2023 (11) TMI 1077 - AT - Service Tax

Refund of service tax paid - SEZ Units - various input services which it had received from its corporate office through ISD invoices - Service Tax exemption notification No. 12/2013-ST - Claim rejected since filed after one year from the date on which the service tax was paid to the service provider and hence they did not meet the time limit set in the exemption notification - what is the meaning of an authorised operation and what is the meaning of prescribed under the SEZ Act and what are such prescriptions and whether they have been fulfilled? - interest on delayed refund. HELD THAT - While the SEZ Act itself provided for exemption from service tax (as well as Central Excise duty and Customs duty), exemption notifications were also issued by the Government under the respective laws. These exemption notifications were also issued with some conditions. Thus, there is duplication inasmuch as the goods and services provided to authorised operations of developers and units in the SEZs are exempted from Customs duty, Central Excise duty and the service tax by the SEZ Act itself (subject to the manner which may be prescribed) and there are also exemption notifications under the respective tax laws which are also subject to some conditions. The exemption notification in dispute in this case is service tax exemption notification ST-40/2012 dated 20.6.2013. Thus, the legal position is that SEZ Act overrides any other law because of section 51 of the SEZ Act. The question is what part of the tax law have been overridden by the SEZ Act. To answer this question, we proceed to examine the requirement under the Constitution of India to levy taxes and the relevant legal provisions of the Central Excise Act and Customs Act and Chapter V of the Finance Act, 1994 under which Service Tax is levied - The charging sections, having been overridden by the SEZ Act, no legal authority to levy and collect central excise duty, customs duty or service tax for goods or services supplied for authorised operations of SEZ developers and units covered by section 26 remains. Without such a legal authority, no tax or duty can be either levied or collected in view of article 265 of the Constitution of India. Service tax was levied under Chapter V of the Finance Act, 1994 under section 66 on taxable services. The list of taxable services was defined under section 65(105) and this list was expanded from time to time. If the taxable service was provided as a part of a works contract which involved both rendering the service and transfer or deemed transfer of goods, exemption notifications were issued by the Government towards abatement of the value of the goods used in the services. Later, on 1.6.2007, works contract service, itself was introduced as a service - the exemption notifications issued under the Finance Act, 1994 are redundant because service tax was already exempted by the Parliament by section 26 of the SEZ Act. Any conditions in such notifications are also, therefore, irrelevant and need not be fulfilled - The question is, therefore, answered in favour of the appellant and the appellant is eligible to refund of service tax. Claim of interest by the appellant on delayed payment of refund - HELD THAT - As far as the claim of interest by the appellant on delayed payment of refund under section 11BB of the Central Excise Act, 1944 as made applicable to service tax by section 83 of the Finance Act, 1994 is concerned, it is found that once the SEZ unit is out of the purview of the Finance Act, 1994 itself, the provisions for payment of interest under it also do not apply to the refunds in question. The question of grant of interest is, therefore, answered against the appellant. The appellant is entitled to refund in all the eight applications - refund must be sanctioned and paid in all cases where it has not already been paid - appellant is not entitled to interest on any of the refunds - appeal disposed off.

Summary

Issues Involved:
1. Entitlement to refund of service tax.
2. Entitlement to interest on the refunds.

Summary of Judgment:

Issue 1: Entitlement to Refund of Service Tax
The appellant, Cummins Turbo Technology, located in a Special Economic Zone (SEZ), sought refunds for service tax paid on input services received through its corporate office. The SEZ Act, 2005, particularly sections 26 and 51, exempts services provided to SEZ units from service tax. The appellant filed eight refund applications under Notification No. 12/2013-ST. Four claims were rejected as time-barred, and this rejection was upheld by the Commissioner (Appeals) in the first impugned order (Service Tax Appeals 50349/2018, 50350/2018, 50351/2018, and 50352/2018). Four other claims were sanctioned but without interest, which was challenged by both the appellant and the Revenue, resulting in the second and third impugned orders (Service Tax Appeals 50368/2021, 50369/2021, 50370/2021, 50371/2021, 50213/2021, 50214/2021, 50215/2021, and 50216/2021).

The Tribunal held that the SEZ Act overrides other laws, including the Finance Act, 1994, due to section 51. Therefore, service tax was not applicable to services provided to SEZ units, making the exemption notifications redundant. Consequently, the appellant was entitled to a refund of service tax paid, and the conditions in the exemption notifications, including the time limit, were irrelevant.

Issue 2: Entitlement to Interest on the Refunds
The appellant also sought interest on the delayed refunds under section 11BB of the Central Excise Act, 1944, as applicable to service tax by section 83 of the Finance Act, 1994. The Tribunal found that since the SEZ units are outside the purview of the Finance Act, 1994, the provisions for interest on refunds under this Act do not apply. Therefore, the appellant was not entitled to interest on the refunds.

Final Orders:
1. The appellant is entitled to refunds in all eight applications.
2. Refunds must be sanctioned and paid where not already done.
3. The appellant is not entitled to interest on any of the refunds.
4. Service Tax Appeals 50349/2018, 50350/2018, 50351/2018, and 50352/2018 are allowed, and the first impugned order is set aside with consequential refunds.
5. Service Tax Appeals 50368/2021, 50369/2021, 50370/2021, and 50371/2021 are dismissed.
6. Service Tax Appeals 50213/2021, 50214/2021, 50215/2021, and 50216/2021 are allowed, and the third impugned order is set aside with consequential refunds.

(Order pronounced in open court on 30/10/2023.)