2018 (5) TMI 565 - AT - Service Tax

Refund of service tax paid - Rule 27 of the SEZ Rules, 2006 - Held that - Since the SEZ Act and the rules have not provided any conditions for granting exemption from payment of service tax, the Central Government cannot issue the notification under a different statute i.e. Finance Act, 1994 in providing the conditions for grant of refund of service tax paid on the taxable services used for the authorised operations in the SEZ - by virtue of Section 51 of the SEZ Act, the provisions of the said Act and the Rules made there under are mandated to have overriding effect over the provisions contained in any other statute. All the activities relating to SEZ shall be guided and governed by the provisions contained in SEZ Act and the SEZ Rules. Since, such statutory provisions governing the SEZ are silent about any condition or restriction for claiming the refund of service tax, the notification issued by the Central Govt. in terms of Finance Act, 1994 cannot prescribe any conditions, which are contrary to the SEZ provisions. Therefore, rejection of refund application by the authorities below by placing reliance on the notification dated 3.3.2009 cannot be sustained and is liable to be set aside. Refund allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
Refund claim of service tax paid on input services for SEZ unit under SEZ Act, 2005.

Analysis:
The appellant, engaged in manufacturing, was allotted a Letter of Approval to operate in SEZ without duty payment. A refund claim of service tax amount was filed but rejected by authorities citing discrepancies. The appellant argued exemption under SEZ Act's Section 27(1)(e) and challenged additional conditions in Notification No. 9/2009. The Tribunal analyzed SEZ Act's Section 26(1)(e) and (2) along with Rule 31 of SEZ Rules, 2006. It noted that SEZ provisions did not specify conditions for service tax refund, unlike Notification No. 9/2009. The Tribunal emphasized SEZ Act's overriding effect on other statutes per Section 51, concluding that conditions contrary to SEZ provisions in the notification were invalid. Citing precedents, the Tribunal held that the notification aimed to operationalize SEZ Act's exemption, thus setting aside the rejection of the refund application.

This judgment clarifies the interplay between SEZ Act provisions and related notifications regarding service tax refunds for SEZ units. It underscores the paramountcy of SEZ Act and Rules in governing SEZ activities, emphasizing that conditions for refunds must align with SEZ statutory framework. The decision provides a nuanced interpretation of statutory provisions and notifications, ensuring consistency and coherence in applying tax exemptions within SEZs.