2015 (7) TMI 823 - HC - Service Tax

Benefit of ab initio exemption - SEZ units were exempted from payment of service tax utilized for the authorized operations of the SEZ units - Notification No.12 of 2013 - Held that - Respondent No.2 was not justified in refusing authorization to the petitioner, in Form A2 for availing ab initio exemption from payment of service tax. On a perusal of the notifications, it is clear that the petitioner had an option to either pay the service tax in advance or not to pay the same, subject to the conditions provided in the notifications. For seeking ab initio exemption, the petitioner unit was required to secure the approval of the list of services, as are required for the authorized operations of the unit on which the unit desires to claim exemption from service tax from the Approval Committee . Admittedly, the petitioner unit also furnished a declaration, in Form A1 verified by the Specified Officer of the SEZ along with the list of specified services. Once, the SEZ unit secures the approval of the Approval Committee to the list of the services on which the SEZ unit wishes to claim exemption from service tax and furnishes a declaration, in Form A1 verified by the Specified Officer of the SEZ, it is rightly submitted on behalf of the petitioner that the respondent No.2 or for that matter, any Jurisdictional Deputy Commissioner of Central Excise or Assistant Commissioner of Central Excise is enjoined with a duty to issue the authorization, in Form A2. It is clear from Notification No.12 of 2013, under which the petitioner unit has exercised an option not to pay the service tax ab initio, that the respondent No.2 was obliged to issue the authorization, in Form A2 to the petitioner unit in the circumstances of the case. Mere issuance of Form A2 by the respondent No.2 would not absolve the petitioner unit of its liability to pay the service tax and cesses along with interest on delayed payment, if it is subsequently found that the petitioner unit has not used the services exclusively for the authorized operations as per the undertaking, in Form A1. In terms of Notification No.12 of 2013, the petitioner unit is enjoined with a duty to submit to the Superintendent of Central Excise, a quarterly statement, in Form A3, furnishing the details of specified services received by it without payment of service tax. If that is so, the respondent No.2 could not have refused the authorization to the petitioner unit in Form A2 on the ground that some of the claims made by the petitioner for refund had been rejected in the past. Ample safeguards are provided by Notification No.12 of 2013 for recovery of sales tax and cesses along with interest on delayed payment if it is found that the specified services on which the exemption has been claimed, have not been used exclusively for authorized operations. On a perusal of the documents annexed to the petition and the communications exchanged between the parties that the respondent No.2 has illegally denied the benefit of Notification No.12 of 2013 to the petitioner unit. - Impugned order is set aside - Decided in favour of assessee.

Issues:
1. Petitioner seeking direction for issuance of authorization in Form A2 and declaration of entitlement to ab initio exemption from service tax.
2. Dispute over refusal to issue Form A2 by respondent No.2 despite compliance with Notification Nos. 17 of 2011 and 12 of 2013.
3. Interpretation of relevant provisions of the Special Economic Zones Act, 2005 and associated notifications.
4. Justification of respondent No.2's refusal and legal obligations regarding authorization in Form A2.

Analysis:

1. The petitioner, a power generating unit in a Special Economic Zone (SEZ), sought a direction for the issuance of authorization in Form A2 and a declaration of entitlement to ab initio exemption from service tax as per Notification No.12 of 2013. The petitioner complied with the requirements by submitting a declaration in Form A1 verified by the Specified Officer of the SEZ to the respondent No.2, the Jurisdictional Deputy Commissioner, Customs, Central Excise & Service Tax, for the issuance of Form A2. The respondent No.2 was obligated to issue Form A2 within a specified period, as per Notification No.7 of 2014, upon approval of specified services by the Approval Committee. However, the respondent No.2 refused to issue Form A2, leading to the petitioner approaching the court seeking relief.

2. The dispute centered around the respondent No.2's refusal to issue Form A2 based on the grounds that the petitioner's activity of manufacturing and selling electricity did not fall within the list of specified services. The petitioner contended that the appellate authority had ruled in their favor regarding the nature of their business activities. The petitioner argued that the respondent No.2 was obligated to issue Form A2 based on the declaration made in Form A1, as per the relevant notifications and provisions of the Act of 2005. The respondent No.2's insistence on additional documents and past rejections of refund claims were deemed unjustified by the court.

3. The court analyzed the relevant provisions of the Special Economic Zones Act, 2005, specifically focusing on Section 13 and Rule 54, to determine the jurisdiction and duties of the Approval Committee and the respondent No.2 in issuing authorization in Form A2. The court emphasized that once the Approval Committee approved the list of specified services and the petitioner submitted a verified declaration in Form A1, the respondent No.2 was duty-bound to issue the authorization in Form A2. The court highlighted the procedural requirements outlined in Notification No.12 of 2013 and emphasized that the respondent No.2's refusal lacked legal basis.

4. The court concluded that the respondent No.2's refusal to issue the authorization in Form A2 was unjustified and quashed the impugned communication. The court ruled in favor of the petitioner, emphasizing that the notifications provided safeguards for recovery of service tax if the specified services were not used exclusively for authorized operations. The court found no legal basis for the respondent No.2's actions, including the reliance on past rejections of refund claims and the failure of another entity to pay service tax. The judgment highlighted the respondent No.2's obligation to adhere to the provisions of Notification No.12 of 2013 and affirmed the petitioner's entitlement to ab initio exemption from service tax.

← Previous Next →