2017 (9) TMI 423 - AT - Service Tax

SEZ unit - Refund of service tax paid - whether the appellant is eligible for refund of the service tax paid under reverse charge mechanism in respect of services received by him from foreign supplier or otherwise? - Held that - it is an admitted fact that appellant being an SEZ unit is not required to pay any service Tax either to service provider or under reverse charge mechanism and even if he pays the same, he is eligible for the refund of the service tax liability so discharged - The bone of contention in these appeals being that the service tax liability was discharged correctly and when it was discharged the said services were not mentioned in the list of approved services, this cannot be a reason for rejection of refund claim as it is an avowed policy of the Govt of India that SEZ unit should not be burdened with any taxes in order to make them competitive - refund allowed. Appeal allowed - decided in favor of appellant.

Issues:
Refund claim rejection based on service approval dates, violation of natural justice, eligibility for refund under SEZ rules, denial of refund under SEZ Act, and time bar for filing refund claim.

Detailed Analysis:

1. Refund Claim Rejection based on Service Approval Dates:
The appellant filed refund claims for service tax paid on specified services for their SEZ units. The lower authorities rejected the claims citing that the services were approved after the tax payment, thus denying CENVAT credit. The appellant argued that the delay in service approval should not affect their refund eligibility, relying on legal precedents supporting their case.

2. Violation of Natural Justice:
The appellant contended that the impugned orders were passed without notice or an opportunity to be heard, violating principles of natural justice. They argued that such rejections are legally unsustainable, referencing rulings to support their claim.

3. Eligibility for Refund under SEZ Rules:
The appellant asserted their eligibility for a refund under the SEZ Act, claiming that denial of refund violates SEZ provisions. They argued that even if the services were not initially on the approved list, subsequent inclusion should not bar their refund entitlement, citing Circulars and legal cases in support.

4. Denial of Refund under SEZ Act:
The appellant argued that denial of refund under the SEZ Act, particularly Sections 7 and 51, and Rule 31 of the SEZ Rules, is unjust. They contended that if the refund under the notification was denied, they could claim it under relevant provisions of the Central Excise Act and Finance Act, supported by legal precedents.

5. Time Bar for Filing Refund Claim:
The appellant faced rejection based on the time bar for filing refund claims. However, they argued that the time limit should be viewed in the context of SEZ approvals and procedural requirements, emphasizing that denial of refund would be unjust when no service tax is payable under SEZ Act provisions.

6. Judicial Pronouncement and Decision:
After considering submissions from both sides, the Tribunal found that the appellant, being an SEZ unit, is eligible for a refund of service tax paid under reverse charge mechanism. The Tribunal held that the delay in service approval should not hinder refund claims, as SEZ units should not be burdened with unnecessary taxes. Citing a relevant case, the Tribunal set aside the impugned orders and allowed the appeals with consequential relief.

This detailed analysis covers the various issues raised in the legal judgment, providing a comprehensive overview of the arguments presented and the Tribunal's decision in each aspect.

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