2019 (3) TMI 877 - AT - Service Tax

SEZ Unit - refund of service tax - credit was distributed by the ISD - Rule 7 of the Cenvat Credit Rules - clause (a) and (e) of para 3 (III) of Notification 12/2013-ST - time limitation - Held that - Clause (e) of para 3(III) of Notification No.12/2013 provides for discretion to the adjudicating authority to permit filing of a refund claim even beyond one year from the end of the month in which actual payment of service tax was made by the SEZ unit to the registered service provider. This discretion has been exercised by the adjudicating authority while granting refund in respect of cases covered under Table-II of Form A-4 to the refund application. The exercise of discretion is evident as the adjudicating authority has in his order taken cognizance of disclosure in the covering letter filed along with the refund claim, wherein in, it has been stated that in respect of cases where refund was being claimed after distribution of credit by ISD there were some instances where on the date of filing of the refund claim the payment date to the service provider by the ISD office for common services was beyond one year from the date of such payment. The adjudicating authority had processed the refund claim without verifying the compliance with the condition regarding time limitation prescribed in clause (e) of Para 3(III), even then there is no warrant to remand the matter back to the adjudicating authority as has been contended by the Revenue, inasmuch as, even if the adjudicating authority had not exercised the jurisdiction vested with it, we can do so and we exercise the said discretion and condone the delay in filing the claim for refund, as prescribed in clause (e) of para 3 (III) of Notification No.12/2013 In case of ISD invoices for all the purposes be it cenvat or refund, the ISD invoice is deemed to be tax paying document, hence the date of that ISD invoice has to be taken even for computing the one year stipulated in the notification. Therefore as long as the SEZ unit files the claim for refund within one year from the ISD unit distributing credit to it, it is reasonable to condone the delay, if any, in filing the claim for refund from the time period of one year from the end of the month, in which tax payment is made to the service provider as envisaged in clause (e) of para 3(III). Clause (a) of para 3(III) of Notification No.12/2013 - Held that - It is not in dispute that the services covered by Table-II of Form A-4 were common to the authorised operations in the SEZ and the operations in the DTA. Such common credit has been distributed on the basis of the turnover of the SEZ unit and that of the DTA unit as envisaged in clause (a) of para 3(III) - the adjudicating authority has acted completely in accordance with law while processing the claim for refund in the manner prescribed in the refund Notification. Appeal dismissed - decided against Revenue.

Summary

Issues Involved:
1. Compliance with the time limitation prescribed in clause (e) of para 3(III) of Notification No. 12/2013-ST.
2. Verification of the correctness of the distribution of credit between the SEZ and DTA units as per Rule 7 of the Cenvat Credit Rules, 2004.

Issue-wise Detailed Analysis:

1. Compliance with the Time Limitation Prescribed in Clause (e) of Para 3(III) of Notification No. 12/2013-ST:

The core issue revolves around whether the refund claims filed by the SEZ unit were within the stipulated one-year period from the end of the month in which actual payment of service tax was made by the SEZ unit to the registered service provider. The Revenue argued that the adjudicating authority did not verify the actual date of payment of the invoices to ascertain if the claims were time-barred, and hence, the matter should be remanded for verification.

The Respondent countered that clause (e) was not applicable to refunds covered by Table-II of Form A-4, as these services were common to both SEZ and DTA operations, and payment was made by the DTA unit. Therefore, the SEZ unit did not make any direct payment to the registered service provider, making the time limitation clause inapplicable. The Respondent further argued that the adjudicating authority had followed the same reasoning and practice as his predecessors, which had been accepted by the Revenue without any challenge.

The Tribunal found the Respondent's arguments convincing but chose not to delve deeply into whether clause (e) was inapplicable. Instead, it upheld the adjudicating authority's decision, noting that the authority had granted refunds following the established practice and precedence. The Tribunal observed that the adjudicating authority had exercised discretion in condoning the delay, as the claims were filed within one year from the date of the ISD invoices, which was when the SEZ unit became aware of the tax liability.

The Tribunal also noted that clause (e) provides discretion to the adjudicating authority to permit filing of a refund claim beyond one year. The adjudicating authority had taken cognizance of the disclosure in the covering letter filed with the refund claim, which mentioned instances where the payment date was beyond one year. The Tribunal held that the adjudicating authority had judicially exercised this discretion, and there was no requirement to record reasons for extending the period.

2. Verification of the Correctness of the Distribution of Credit Between the SEZ and DTA Units as Per Rule 7 of the Cenvat Credit Rules, 2004:

The Revenue contended that the matter should be remanded to verify the correctness of the distribution of credit made to the SEZ unit through ISD invoices, as per Rule 7 of the Cenvat Credit Rules. The Respondent argued that all necessary data for verification had been furnished, including certification by statutory auditors, and no infirmity was shown by the Revenue in its appeal.

The Tribunal examined the claim for refund and noted that the details regarding turnover of the DTA and SEZ units were furnished in Form A-4. It was undisputed that the services covered by Table-II were common to both SEZ and DTA operations, and the common credit was distributed based on the turnover as envisaged in clause (a) of para 3(III). The Tribunal found no merit in the Revenue's objections and held that the adjudicating authority had acted in accordance with the law while processing the refund claim.

Conclusion:

The Tribunal dismissed the appeals filed by the Revenue, upholding the adjudicating authority's orders. It found no merit in the Revenue's objections regarding compliance with the time limitation and the correctness of credit distribution. The Tribunal emphasized that the adjudicating authority had followed established practices and exercised discretion judicially, and the Revenue failed to demonstrate any infirmity in the adjudicating authority's order.