2024 (3) TMI 757 - AT - Service Tax

Exemption to SEZ Units from payment of Service Tax under N/N. 17/2011-S.T. dated 01.03.2011 - Reversal of CENVAT Credit utilized by the Appellant for discharging service tax liability which was allegedly not permissible under the Exemption Notification - Scope of SCN - HELD THAT - The Exemption Notification which is applicable in the present case provides for refund of Service Tax paid by a SEZ Unit or a SEZ Developer, The Notification also does not provide for any conditions or restrictions on the discharge of the output liability of an SEZ Unit making sales or providing services in the DTA by utilising the Cenvat credit of a Non-SEZ Unit of the same assessee when both units are covered under the same centralized registration. It is well settled law that there is no bar on units registered under a centralized registration utilizing accumulated Cenvat Credit in discharge of liability, even if the said units were not entitled to avail Cenvat Credit on inputs/input services - Reliance can be placed in BE. BILLIMORIA CO. LTD. VERSUS COMMISSIONER OF SERVICE TAX, MUMBAI 2013 (4) TMI 272 - CESTAT MUMBAI where it was held that As decided in Bharat Heavy Electricals Ltd. Vs. CCE 2012 (4) TMI 197 - CESTAT, MUMBAI wherein held that the appellant are entitled to utilize centralized Cenvat credit for payment of service tax for the service availed under the category of Commercial or Industrial Service' and Construction of Complex Services'. The Ld. Commissioner (Appeals) ought to have considered that there is no statutory basis for holding that there was a requirement of having the same invoicing series for units having a centralized registration. It is submitted that the sole basis for confirmation of demands in the Order-in-Original was that different invoicing series were being used for the two Units of the Appellant under centralized registration. Holding that the appellant does not have a centralized registration as they do not maintain centralized billing or accounting system as appearing from different invoicing series of the SEZ and Non-SEZ unit of the appellant. Even the learned Commissioner (Appeals) further digressed from the SCN and held the SEZ unit cannot operate under a centralized billing system under Rule 19(7) of the SEZ Rules. Both the Adjudicating Authority and the learned Commissioner (Appeals) have travelled beyond the scope of SCN which is not permitted - support found the from the judgment of the Hon ble Supreme Court in the case of COMMISSIONER OF CENTRAL EXCISE, NAGPUR VERSUS M/S BALLARPUR INDUSTRIES LTD 2007 (8) TMI 10 - SUPREME COURT that a show cause notice being the foundation of the matter, it was not permissible for the Commissioner to travel beyond it. The impugned order cannot be sustained and are accordingly set aside - Appeal allowed.

Summary

Issues Involved:
1. Validity of centralized registration for SEZ and Non-SEZ units.
2. Eligibility to utilize Cenvat Credit by SEZ unit.
3. Invocation of extended period of limitation.
4. Authority of adjudicating bodies to go beyond the scope of the Show Cause Notice (SCN).

Summary:

1. Validity of Centralized Registration for SEZ and Non-SEZ Units:
The Appellant argued that it is entitled to avail and utilize Cenvat credit relating to a non-SEZ unit to discharge the tax liability of its SEZ Unit when both units are covered under a centralized registration. The learned Commissioner (Appeals) rejected the appeal on the ground that SEZ unit cannot operate under centralized billing system under Rule 19(7) of the SEZ Rules. The Tribunal found no statutory basis for holding that there was a requirement of having the same invoicing series for units under centralized registration, and the sole basis for confirmation of demands was found to be erroneous.

2. Eligibility to Utilize Cenvat Credit by SEZ Unit:
The Appellant contended that none of the statutory provisions restricts the discharge of the output liability of an SEZ Unit by utilizing the Cenvat credit of a Non-SEZ Unit of the same assessee when both units are covered under the same centralized registration. The Tribunal noted that the Exemption Notification and Credit Rules do not provide any restriction prohibiting the discharge of service tax liability of a SEZ Unit by utilizing Cenvat Credit of a Non-SEZ Unit.

3. Invocation of Extended Period of Limitation:
The Appellant argued that the extended period of limitation was wrongly invoked as they had been regularly filing service tax returns, were under a bona fide belief of correct utilization of Cenvat credit, and had disclosed all information in their financial records. The Tribunal found that the demand in the SCN was based on the reasoning that the Appellant's SEZ unit is not eligible to avail Cenvat Credit in terms of the Exemption Notification, and therefore, could not have discharged its service tax liability through its Cenvat account.

4. Authority of Adjudicating Bodies to Go Beyond the Scope of SCN:
The Tribunal held that both the Adjudicating Authority and the learned Commissioner (Appeals) had traveled beyond the scope of the SCN, which is not permitted. It cited the judgment of the Hon'ble Supreme Court in the case of CCE, Nagpur v. Ballarpur Industries Ltd., 2007 (215) ELT 489 (SC) and CC, Mumbai v. Toyo Engineering India Ltd. 2006 (201) ELT 513(S.C.), emphasizing that it is not permissible for the department to travel beyond the show cause notice.

Conclusion:
The Tribunal set aside the impugned order and allowed the appeal with consequential relief as per law, emphasizing that the adjudicating authorities had overstepped the bounds of the SCN and the applicable legal provisions did not support the demands made.