2019 (2) TMI 210 - AT - Service Tax

Refund of service tax - rejection on the ground that the input services are not used with the SEZ area and also that the input services are not used for authorized operations - Held that - Almost all the activities, which are related to the business of assessees would be covered within the definition of input services . In various decision of the Tribunal as well as various High Courts, the services in the nature of Air Travel Agents Service, Architect Services, Courier Services, Custom House Agents Service and Repair & Maintenance Services have been held to be eligible for credit - the rejection of refund claim on the ground that the input service do not have nexus with the manufacturing activity of the appellants is without basis. Rejection on the ground that input services having been consumed fully within the SEZ area and also that the services are not used for authorized operations - Held that - Though, the department alleges that the services are not used for authorized operations, the impugned services like Air Travel Agents Service, Architect Services, Courier Services, Custom House Agents Service and Repair & Maintenance Services etc., is consumed by the appellants for the purpose of the authorized operations as SEZ developer - refund cannot be rejected on this ground. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Refund claims rejection based on nexus with business activity and authorized operations.

Analysis:
The appellants, SEZ developers, filed refund claims for various periods, which were partially allowed and rejected by refund sanctioning authorities. The Commissioner (Appeals) rejected part of the refund claims, citing reasons that the input services lacked nexus with business activities and were not used for authorized operations. The appellants argued that the input services were utilized for output services/business activities, and being prior to 01.04.2011, were eligible based on Tribunal and High Court decisions. The Tribunal had previously ruled on similar cases, establishing the eligibility of input services even if not used within the SEZ unit or approved by the Approval Committee.

The Authorized Representative supported the findings of the impugned order, but the Tribunal disagreed. The Commissioner (Appeals) rejected the refund claims on the grounds that the input services did not have a nexus with business activities and were not used for authorized operations within the SEZ. However, considering the wide definition of "inputs" during the relevant period and precedents from various Tribunals and High Courts, the Tribunal found the rejection unjustified. The services in question, such as Air Travel Agents Service, Architect Services, Courier Services, etc., were deemed essential for the authorized operations as an SEZ developer. The Tribunal concluded that the rejection of the refund claims lacked basis and set aside the impugned order, allowing the appeals with consequential reliefs.

In conclusion, the Tribunal overturned the Commissioner (Appeals) decision to reject the refund claims based on the lack of nexus with business activities and unauthorized operations within the SEZ. The Tribunal emphasized the broad definition of "inputs" during the relevant period and relied on previous decisions to support the appellants' claim for refund, ultimately allowing the appeals and providing consequential reliefs.