2018 (10) TMI 1375 - AT - Service Tax

Refund of service tax paid subject to the condition that no credit has been availed - benefit of Notification No. 17/2011-ST dated 1.3.2011 as also a subsequent identical Notification No.40/2012-ST dated 20.6.2012 - Revenue entertained a view that they have availed the cenvat credit of service tax so paid by them and as such, the condition of the notification stands violated by them - what exactly is the meaning of the expression taken appearing in sub-clause (g) of Explanation (2) appended to the notification in question? Held that - The notification debars taking of cenvat credit of service tax paid on the specified services used for the operations in SEZ unit. A mere maintenance of an account showing the total quantum of service tax paid by the assessee cannot be held to be availment of cenvat credit. The mere entries in such records which are not even prescribed statutory records, cannot lead to the inevitable conclusion that the assessee has taken the credit. Similarly, the reflection of such account in the ST-3 returns so as to let the department know about the total service tax quantum earned by the assessee will also not amount to the fact that as if the assessee has taken and utilized the credit. Not only that the appellant in their subsequent ST-3 returns has again shown the opening balance of such account maintained by them as zero and has reflected the total service tax earned by them in that period. The appreciation of all the above facts leads to only one inevitable conclusion that no cenvat credit was availed by the assessee and as such, there was no violation of the condition of the notification. The lower authorities in their impugned orders have nowhere disputed the fact that such amount of service tax reflected by them in their ST-3 returns was utilized by them. The condition of the notification, which grants refund of service tax paid on various services utilized for authorized operations on SEZ, is that no cenvat credit would be availed by the assessee. Such availment cannot be held to be there unless such service tax accumulated in the accounts of the assessee stands utilized by them. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Interpretation of Notification No. 17/2011-ST and No. 40/2012-ST regarding service tax exemption for SEZ units. Whether maintaining a record of service tax paid amounts to availing cenvat credit.

Analysis:
1. The appellant, a unit in a Special Economic Zone (SEZ), was availing service tax exemption under Notification No. 17/2011-ST and No. 40/2012-ST for input services used in authorized operations within the SEZ area. The notification allows the option of not paying service tax upfront if services are wholly consumed within the SEZ.

2. The appellant chose to file a refund claim for service tax paid on various services utilized, maintaining records of the tax amounts. However, the Revenue contended that reflecting the service tax in ST-3 returns implied availing cenvat credit, violating the notification's conditions.

3. During adjudication, the appellant clarified that they did not utilize any cenvat credit and merely recorded the service tax payments to inform the department. They argued that maintaining records and reflecting amounts in returns did not constitute availing cenvat credit as per the notification.

4. The key issue revolved around the interpretation of the term "taken" in the notification regarding cenvat credit. The tribunal concluded that merely recording service tax payments and informing the department did not amount to availing or utilizing cenvat credit, especially when subsequent returns showed zero balance.

5. The tribunal emphasized that the notification prohibits availing cenvat credit on services used in SEZ operations to prevent double benefits. It was established that no cenvat credit was utilized by the appellant, and the service tax paid on such services was eligible for refund as per the notification.

6. The lower authorities did not dispute that the reflected service tax amounts were not utilized by the appellant. The tribunal highlighted that the essence of the notification was to prevent both availing cenvat credit and claiming refunds, ensuring no double benefits for SEZ units.

7. Consequently, the tribunal set aside the impugned orders, ruling in favor of the appellant and allowing the appeal with consequential relief. The judgment clarified the interpretation of the notification's conditions regarding cenvat credit and refund claims for service tax paid by SEZ units.