2012 (8) TMI 500 - AT - Service Tax

Refund Claim of Service Tax paid on services consumed within the SEZ and services which were used in the authorized operations of the SEZ units - partial denial on ground of absence of nexus and non-application of Notification No. 09/2009-ST - Held that - Approval Committee, examined this issue and had issued a specific certificate indicating the various services received by the appellant and justification for use of such services in relation to authorized operations. Once the Approval Committee has given the nexus and the justification, rejection by the lower authorities of the refund claims of the service tax paid on various services on this ground is bad in law and is accordingly set aside. In the case of services which are wholly consumed within the SEZ, there is no necessity to discharge the service tax liability ab initio. That does not mean that in a case where service tax liability has been discharged, the appellant is not eligible or not entitled for refund of the service tax paid under the provisions of Section 11B of the Central Excise Act, 1944 r.w.s. 83 of the Finance Act, 1994. If the appellant is eligible for refund u/s 11B, then the same cannot be denied on the ground that the claim was made under Notification No. 09/2009-ST - Decided in favor of assessee.

Summary

Issues:
Refund claims rejection on the ground of nexus with authorized operations and service tax on services wholly consumed within SEZ.

Analysis:
1. Refund Claim Rejection - Nexus with Authorized Operations:
The appellant filed refund claims for Service Tax paid on services consumed within the SEZ and used in authorized operations. The lower appellate authority rejected claims amounting to Rs. 19,80,569, comprising two components. The first component of Rs. 6,66,794 was rejected due to alleged lack of nexus with authorized operations. The Approval Committee had approved these services, and the appellant argued that the rejection was unwarranted as the Committee's approval sufficed. The Tribunal concurred, setting aside the rejection as legally incorrect.

2. Refund Claim Rejection - Services Wholly Consumed Within SEZ:
The second component of Rs. 13,13,775 related to service tax on services wholly consumed within the SEZ. The Revenue contended that the refund was not applicable under Notification No. 09/2009-ST. However, the Tribunal disagreed, citing that the notification exempts taxable services in relation to authorized SEZ operations, irrespective of whether services are provided inside the SEZ. The Tribunal emphasized that the appellant, eligible for refund under Section 11B, should not be denied based on the notification. Additionally, services provided to a SEZ or unit are deemed exports, entitling them to service tax exemption. The rejection of the service tax refund was deemed unsustainable in law, leading to the allowance of the appeals with consequential relief.

In conclusion, the Tribunal found the impugned order unsustainable in law and allowed the appeals, emphasizing the entitlement to refunds under relevant legal provisions despite the initial rejection based on incorrect interpretations of nexus and exemptions within SEZs.