2023 (3) TMI 1122 - AT - Central Excise

Refund of service tax paid on input services - rejection on the ground of time limitation - whether the claim for refund of service tax paid on input services has been filed within the time limit in terms of para 3 (III) (e) of the Notification No 12/2013-ST dated 01.07.2013 and if the same is hit by latches, is the appellant entitle to condonation of delay? HELD THAT - The Special Economic Zone Act, 2005 is a special statute basically enacted for the establishment of SEZ providing special benefits by way of exemptions with a view to promote the Exports. Section 26 of the SEZ Act read with Rule 31 of SEZ Rules, 2006 provides wholesale exemption from payment of duties under the Central Excise Act, Customs Act and from Service Tax under the Finance Act, 1994 on taxable services provided to SEZ units / developers for carrying on authorised operations in a Special Economic Zone - The intention of the Legislature in granting exemption from levy of duties and taxes was to ensure that the SEZ units function burden free. The whole object is to boost the SEZ units. The High Court of Andhra Pradesh in GMR AEROSPACE ENGINEERING LIMITED AND ANOTHER VERSUS UNION OF INDIA AND OTHERS 2019 (8) TMI 748 - TELANGANA AND ANDHRA PRADESH HIGH COURT after analysing the provisions of the SEZ Act, 2005 and the provisions of the Finance Act, 1994 concluded that the notification issued under section 93 of the Finance Act, 1994 cannot be pressed into service for finding out whether a unit in SEZ qualifies for exemption or not. Subsequently, the Tribunal in M/S. SRF LIMITED VERSUS COMMISSIONER OF CUSTOMS, CENTRAL EXCISE SERVICE TAX, LTU NEW DELHI AND COMMISSIONER OF CGST, AND CENTRAL EXCISE, INDORE 2022 (4) TMI 989 - CESTAT NEW DELHI dealt with the issue of entitlement of refund of service tax where some of the services were directly provided to and paid for by the SEZ unit while certain other services were provided to the head office which was registered as an Input Service Distributor (ISD) and on examining the various provisions of the SEZ Act, observed that there is duplication as the Act itself provides for exemption of central excise duty, customs duty and the service tax, however there are exemption notifications issued under the respective laws subject to certain conditions. Time limitation of one year for filing the refund claim - HELD THAT - Tribunal in the case of C.C.E. S.T., - RAJKOT VERSUS M/S RELIANCE INDUSTRIES LTD 2019 (3) TMI 877 - CESTAT AHMEDABAD , whereby it has been clarified that the condition under para 3 (III) (e) of the Notification for filing the refund claim within one year is applicable only in respect of refund claimed under Table I of Form A-4. For Table II, the refund claim can be filed when the SEZ unit receives the ISD invoices as the format in Table II particularly the specifications in column 9,10 and 11, required that refund cannot be filed without the ISD invoices. Further, it was held that no time limit has been prescribed for issuing ISD invoices under Rule 7 of Cenvat Credit Rules, 2004 for distributing credit under ISD invoices. It was then concluded that for a minor procedural lapse, if the SEZ unit is burdened with duties or taxes the whole objective of SEZ scheme will stand defeated. It is evident that the appellant fulfilled the criterias of eligibility to claim refund of the service tax paid on input services in terms of the Notification No 12/2013-ST. Infact it is not the case of the revenue that the appellant is not eligible to make such claims. Their only objection is to the claim being filed beyond the period of one year as per the notification - Considering the beneficial object of establishing the SEZ tax free, without any burden of duties, the procedural lapse, if any, cannot be the basis to deny the refund to the appellant. The exemption is intended to be absolute is further evident from para 3 (II) of the Notification which provides for ab-initio exemption. From what has been observed by the adjudicating authority is that for the period January to March 2017, service tax was paid prior to 01.10.2016 and the refund claim was filed on 10.10.2017 and therefore it is beyond the period of one year. Even, if one calculates the actual delay the same appears to be somewhere around 10 days or so. Similarly, for the period April to June, 2016 service tax was paid prior to 01.03.2017 and refund claim was filed on 28.03.2018. In both the cases, the delay is neither exorbitant nor unreasonable which on the face of it cannot be condoned - It is the well established principle that the eligibility criteria laid down in an exemption notification are required to be construed strictly, however once it is found that the applicant satisfies the same, the exemption notification should be construed liberally. Refund claim allowed - appeal allowed.

Summary

Issues Involved:
1. Whether the refund claims for service tax paid on input services were filed within the time limit as per Notification No. 12/2013-ST.
2. Whether the delay in filing the refund claims can be condoned.

Summary:

Issue 1: Timeliness of Refund Claims
The appellant, an SEZ unit engaged in the manufacture and export of pharmaceutical products, filed refund claims for service tax paid on input services. The adjudicating authority initially sanctioned part of the refund but rejected the remainder as time-barred. The appellant argued that the time limit should be calculated from the date of the ISD invoice, not the date of payment by the SEZ unit, citing various judicial precedents. The Tribunal noted that the SEZ Act, 2005, being a special statute, overrides other laws, and the exemption from service tax provided under Section 26 should be interpreted liberally. It concluded that the relevant date for computing the one-year time limit is the date of the ISD invoice, not the date of payment by the SEZ unit. The Tribunal referenced several cases, including SRF Ltd. and Reliance Industries Ltd., to support this interpretation.

Issue 2: Condonation of Delay
The adjudicating authority rejected the condonation of delay, stating no new grounds were presented. The Tribunal found this reasoning unreasonable, emphasizing that grounds for condonation do not change over time and should be examined in light of existing law. The Tribunal highlighted that the SEZ Act aims to provide a tax-free environment to boost SEZ units and that procedural lapses should not defeat this objective. It referenced decisions like Government of Kerala vs. Mother Superior Adoration Convent, which advocate for a liberal interpretation of beneficial exemptions. The Tribunal found the delay in the appellant's case to be minor and not exorbitant, warranting condonation.

Conclusion:
The Tribunal allowed the refund claims, setting aside the impugned order, and emphasized a liberal interpretation of the SEZ Act and related notifications to promote the intended benefits for SEZ units. The appeal was allowed, and the order was pronounced on 23rd March 2023.