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2017 (6) TMI 364 - AT - Service Tax100% EOU - refund claim - rejection on the ground that services rendered to SEZ and such services are only exempted and not export of services - Held that - As per Section 53 of SEZ Act, 2005, the SEZ territory is to be treated as territory outside the customs territory of India. Further, according to the SEZ Act 2005, supply of goods from DTA to SEZ constitutes exports - for the purposes of Rule 6 A of Service Tax Rules, the SEZ will necessarily have to be treated as territory deemed to be located outside India and the provision of any services provided by a DTA unit to an unit located in such SEZ shall be treated as export of service provided all other conditionalities of the said Rule 6 A are satisfied - further, there is no distinction in Rule 5 of the CCR 2004, between exports and deemed exports - export of such services to SEZ will necessarily have to be treated as deemed export and will be eligible for refund of accumulated credit under Rule 5 of CCR and notifications issued thereunder. The matter is remanded back to the original authority only to the limited purpose of verifying whether the payment received towards such services have been received in convertible foreign exchange or otherwise - appeal allowed by way of remand.
Issues:
Refund claim of accumulated cenvat credit for services provided to SEZ, applicability of Rule 5 of Cenvat Credit Rules, 2004, interpretation of SEZ Act and Service Tax Rules, 1994. Analysis: 1. The case involved a dispute over a refund claim of accumulated cenvat credit by an EOU for services provided to an SEZ. The original adjudicating authority partially allowed the refund, which was challenged by the department on the grounds of ineligibility of a portion of the amount related to services rendered to SEZ. The Commissioner (Appeals) upheld the department's appeal citing non-compliance with Notification No.17/2011-ST dated 01.03.2011. This led to the appeal before the CESTAT Chennai. 2. During the hearing, the appellant's advocate referred to Section 51 & 53 of SEZ Act and a circular clarifying SEZ's status outside India for customs purposes. The advocate argued that services to SEZ should be treated as exports, citing a Tribunal decision supporting this view. The respondent's representative contended that without Foreign Inward Remittance Certificates (FIRCs) for deemed exports to SEZ, Rule 5 of Cenvat Credit Rules cannot apply. 3. The CESTAT analyzed Rule 5 of Cenvat Credit Rules, 2004, which allows refund of cenvat credit for exported services. The definition of "export service" under Service Tax Rules, 1994, was also examined to determine if services to SEZ qualify as exports. The SEZ Act's provisions were crucial, with SEZ territory deemed outside India for customs purposes, making supply of goods to SEZ equivalent to exports. 4. The CESTAT noted the importance of payment in convertible foreign exchange for services to SEZ to qualify as exports. The tribunal found no distinction in Rule 5 between exports and deemed exports, emphasizing compliance with procedural requirements. A notification amendment highlighted the necessity of foreign exchange receipts for refund claims. The appellant's confirmation of foreign exchange receipts supported their eligibility for the refund. 5. Ultimately, the CESTAT ruled in favor of the appellant, deeming services to SEZ as deemed exports eligible for accumulated credit refund under Rule 5, subject to meeting procedural conditions. The case was remanded to verify foreign exchange payments for services, ensuring full compliance with Rule 5 and related notifications. In conclusion, the judgment clarified the treatment of services to SEZ as exports, emphasizing the significance of convertible foreign exchange receipts for refund eligibility under Rule 5 of Cenvat Credit Rules, 2004.
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