2022 (8) TMI 1557 - AT - Service Tax

Refund of service tax paid on services received prior to obtaining approval from the Approval Committee under Notification No. 12/2013-ST - whether the refund application can be allowed in respect of the services which were received prior to the approval granted by the Approval Committee? - HELD THAT - In the case of M/S DIVI S LABORATORIES LTD. VERSUS COMMISSIONER OF CENTRAL TAX, VISAKHAPATNAM 2021 (9) TMI 358 - CESTAT HYDERABAD , considering the same issue, the Tribunal has observed 'The finding of Commissioner (Appeals) that since ocean freight service has been included in the list of services with SEZ services authorities only on 27.11.2017 i.e. subsequent to their refund application, the retrospective application can not be allowed is not sustainable.' Conclusion - The issue is no longer res integra and the Tribunal has been consistently taking the view that till the time the services are input services for the developer, the refund claim made as per Notification No. 12/2013 could not have been denied just for the reason that at the time of receipt of services, there was no approval of Approval Committee cannot be upheld. Appeal allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

• Whether the appellant is entitled to a refund of service tax paid on services received prior to obtaining approval from the Approval Committee under Notification No. 12/2013-ST.
• Whether the conditions stipulated in Notification No. 12/2013-ST must be fulfilled at the time of availing services to qualify for a refund.
• Whether the Tribunal's previous decision in a similar case (Mahindra Engineering Services Ltd.) should influence the current proceedings.
• Whether the SEZ Act's provisions have an overriding effect over the conditions stipulated in the Finance Act and related notifications.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Entitlement to Refund of Service Tax

• Relevant Legal Framework and Precedents: The appellant sought a refund under Notification No. 12/2013-ST, which provides an exemption by way of refund for service tax paid on specified services used for authorized operations in a SEZ. The Tribunal had previously ruled in similar cases (e.g., Mahindra Engineering Services Ltd.) that approval from the Approval Committee is not required at the time of service receipt.
• Court's Interpretation and Reasoning: The Tribunal considered that the appellant had later obtained the necessary approvals and that the services were indeed used for authorized operations. The Tribunal referenced its previous decisions and the overriding effect of the SEZ Act over other laws.
• Key Evidence and Findings: The appellant had received approvals for the services at the time of filing the refund claim, although not at the time of service receipt.
• Application of Law to Facts: The Tribunal applied the SEZ Act's provisions, which exempt services used for authorized operations from service tax, and found that the procedural requirement of obtaining prior approval was not mandatory.
• Treatment of Competing Arguments: The Revenue argued that the conditions under Notification No. 12/2013-ST were not met. However, the Tribunal found that the SEZ Act's provisions took precedence.
• Conclusions: The Tribunal concluded that the appellant was entitled to the refund as the substantive conditions of using services for authorized operations were met, and procedural lapses were not grounds for denial.

Issue 2: Fulfillment of Conditions at Time of Availing Services

• Relevant Legal Framework and Precedents: The Tribunal examined Notification No. 12/2013-ST and compared it with Notification No. 09/2009-ST, noting differences in their provisions.
• Court's Interpretation and Reasoning: The Tribunal emphasized that the SEZ Act has an overriding effect, and procedural requirements under the Finance Act notifications should not negate the substantive benefits provided by the SEZ Act.
• Key Evidence and Findings: The Tribunal noted that the appellant had complied with the substantive requirements of the SEZ Act by using the services for authorized operations.
• Application of Law to Facts: The Tribunal applied the SEZ Act's provisions to find that the timing of approval was not crucial as long as the services were used for authorized operations.
• Treatment of Competing Arguments: The Tribunal dismissed the Revenue's argument that the procedural requirement of prior approval was mandatory.
• Conclusions: The Tribunal concluded that the appellant's failure to obtain prior approval did not bar the refund claim.

Issue 3: Influence of Previous Tribunal Decisions

• Relevant Legal Framework and Precedents: The Tribunal considered its previous decision in Mahindra Engineering Services Ltd., which held that prior approval was not necessary.
• Court's Interpretation and Reasoning: The Tribunal found that it was bound by its previous decisions unless there was a compelling reason to deviate.
• Key Evidence and Findings: The Tribunal noted that the facts of the current case were similar to those in Mahindra Engineering Services Ltd.
• Application of Law to Facts: The Tribunal applied the same reasoning as in the previous decision, emphasizing consistency in its rulings.
• Treatment of Competing Arguments: The Tribunal rejected the Revenue's argument that the previous decision should not apply due to differences in the notifications.
• Conclusions: The Tribunal concluded that its previous decision should guide the current case.

3. SIGNIFICANT HOLDINGS

• Preserve Verbatim Quotes of Crucial Legal Reasoning: "The substantive benefit cannot be denied for a procedural lapse."
• Core Principles Established: The SEZ Act has an overriding effect over the Finance Act and related notifications; procedural lapses should not negate substantive benefits.
• Final Determinations on Each Issue: The appellant is entitled to a refund of service tax; prior approval is not a mandatory condition for refund claims under the SEZ Act.

The Tribunal's decision underscores the importance of adhering to the substantive provisions of the SEZ Act while treating procedural requirements as non-mandatory, thereby ensuring that the intended benefits of the SEZ framework are realized.