2019 (6) TMI 517 - AT - Service Tax

Refund claim - services availed by the SEZ Unit - time limitation - whether the refund claims are to be filed within one year from the date of payment or from the end of the quarter for which payments were received? - period July 2014 to September 2014. HELD THAT - The refund application relates to the period July 2014 to September 2014. The refund application was filed by the Appellant on 30.09.2015. The Ld. Counsel of the Appellant had relied on Para 3(III)(e) of the Notification No. 12/2013-ST dated 01.07.2013 which provides that a refund application shall be filed within one year from the end of the month in which actual payment of service tax was made by a SEZ unit to the registered service provide. Moreover sub clause(f) of the Para 3(III) of the impugned provides that a SEZ unit is required to submit only one claim of refund for every quarter. In the light of overlapping in the impugned Notification I am of the view that the adjudicating authority has not considered such technical and practical aspects nor is there a finding in this regard. Accordingly as the refund application has been filed within the end of the quarter from one year such delay should be condoned and consequential refund allowed. Refund claim - common input services - HELD THAT - Services which are common in nature not exclusively used for authorized operation have to be dealt in a manner prescribed. Clause (a) of Paragraph III of the said Notification provides that the service tax paid on specified services that are common to the authorized operation in an SEZ and the operation is domestic Tariff Area (DTA units) shall be distributed amongst the SEZ unit and DTA units in the manner as prescribed in Rule 7 of Cenvat Credit Rules. Moreover it further provides that for the purpose of distribution the turnover of the SEZ unit shall be taken as the turnover of authorized operation during the relevant period - In the instant case it is the argument of the Appellant s Counsel that they do not have any DTA units however they do have DTA operations wherein they are providing erection and commissioning service. Moreover DTA sale undertaken by them forms part of authorized operation in terms of provisions of SEZ Act. The turnover of DTA sale shall be considered as part of authorized operation and forms an integral part of turnover of SEZ unit for the purpose of calculating proportionate refund of service tax used for the authorized operation. Thus the lower authority has wrongly considered DTA sale from SEZ unit as part of DTA operation for the purpose of calculating proportionate service tax refund on common input services. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Timeliness of refund claims under Notification No.12/2013-ST dated 01.07.2013.
2. Proportionate calculation of refund claims concerning SEZ and DTA sales.
3. Interpretation and application of procedural compliance for tax exemptions.

Issue-wise Detailed Analysis:

1. Timeliness of Refund Claims:
The core issue revolves around whether refund claims should be filed within one year from the date of payment or from the end of the quarter for which payments were received. The appellant argued that there was ambiguity in the overlapping period and interpreted the condition as one year from the end of the quarter. The Tribunal found that the refund application was submitted within one year from the end of the quarter, not within one year from the end of the month as stipulated by Clause 3(III)(e) of Notification No.12/2013-ST. The Tribunal observed that the provisions were overlapping and that the Assistant Commissioner/Deputy Commissioner could permit an extended period for filing refund applications. The lower authority's failure to consider this extended period was against the principle of natural justice. Consequently, the Tribunal condoned the delay and allowed the refund.

2. Proportionate Calculation of Refund Claims:
The appellant contended that the refund claim pertained only to the SEZ Unit for authorized and common operations, and there was no question of distribution in terms of Rule 7 of the Cenvat Credit Rules, 2004. The Tribunal noted that the lower authority had only considered the turnover of physical export from the SEZ as the numerator, excluding DTA sales, which should also be part of the authorized operation. The Tribunal clarified that the turnover of DTA sales should be considered as part of the authorized operation for calculating the proportionate refund of service tax on common input services. The appellant's methodology of claiming refunds was in consonance with the provisions of Rule 7 of the Cenvat Credit Rules, 2004.

3. Interpretation and Application of Procedural Compliance:
The Tribunal referenced the Hon'ble Supreme Court's judgment in the case of Commissioner of Customs (Import), Mumbai Vs. Dilip Kumar and Company and Others, emphasizing the distinction between substantial and procedural compliance. The Tribunal highlighted that procedural deviations could be condoned if the substantive requirements were met. The appellant had complied with the substantive requirement of receiving services and paying service tax, thus fulfilling the conditions for claiming a refund. The Tribunal underscored that the procedural provisions should be interpreted in light of the spirit and intentions of the legislature, which aimed to exempt SEZ units from service tax.

Conclusion:
The Tribunal set aside the impugned orders, allowed the appeal filed by the appellant, and granted consequential benefits. The judgment emphasized the importance of considering both substantive and procedural compliance while interpreting tax exemption provisions.