2025 (1) TMI 224 - AT - Service Tax

Refund of service tax paid - whether the Appellant being the developer / co-developer in Special Economic Zone entitled to refund of service tax paid by them in relation to their authorised operations? - HELD THAT - In case of INOX INDIA P LTD VERSUS C.C.E. -KUTCH (GANDHIDHAM) 2024 (3) TMI 922 - CESTAT AHMEDABAD , this Bench has considered the issue and decided ' We find that a substantive benefit of Service Tax exemption has been provided under the above Section 26 of the Special Economic Zone Act. Once the legislature by way of enactment has provided certain exemption we feel that any notification issued under any other enactment will not take away the right of the exemption from payment of the Service Tax to the appellant for the activity while falls under category of the authorized operations within a Special Economic Zone.' Similarly, in case of ANJANI EXCAVATION OPERATION VERSUS COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX CGST CENTRAL EXCISE VADODARA II 2024 (11) TMI 405 - CESTAT AHMEDABAD , this Bench has held the benefit of exemption available to the service provider by resorting to the provisions of Special Economic Zones Act, 2005. The benefit of refund of service tax paid by the appellant cannot be snatched away on grounds of procedural and hyper technical infarctions pointed out by the revenue in the impugned orders. It is no matter of dispute that the appellant including its erstwhile entity were duly approved and authorised as co-developer of Special Economic Zone in Mundra, Gujarat - there are no merit in the arguments and averments made by the appellate authority in impugned order to deny the benefits granted by the provisions of the Special Economic Zones Act. Once the tax has been charged, collected and paid by the respective service provider, the recipient cannot be burdened to show and explain the reasons for levy carried out by the service provider. Burden of recipient is limited to prove payment of such amount as service tax to the service provider and which has not been challenged in the present appeals. Thus, there are no merit in the justifications given in the impugned orders to deny the refund claim and we find that the appellant succeeds in explaining their eligibility to refund in respect of service tax paid with respect to transportation of passengers services. Conclusion - The appellant is entitled to the refund of service tax paid for services used in authorized operations within the SEZ. The appellant is entitled to refunds involved in all the appeals - Appeal allowed.

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

Whether the appellant, as a co-developer in a Special Economic Zone (SEZ), is entitled to a refund of service tax paid in relation to their authorized operations under the Special Economic Zones Act, 2005.
Whether procedural lapses under Notification No. 9/2009-ST and its amendments can bar the substantive benefit of service tax exemption provided under the SEZ Act.
Whether the refund claims can be denied based on technical grounds, such as the timing of service tax levy or procedural compliance.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Entitlement to Refund of Service Tax

Relevant Legal Framework and Precedents: The appellant's claim for refund is based on Section 26 of the Special Economic Zones Act, 2005, which provides exemptions from service tax for services provided to a developer or unit to carry on authorized operations in an SEZ. The precedents considered include the cases of Inox India P Ltd and Anjani Excavation Operation, which support the view that substantive benefits under the SEZ Act cannot be denied due to procedural requirements.
Court's Interpretation and Reasoning: The court emphasized that the SEZ Act grants substantive exemptions that should not be negated by procedural requirements under other enactments. The court referenced the overriding effect of the SEZ Act as per Section 51, which ensures that its provisions take precedence over conflicting laws.
Key Evidence and Findings: The appellant was duly approved as a co-developer in the SEZ, and there was no dispute regarding the payment of service tax to service providers. The court found no challenge from the revenue regarding the services involved in the refund claims being outside the SEZ Act's provisions.
Application of Law to Facts: The court applied the SEZ Act's provisions to determine that the appellant was entitled to the service tax refund. The procedural lapses highlighted by the revenue were deemed insufficient to deny the substantive exemption granted by the SEZ Act.
Treatment of Competing Arguments: The court dismissed the revenue's arguments that procedural non-compliance under Notification No. 9/2009-ST could negate the exemption. It held that the substantive right to exemption under the SEZ Act prevails over procedural lapses.
Conclusions: The appellant is entitled to the refund of service tax paid for services used in authorized operations within the SEZ, as the substantive exemption under the SEZ Act overrides procedural requirements.

Issue 2: Procedural Lapses and Timing of Service Tax Levy

Relevant Legal Framework and Precedents: The court considered the procedural requirements under Notification No. 9/2009-ST and its amendments. The case of Intas Pharma Ltd was referenced, which held that SEZ Act provisions should not be eclipsed by procedural prescriptions of notifications.
Court's Interpretation and Reasoning: The court reasoned that procedural lapses should not prevent the granting of exemptions provided by the SEZ Act. It highlighted that the SEZ Act's provisions have an overriding effect, ensuring that substantive rights are not negated by procedural issues.
Key Evidence and Findings: The court found that the appellant had paid service tax to service providers, and there was no dispute about the services being provided within the SEZ. The timing of the service tax levy was irrelevant to the appellant's entitlement to a refund.
Application of Law to Facts: The court applied the SEZ Act's provisions to conclude that the appellant was entitled to a refund, regardless of procedural lapses or the timing of service tax levy.
Treatment of Competing Arguments: The court rejected the revenue's argument that procedural non-compliance could negate the exemption. It emphasized that the substantive exemption under the SEZ Act takes precedence.
Conclusions: The appellant is entitled to the refund of service tax, as procedural lapses and the timing of service tax levy do not negate the substantive exemption under the SEZ Act.

3. SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning: "Once the legislature by way of enactment has provided certain exemption, we feel that any notification issued under any other enactment will not take away the right of the exemption from payment of the Service Tax to the appellant for the activity while falls under category of the authorized operations within a Special Economic Zone."
Core Principles Established: The SEZ Act provides substantive exemptions from service tax for services provided to developers or units within an SEZ. Procedural requirements under other enactments cannot negate these substantive rights. The SEZ Act's provisions have an overriding effect, ensuring that exemptions are granted despite procedural lapses.
Final Determinations on Each Issue: The appellant is entitled to the refund of service tax paid for services used in authorized operations within the SEZ. Procedural lapses and the timing of service tax levy do not affect the appellant's entitlement to the refund.

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