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2015 (3) TMI 138 - HC - Service TaxDenial of refund claim u/s 11B - SEZ - assessee claimed refund of service tax paid thereon under Notification No.9/2009-ST dated 3rd March 2009 as amended by Notification No.15/2009-ST dated 20th May 2009 - Department was of the view that the services consumed within the SEZ are exempt from tax. Hence no refund can be claimed on such exempt input services under the Notifications - Maintainability of appeal - Held that - As per Rule 31 of the Special Economic Zone Rules 2006 the appellants are entitled for exemption from payment of service tax on the services which are used or provided for a unit in the SEZ. The Tribunal referred to section 51 of the SEZ Act 2005 and held that these provisions prevail over the provisions contained in any other law for the time being in force. It is the avowed policy objective of the Government of India that exports should not bear the burden of taxes. If this policy objective has to be sub-served and the objective realized broader view of the provisions relating to refund has to be taken. Therefore even if the appellants were not eligible for refund under Notification No.9/2009-ST the appellants were clearly eligible for refund under section 11B of the Central Excise Act 1944. Therefore the rejection of service tax refund is not sustainable in law. Clause (c) of explanation to section 35E(5) reveals as to how it covers a case of the goods being excisable at all or whether the rate of duty of excise on any goods is nil. This clause is an aid or guide with the assistance of which we can decide as to whether any question has a relation to the rate of duty of excise as appearing in section 35-G(1) of the Central Excise Act 1944. - Preliminary objections are upheld - Appeal are not maintainable - Decided against Revenue.
Issues Involved:
1. Whether CESTAT was right in holding that refund of Service Tax was available to the assessee under Section 11B of the Central Excise Act, 1944, when the claim was actually filed under Notification No.9/2009-ST or under Notification No.15/2009-ST. 2. Whether CESTAT was right in holding that the assessee was eligible for refund at all, when Notification No.15/2009-ST (which amended Notification No.9/2009-ST) specifically provided that if services are wholly consumed in the SEZ, then the same would be exempted from payment of service tax. 3. Preliminary objection regarding the maintainability of the appeals in the High Court based on Section 35-G of the Central Excise Act, 1944. Detailed Analysis: 1. Refund of Service Tax under Section 11B of the Central Excise Act, 1944: The core issue was whether the CESTAT was correct in allowing the refund of service tax under Section 11B of the Central Excise Act, 1944, when the claim was filed under Notification No.9/2009-ST or Notification No.15/2009-ST. The Tribunal had ruled in favor of the assessee, allowing the refund under Section 11B, which was contested by the Revenue. The Tribunal relied on its previous decisions in the cases of Tata Consultancy Services Limited and Wardha Power Company, concluding that the refund could be claimed under Section 11B, provided the conditions stipulated therein were satisfied. 2. Eligibility for Refund when Services are Consumed in SEZ: The Tribunal held that the assessee was eligible for a refund even when the services were wholly consumed in the SEZ, which would exempt them from payment of service tax. The Tribunal interpreted the Notifications to mean that services consumed within the SEZ were not taxable, thus allowing the refund claim. The Tribunal's decision was based on the premise that services provided to SEZ or units in the SEZ are deemed as export, and under Rule 31 of the SEZ Rules, 2006, the appellants are entitled to exemption from service tax. 3. Preliminary Objection on Maintainability of Appeals: A significant point of contention was the preliminary objection raised by the respondent regarding the maintainability of the appeals in the High Court. The respondent argued that under Section 35-G of the Central Excise Act, 1944, the appeals should be directed to the Hon'ble Supreme Court as they involved questions related to the rate of duty of excise. The High Court examined the language of Section 35-G and the relevant explanations provided in Section 35-E of the Central Excise Act, 1944. The Court referred to the Supreme Court's judgment in Navin Chemicals Manufacturing & Trading Company Limited vs. Collector of Customs, which clarified that questions relating to the rate of duty and the value of goods for assessment fall within the purview of the said expression. The High Court concluded that the issue of whether services consumed within the SEZ are exempt or taxable has a direct relation to the rate of duty. Thus, the appeals involved questions that should be determined by the Supreme Court, not the High Court. Consequently, the preliminary objection was upheld, and the appeals were dismissed as not maintainable before the High Court. Conclusion: The High Court upheld the preliminary objection regarding the maintainability of the appeals, directing that the Revenue should approach the Supreme Court for challenging the Tribunal's orders. The Tribunal's decision to allow the refund under Section 11B and the eligibility for refund of services consumed in the SEZ were central issues, but the High Court did not adjudicate on these merits due to the jurisdictional limitation under Section 35-G of the Central Excise Act, 1944.
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