2018 (1) TMI 113 - AT - Service Tax

SEZ unit - refund of service tax - N/N. 40/12-ST dt. 20.06.2012 - Held that - the Revenue in their memo of appeal, has not been satisfactorily able to convass their case. Once the substantive condition of the Notification has been fulfilled by an Assessee, denial of refund on the procedural condition, which are impossible to observe, cannot be appreciated - appeal dismissed - decided against Revenue.

Summary

Issues involved:
Refund claim admissibility for a SEZ unit engaged in manufacturing solar modules and parts, compliance with exemption Notification No.40/12-ST, satisfaction of procedural conditions for refund, rejection of refund claim based on procedural grounds, interpretation of Rule 4A of Service Tax Rules, 1994.

Analysis:

1. Refund claim admissibility for SEZ unit:
The case involved a SEZ unit engaged in manufacturing solar modules and parts, seeking a refund of service tax paid. The unit was exempted from service tax payment under Notification No.40/12-ST. The refund claim was initially sanctioned but later challenged by the Revenue due to incomplete documentation in the invoices submitted by the assessee.

2. Compliance with exemption Notification No.40/12-ST:
The Notification provided exemption from service tax payment to SEZ units by way of refund. The issue arose when the Revenue contended that the invoices submitted by the assessee did not contain the full description of services, classification, and value, leading to the initiation of proceedings against the assessee for recovery of the refunded amount.

3. Satisfaction of procedural conditions for refund:
The Revenue argued that the refund was not admissible as the Rule 4A of the Service Tax Rules, 1994, requisites were not met. However, the Appellate Authority observed that the assessee, located in a SEZ, had fulfilled the conditions stipulated in the Notification, and the documents submitted, including foreign service providers' invoices, challans, and bank debit advices, satisfied the procedural requirements.

4. Rejection of refund claim based on procedural grounds:
The Revenue's appeal against the order allowing the refund was rejected by the Commissioner (Appeals). The Appellate Authority emphasized that once the substantive conditions of the Notification were met by the assessee, denial of refund based on procedural grounds that were impossible to fulfill was unjustified. The Authority highlighted the importance of granting incentives like refunds to exporters to promote exports and ensure international competitiveness.

5. Interpretation of Rule 4A of Service Tax Rules, 1994:
The Appellate Authority relied on a Tribunal decision and concluded that the challans issued by the assessee, containing all requisite details and evidencing service tax payment, were eligible documents. The Authority emphasized that denial of a refund claim solely on procedural grounds when the substantive conditions were met was not justified, especially in the context of promoting exports and relieving exported goods/services from domestic taxes.

In conclusion, the Revenue's appeals were rejected as the Appellate Authority found no infirmity in the Commissioner (Appeals) order, emphasizing the importance of not denying substantive benefits like refunds based on procedural grounds that were impossible to observe.