2017 (12) TMI 1184 - AT - Service Tax

Refund claim - services consumed in SEZ unit - N/N. 17/2011-ST dated 1.3.2011 - denial of refund on the ground that there were no nexus between the services and the operation carried out in the SEZ - Held that - In absence of proper enquiry being conducted to bring out that the service was not utilized or the evidence adduced was insufficient nor there was any evidence, it is not possible to be appreciated that the appellant was disentitled to the benefit of refund. The flimsy plea of Revenue is also that the invoices were in the name of head office and tours were not verifiable as well as certain invoices were not relatable do not base on any enquiry result for which allegation of Revenue without discharging its burden of proof fails to stand. Further, stand of Revenue does not seem to be substantiated without any cogent or credible evidence brought to record. We may make it clear that we have not read the show cause notice hypertechnically but minutely. Taking note of method of approach of learned adjudicating authority to law, failing to examine relevant evidence, without causing enquiry wherever needed as well as improper evaluation of evidence and having suspicion on the appellant, his order is set aside - appeal allowed - decided in favor of appellant.

Issues:
1. Denial of refund application for services consumed in SEZ.
2. Dispute regarding nexus between services and operation in SEZ.
3. Allegations of lack of evidence for service utilization in SEZ.
4. Evaluation of disallowed services by the Authority.
5. Burden of proof on the appellant for refund entitlement.
6. Disallowances based on suspicion without substantial proof.
7. Invoices in the name of head office affecting refund claim.
8. Set aside order based on improper evaluation of evidence.
9. Public interest and guidance for proper adjudication.

Analysis:

1. The appellant filed a refund application for services consumed in the SEZ, seeking entitlement under Notification No.17/2011-ST. The Revenue denied the refund, citing a lack of nexus between the services and the SEZ operation.

2. The appellant argued that being an SEZ, it was entitled to avail exempt services, and subsequent approvals for certain services were granted by the Development Commissioner, integral to SEZ operations.

3. The Revenue contended that there was no evidence of service utilization in the SEZ, leading to the dismissal of the appellant's claim. The Authority below evaluated specific services like goods transport, management, and repair services, highlighting the lack of proof for SEZ utilization.

4. The Authority disallowed certain services based on suspicion without substantial proof, leading to the denial of the refund. The appellant emphasized that suspicion alone cannot substitute proof, and the Revenue failed to discharge the burden of proof for non-utilization in the SEZ.

5. The burden of proof was a crucial aspect, with the appellant arguing that the evidence supported service utilization in the SEZ, shifting the burden to the Revenue to prove otherwise.

6. The Tribunal found the Authority's approach flawed, citing improper evaluation of evidence, lack of necessary inquiries, and suspicions without concrete proof, leading to the setting aside of the order and allowing the appeals.

7. The Revenue's objections regarding invoices in the name of the head office and unverifiable tours were dismissed as lacking substantial evidence or verifiability, emphasizing the need for a thorough examination of evidence.

8. The Tribunal's decision to allow the appeals was based on an objective analysis of facts and circumstances, ensuring public interest was not compromised, and highlighting the importance of proper guidance for adjudication to prevent wastage of resources.

9. The judgment emphasized the need for a meticulous approach to adjudication, avoiding futile exercises, and ensuring a fair and evidence-based decision-making process to uphold the purpose of SEZ establishments.

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