2012 (12) TMI 793 - AT - Service Tax

Refund of input service tax credit for the activities undertaken within the SEZs - Business Auxiliary Services - Held that - As clarified by the Board in the Circular no. 105/8/2008 dated 16.09.2008 it is for the jurisdictional Excise/Service Tax authorities to deal with the refund claims filed by the SEZ units. Therefore, it is very clear that the appellant is eligible for refund of service tax paid which was not required to be paid under section 11B of the Act itself, provided that the appellant has filed the refund claim within the prescribed time-limit and the bar of unjust enrichment does not apply. As the appellant has exported the output service the principle of unjust enrichment does not apply - remand the case back to the original adjudicating authority to examine the claim with respect to the time-limit involved and if the refund claim is in time, to sanction it - in favour of assessee by way of remand.

Summary

Issues:
Claim for refund under Rule 5 of CENVAT Credit Rules by SEZ unit.

Analysis:
The appellant, a SEZ unit, exported taxable output service without paying service tax, resulting in an accumulation of unutilized credit of service tax availed on input service. The lower adjudicating authority rejected the refund claim stating that the appellant procured input service from the Domestic Tariff Area, which was exempted, and thus, the appellant should not have paid any duty. The appellate authority also dismissed the appeal, stating that the CENVAT Credit Rules and notifications are not applicable to SEZ units. The appellant argued that there is no provision debarring SEZ units from claiming refunds under Rule 5 of the CENVAT Credit Rules. They relied on a Board Circular and court judgments supporting their claim for refund under the more beneficial exemption notification.

The Tribunal observed that the appellant had utilized duty-paid input service in rendering the exported output service and was registered under the category of 'Business Auxiliary Service'. Referring to the Board's Circular, the Tribunal highlighted that jurisdictional authorities should handle refund claims by SEZ units. It concluded that the appellant was eligible for a refund under section 11B of the Act, provided the refund claim was within the prescribed time-limit and unjust enrichment did not apply. As the appellant exported the output service, the principle of unjust enrichment did not apply. The Tribunal set aside the impugned order and remanded the case to the original adjudicating authority to examine the time-limit for the refund claim and, if in time, to sanction the refund in accordance with the law.

Therefore, the Tribunal allowed the appeal by way of remand, emphasizing the eligibility of the SEZ unit for a refund under section 11B of the Act, subject to meeting the prescribed conditions and time-limit for the refund claim.