2019 (5) TMI 759 - AT - Service Tax

SEZ Unit - Refund of service tax paid - service tax amount paid on specified services said to have been used for various operation in the SEZ under Notification No.12/2013-ST dated 1.7.2013 - refund rejected on the ground that the services are not approved by the Unit Approval Committee (UAC) without verifying the usage of the services - HELD THAT - Both the authorities have not considered the usage of the input services procured by the appellant during the refund period. Further, the original authority should have verified the usage and the nexus of the impugned services with the authorized operations. In the case of TATA CONSULTANCY SERVICES LTD VERSUS COMMISSIONER OF CENTRAL EXCISE ST (LTU), MUMBAI 2012 (8) TMI 500 - CESTAT, MUMBAI , it was held that services provided to SEZ or a unit in the SEZ is deemed as export as per the provisions of Section 2((m)(ii) of the SEZ Act, 2005 and as per Rule 31 of the SEZ Rules, 2006, the assessee is entitled for exemption from payment of service tax on the services which are used or provided to a unit in SEZ. Refund allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Rejection of refund claims under Notification No.12/2013-ST
- Compliance with conditions of Notification No.12/2013-ST
- Approval of services by Unit Approval Committee (UAC) of SEZ
- Usage of input services in SEZ operations
- Legal rights denial due to procedural lapses
- Applicability of SEZ Act provisions over other laws
- Admissibility of refund despite services not in approved list
- Violation of principles of natural justice in rejecting refund claims

Analysis:
The case involved appeals against the rejection of refund claims under Notification No.12/2013-ST by the Commissioner (A). The appellants, engaged in providing taxable services to a foreign principal, filed refund claims for service tax paid on specified services used in SEZ operations. The key contention was the rejection of refunds due to non-approval of services by the Unit Approval Committee (UAC) of the SEZ, as mandated by the notification. The appellant argued that procedural lapses should not deny legal rights and emphasized the nexus of services with authorized operations. Citing judicial precedents like Lowe's Services India Pvt. Ltd. and Mast Global Business Services India Pvt. Ltd., the appellant asserted that services used for authorized operations should be eligible for refund, even if not in the approved list.

The respondent defended the rejection, highlighting non-compliance with Notification No.12/2013-ST conditions and lack of UAC approval for specified services. The respondent relied on the case of Kolland Developers Pvt. Ltd. to support the rejection based on non-compliance. The Tribunal, after considering arguments from both sides and reviewing the record, found that the rejection was primarily due to lack of UAC approval, overlooking the usage of input services in the refund period. Referring to the SEZ Act provisions and judicial decisions, including Tata Consultancy Services Ltd., the Tribunal emphasized the entitlement of SEZ units to exemption from service tax on services used for SEZ operations.

The Tribunal noted that the non-inclusion of services in the approved list was a procedural lapse, as established in Mast Global Business Services India Pvt. Ltd. case. It highlighted the violation of natural justice principles in rejecting refund claims based on grounds beyond the show-cause notices. Upholding the applicability of SEZ Act provisions over other laws, the Tribunal set aside the impugned order, allowing the appeal and granting consequential relief. The judgment underscored the importance of considering the nexus of services with authorized operations and upheld the legal rights of the appellant despite procedural infractions, ultimately ruling in favor of the appellant.