for authorised operation or the specified services on which ab initio exemption is admissible but not claimed, shall be allowed subject to procedure and condition prescribed. Further, in clause 3(iii) provides that refund claim 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 shall permit.
5. Admittedly, the appellant is a SEZ developer and they have received the specified services and paid service tax to the service provider who are registered with the Service Tax Department. Accordingly, as per the scheme under the SEZ Act and Rules read with notification hereinabove mentioned, the appellant filed periodical refund claims, which is as under:-
|Item No.||Appeal No.||Refund claimed||SEZ
|1||ST/52078/18||260323/-||Developer unit||30.4.15 to 5.11.15||19.5.17|
|2||ST/52079/18||591979/-||Module unit||31.7.15 to 4.8.16||19.5.17|
|3||ST/52080/18||1614604/-||Poly unit||26.2.15 to 30.6.15||19.5.17|
6. The Assistant Commissioner while processing the refund claim, found that the invoices submitted are more than twelve months old as on the date of filing of the refund application. Accordingly, it appeared to Revenue that under para 3(iii)(e) of Notification No. 12/2013, the refund is time barred and accordingly show cause notice was issued to deny the refund as time barred.
7. The refund claims were adjudicated vide separate orders-in-original for denial of refund claim on the ground of time bar under Section 11B of the Central Excise Act. Being aggrieved, the appellant filed appeals before the Commissioner (Appeals) who was pleased to dismiss the appeals. Being aggrieved, the appellant is before this Tribunal.
8. Learned Counsel appearing for the appellant urges that ab initio exemption is available to the appellant-assessee from payment of service tax under Section 26(1)(e) read with Section 51 of the SEZ Act, 2005 read with Rule 31 of SEZ Rules, 2006. This rule provides exemption, is available to a SEZ unit/developer with respect of services authorised, by developer without any restriction. Section 26 provides exemption from payment of service tax and Section 51 provides for overriding effect of the SEZ provisions over other statutes, including the provisions of service tax.
9. Thus, the issue which arises for consideration is whether the notification under Section 93(1) of Finance Act, 1994, can restrict the exemption available to the SEZ unit/developer. Learned Counsel have also drawn my attention to the precedent judgment of this Tribunal in the following decisions:-
i) Intas Pharma Ltd. vs. Commissioner of Service Tax, Ahmedabad -2013 (32) STR 543 (Tri. Ahmd.).
ii) Reliance Ports & Terminals Ltd. vs. Commr. of C. E. &ST, Rajkot-2015 (40) STR 200 (Tri. Ahmd.)
iii) Mahindra Engineering Service Ltd. vs. Commissioner of C. Ex. Pune-I, 2015 (38) STR 841 (Tri. Mumbai).
9. In the matter of Intas Pharma Ltd., the SEZ unit had applied for refund of service tax in relation to specified input services. Revenue had issued show cause notice proposing to disallowance of refund claim to the extent of Rs. 56,650/- out of total refund claim of Rs. 1,30,410/-, as some of the services like Architect, Interior designing and Consulting Engineer services appeared to be not wholly consumed by the SEZ unit. The adjudicating authority had held that though the architect services are further consumed in the SEZ, and therefore fall beyond the date of Notification No. 15/2009-ST. The rejection of refund in part was upheld by the Commissioner (Appeals). This Tribunal allowing the appeal of Intas Pharma (supra) held as follows:-
“7. We notice that the Special Economic Zones Act, 2005 (Central Act 28 of 2005) was enacted providing for SEZ within the territory of India and for providing inter alia immunities/exemptions from taxes/duties/cesses. Section 7 of the 2005 Act enjoins that any goods or services exported outside, or imported into, or procured from the domestic tariff area, by a unit in SEZ or a developer shall, subject to such terms and conditions and limitations, as may be prescribed be exempted from payment of taxes/duties/cesses under all enactments specified in the First Schedule. The First Schedule does not enumerate the Act (Finance Act, 1994) as among the enactments in respect of which exemption from taxes/duties or cesses is available under Section 7 of the 2005 Act. However, Section 26(1)(e) enacts that subject to the provisions of sub-section (2) thereof, every developer and entrepreneur shall be entitled to exemption from Service Tax under Chapter (V) of the Act on taxable services provided to a developer or unit to carry on the authorised operations in a SEZ.
8. In view of the legislative exemption supra and since provisions of the 2005 Act are provided an overriding effect vide Section 51; and absent any provision in the Act which eclipses the overarching trajectory of the 2005 Act, the immunity to Service Tax in respect of taxable services provided in relation to SEZ is a legislatively enjoined immunity. Therefore, any Service Tax paid/remitted by a service provider is liable to be refunded to the provider who has remitted Service Tax in relation to taxable services provided to a developer or unit, to carry on authorized operations in a SEZ.
9. However, the issue in this case is refund claimed by the petitioner as the recipient of the taxable service of Architect, Interior Decorator and Consulting Engineer, i.e. in respect of those services provided to the appellant by M/s. Venkataramanan Associates. Notification No. 9/2009-S.T., dated 3-3-2009 as earlier adverted to, enables claim of exemption by developers or units in SEZ by way of refund of Service Tax paid for services used in relation to authorized operations in SEZ, insofar as the claim for refund is filed within six months or within such extended period as the Assistant Commissioner or Deputy Commissioner of Central Excise, as the case may be, shall permit.
10. Insofar as Notification No. 15/2009-S.T. is concerned, Para „c‟ of the earlier Notification No. 9/2009-S.T. was substituted. The current requirement is that the exemption claimed by the developer or units of SEZ shall be provided by way of refund of Service Tax paid on the specified services used in relation to the authorised operations in the SEZ, except for services consumed wholly within the SEZ.
11. On true and fair construction of Notifications 9/2009 and 15/2009 issued under Section 93(1) of the Act, considered in the light of the overarching provisions of Sections 7 and 26(e) of the 2005 Act, the conclusion appears compelling that neither Notification 9/2009 nor 15/2009 disentitle immunity to Service Tax enjoined by the provisions of the 2005 Act. It therefore appears that Notification Nos. 9/2009 and 15/2009 merely contour the process by which the benefit of exemption/immunity to tax is operationalised. Notification Nos. 9/2009 and 15/2009 have provided a facilitative regime whereby a developer or units of SEZ, as recipients of taxable service are enabled the facility of claiming refund of Service Tax, remitted by taxable service providers in relation to the taxable services provided to a unit in a SEZ. On this harmonious construction, the immunity to Service Tax provided under Section 7 or 26 of the 2005 Act cannot be so interpreted as to be eclipsed by the procedural prescriptions of Notification No. 9/2009 or 15/2009. These Notifications are calibrated to enable recipients of taxable services (exempt from liability to tax under the provisions of the 2005 Act), to claim refund of the Service Tax, wherever assessed and collected by Revenue or remitted otherwise by the taxable service provider, inadvertently. Considered in the light of this analysis, the substituted provisions, of clause/sub-paragraph „c‟ of Notification No. 15/2009 cannot be inferred to have imposed any disability on the recipient of services consumed wholly within the SEZ, from seeking refund of Service Tax remitted on such transactions, by the providers of such services.”
10. Having considered the rival contentions and relying on the precedent decisions of this Tribunal, particularly in the case of Intas Pharma (supra), I hold that the ab initio exemption provided under the SEZ provisions, having over riding effect on the service tax provision. Under such position of law, a notification under service tax cannot restrict or provide a time limit for grant of refund to the SEZ unit and developer. Accordingly, impugned orders are set aside and appeals are allowed. The appellant is entitled to consequential benefit, in accordance with law. I further direct the adjudicating authority to grant the refund within a period of 45 days from the date of receipt of this order alongwith interest as per Rules.