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TMI Blog2015 (11) TMI 1048X X X X Extracts X X X X X X X X Extracts X X X X ..... Zones Act, 2005 was brought into force on 10 th February 2006. From the notifications of 2009 issued by Department of Revenue, it is clear that the test of utilization of service for authorized operations is left to the wisdom of the Approval Committee and the satisfaction of the jurisdictional Assistant Commissioner regarding its actual utilization. This is in conformity with the scheme envisaged by the Special Economic Zones Act, 2005. The approval of the Approval Committee is not in question in the instant case. However, the original authority could not find a link between the service rendered by M/s NSDL and the operations of the appellant as developer/unit in the Zone. The two lower authorities have erred in arriving at this conclusion. The undertaking in the Zone was the sole investment of the appellant and hence any service provided to the appellant cannot but be in relation to its authorized operations. Provisions of section 26 of Special Economic Zones Act, 2005 are conferred with a primacy that cannot be denied, diluted or denigrated owing to delay in devising a facilitative mechanism that was agreeable to Revenue. Disregard of parliamentary intent to levy a tax or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arned Counsel for appellant referred to decisions of the Tribunal in Norasia Container Line v Commissioner of Central Excise, New Delhi [2011 (923) STR 295 (Tri-Del)], Reliance Ports Terminal Ltd v Commissioner of Central Excise Service Tax Rajkot [2013-TIOL-1473-CESTAT-AHM], IntasPharma Ltd v Commissioner of Service Tax Ahmedabad [2013-TIOL-1091-CESTAT-AHM] and Tata Consultancy Services Ltd v Commissioner of Central Excise Service Tax, Mumbai [2012-TIOL-1034-CESTAT-MUM]. Learned Authorized Representative reiterated the findings in the impugned order and contended that the exemptions were available only when the nexus with authorized operations within the Special Economic Zone is established. 3.1 As contended by the appellant, they are in the business of setting up and operating a Special Economic Zone; that they needed funds to set up a unit in the said Special Economic Zone for which an Initial Public Offering (IPO) was contemplated. According to the appellant, the refund claim was backed by section 26 of Special Economic Zones Act, 2005 and not notification 4/2004-ST with the former possessing a much wider scope than the notification of 2004 because Section 26 of Specia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies and taxes besides according overriding effect when in conflict with other laws and for deeming the Zone to be outside the Customs territory in relation to authorized operations. The relevant provisions of the Special Economic Zones Act, 2005 are as below: 26. (1) Subject to the provisions of sub-section (2), every Developer and the entrepreneur shall be entitled to the following exemptions, drawbacks and concessions, namely:- (a) exemption from any duty of customs, under the Customs Act, 1962 or the Custom Tariff Act, 1975 or any other law for the time being in force, on goods imported into, or service provided in, a Special Economic Zone or a Unit, to carry on the authorized operations by the Developer or entrepreneur; (b) exemption from any duty of customs, under the Customs Act, 1962 or the Customs Tariff Act, 1975 or any other law for the time being in force, on goods exported from, or services provided, from a Special Economic Zone or from a Unit, to any place outside India: (c) exemption from any duty of excise, under the Central Excise Act, 1944 or the Central Excise Tariff Act, 1985 or any other law for the time being in force, on goods brought from Domestic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Economic Zone, whether or not the said taxable services are provided inside the Special Economic Zone, from the whole of the service tax leviable thereon under section 66 of the said Finance Act: Provided that- (a) the developer or units of Special Economic Zone shall get the list of services specified in clause (105) of section 65 of the said Finance Act as are required in relation to the authorised operations in the Special Economic Zone, approved from the Approval Committee (hereinafter referred to as the specified services); (b) the developer or units of Special Economic Zone claiming the exemption actually uses the specified services in relation to the authorised operations in the Special Economic Zone; (c) the exemption claimed by the developer or units of Special Economic Zone shall be provided by way of refund of service tax paid on the specified services used in relation to the authorised operations in the Special Economic Zone; (d) the developer or units of Special Economic Zone claiming the exemption has actually paid the service tax on the specified services; (e) no CENVAT credit of service tax paid on the specified services used in relation to the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loper or units of Special Economic Zone shall be provided by way of refund of service tax paid on the specified services used in relation to the authorised operations in the Special Economic Zone except for services consumed wholly within the Special Economic Zone; (2) for sub-paragraph (d), the following shall be substituted, namely:- (d) the developer or units of Special Economic Zone claiming the exemption, by way of refund in accordance with clause (c), has actually paid the service tax on the specified services; 3.7 The refund application was made in May 2007 when the exemption of service tax did not have any enabling procedure other than notification no 4/2004-ST dated 31 st March 2004. Rejection of the claim was effected in December 2008 when the same notification prevailed. The original authority was of the view that Initial Public Offering did not comply with the requirement of the notification that services on which exemption was sought had to be consumed within the Zone as the invoices was raised on the corporate office of the appellant at Mumbai. Justifying the rejection, the original authority placed reliance on the principle of equivalence enunciate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 10 th February 2006. 3.10 The two notifications, in conjunction, have given effect to the statutory promise by devising two methods for availing the exemption - by upfront exemption when the service is rendered within the geographical boundaries of the Special Economic Zone and by the refund route where the physical performance of service is not within the boundaries but is intended for the authorized operation of the developer or unit. A pre-approval and verification system was also established in the same notifications -necessitated by the potential for wrongful availment arising from the intangibility of services. 3.11 The exemption notification that was the immediate predecessor of this elaborate procedure, notification no 4/2004-ST, and the only one that was in existence when the tax was paid by the appellant and the application for refund was processed. This notification, though found to be consistent with the Special Economic Zones Act, 2005 by the two lower authorities, would not appear to be so. That exemption procedure having been notified well before the enactment of the Special Economic Zones Act, 2005 and with intent to provide the benefit within the limited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3.14 In re Norasia Containers Lines, the Tribunal considered the appeal filed against a demand for tax that had not been included in the invoice raised for supply of taxable services while providing containers to unit in a Special Economic Zone which the jurisdictional Central Excise authority felt was not consumed within the Zone. It uncannily resembles the transaction that occurred between the appellant in the matter before us and M/s NSDL and which, undoubtedly, would have confronted M/s NSDL had they chosen the route adopted by M/s Norasia to render the service without including tax in the consideration. Hence, it would be appropriate to recall the findings of the Tribunal in that case: 4. We have considered the submissions from both the sides. The notification No.4/2004 uses expression for consumption of services within such Special Economic Zone , but at the same time also uses the expression taxable services provided to a unit of the SEZ . Both the expressions are required to be read harmoniously. In any case, the subsequently enacted SEZ Act further provides in Section 26 as under: Section 26. Exemptions, drawbacks and concessions to every Developer a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resorted to for denial of exemption, under section 11B of Central Excise Act, 1944 read with section 83 of Finance Act, 1994 was laid down. Accordingly, we refer to the decision therein: 6.2 Coming to the next question, whether in respect of the services which were wholly consumed and which were fully exempt from payment of duty, whether the appellants can be granted refund under Notification No. 09/2009-ST dated 3.3.2009 as amended by Notification No. 15/2009-ST dated 20.5.2009 through which amendment a condition was inserted stating that the refund procedure prescribed under the said Notification shall apply only in the case of services used in relation to the authorized operations in the SEZ except for services consumed wholly within the SEZ. This view of the department is also incorrect. Notification No. 09/2009-ST exempts the taxable services specified in Clause (105) of Section 65 of the Finance Act, 1994 which are provided in relation to the authorized operations in a SEZ and received by a developer or units of a SEZ, whether or not the said taxable services are provided inside the SEZ, from the whole of the service tax leviable thereon under Section 66 of the Finance A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r refund. The Tribunal held therein that: 11. On true and fair construction of Notifications 9/2009 and 15/2009 issued under Section 93(1) of the Act, considered in the light of the overarching provisions of Section 7 and 26 (e) of the 2005 Act, the conclusion appears compelling that neither Notification 9/2009 nor 15/2009 disentitle immunity to service tax enjoined by the provisions of the 2005 Act. It therefore appears that Notification Nos. 9/2009 and 15/2009 merely contour the process by which the benefit of exemption/immunity to tax is operationalised. Notification Nos. 9/2009 and 15/2009 have provided a facilitative regime whereby a developer or units of SEZ, as recipients of taxable service are enabled the facility of claiming refund of service tax, remitted by taxable service providers in relation to the taxable services provided to a unit in a SEZ. On this harmonious construction, the immunity to service tax provided under Section 7 or 26 of the 2005 Act cannot be so interpreted as to be eclipsed the procedural prescriptions of Notification Nos. 9/2009 or 15/2009. These Notifications are calibrated to enable recipients of taxable services (exempt from liability to tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the light of this analysis, the substituted provisions, of clause/sub-paragraph 'C' of Notification No.15/2009 cannot be inferred to have imposed any disability on the recipient of services consumed wholly within the SEZ, from seeking refund of service tax remitted on such transactions, by the providers of such services. It is also relevant to quote the provisions contained in Sec.26(1)(e) and Sec. 51 of the SEZ Act, 2005 as reproduced below: 26(1)(e): exemption from service tax under Chapter V of the Finance Act, 1994 (32 of 1994) on taxable services provided to a Developer or Unit to carry on the authorized operations in Special Economic Zone. 51. The provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any law other than this Act. 7. From the provisions contained in Section 26 (1)(e) of the SEZ Act, read with Rule 30 (10) of the SEZ Rules, 2006, it can be seen that no service tax is payable on the services provided by a service provider to a SEZ unit. Further, Sec. 51 of the SEZ Act also makes an over-ridi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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