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TMI Blog2020 (12) TMI 1069X X X X Extracts X X X X X X X X Extracts X X X X ..... SS SERVICES INDIA PVT LTD VERSUS COMMISSIONER OF CENTRAL TAX, BANGALORE [ 2018 (9) TMI 258 - CESTAT BANGALORE] the Tribunal held that the SEZ Act had an overriding effect, in view of the provisions of section 51 of the SEZ Act, over all other laws and, therefore, the ground for rejecting the refund claims was not tenable in law and even otherwise, approval from UAC was only procedural in nature and not a mandatory condition - the Commissioner (Appeals) was not justified in rejecting the refund claims on this ground. Availment of CENVAT Credit - proviso (e) of the Notification dated March 3, 2009 - HELD THAT:- The reversal of CENVAT credit prior to its utilization and prior to the filing of the refund application would amount to not availing CENVAT credit. This, in turn, would mean that the requirement for claiming exemption contemplated under proviso (e) of the Notification dated March 3, 2009 stands satisfied. The rejection of the refund claim on this ground by the Commissioner (Appeals) is, therefore, not justified. Time limit for filing of refund - clause 2(f) of the Notification dated March 3, 2009 - HELD THAT:- Though, this issue did not form part of the show cause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 31 of the SEZ Rules cannot be denied by any procedural requirement under a notification - This submission of learned counsel for the appellant deserves to be accepted. The substantive benefit of service tax exemption provided under section 26 of the SEZ Act read with rule 31 of the SEZ Rules cannot be denied on procedural grounds. It is not in dispute that the appellant was not required to deposit service tax under the notification dated May 20, 2009, but service tax was deposited. It cannot be urged that the appellant is not entitled to claim refund because of a mistake in depositing service tax even if it was not required to be deposited. This issue has been examined while dealing with the applicability of the section 26(1) of the SEZ Act - the Commissioner (Appeals) was not justified in rejecting the refund applications on this ground. The matter is remitted to the Commissioner (Appeals) to decide whether the appellant had paid service tax on the services for which the appellant had claimed refund in the five applications submitted by the appellant - Appeal allowed by way of remand. - Service Tax Appeal No. 52470 of 2016 - Final Order No.: 51652/2020 - Dated:- 22-12-20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f refund of service tax. The said notification was amended by a notification dated May 20, 2009. It provided unconditional exemption from payment of service tax on all the services consumed wholly within SEZ, but on services consumed partly or wholly outside the SEZ, the exemption was granted by way of refund. In order to claim refund, it was mandatory for all the SEZ units to get the input services, for which refund was claimed and used by them for performing the authorized operations approved by the Unit Approval Committee UAC of the SEZ unit. It transpires that the appellant deposited service tax in terms of these notifications. 5. The appellant subsequently submitted five applications claiming refund of the service tax paid under the notification dated March 3, 2009 as also notification dated May 20, 2009 that amended the said notification dated March 3, 2009. The refund period, the date of application, the date of the notification and the amount involved in the five refund applications are as follows: S. No. REFUND PERIOD DATE OF REFUND APPLICATION NOTIFICATION DATE AMOUNT IN RU ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e been accompanied by the documents for having paid the service tax. In this regard, you have submitted only Input Service Invoice Register (in a computerized statement format without copies any input invoices) and copy of bank statement. A sample check of these two documents revealed that Input Service Invoice Register reflects only date of payments in addition to details of invoice. It does not reveal amount and mode of payment. While cross checking these dates of payments with the bank statement, in the month of March 09, payments were made on 29.03.2009 against the invoices mentioned at Sr. No. 2 to 68 of the register whereas no such payments are reflected in the bank statement on 29.03.2009. Likewise, all the other dates of payments are also not tallied with the bank statement in absence of other details such as amount and mode of payments, name of service provider in the bank statement etc. therefore, it may be clarified that as to why all the refund claims should not be rejected on this ground. 7. It may also be satisfied/established that the said specified services have actually been used in relation to the authorized operations in the Special Economic Zone. Therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ule 47 of the SEZ Rules, the modalities regarding refund are governed by the provisions of the Finance Act and so the conditions prescribed in the two notifications dated March 3, 2009 and May 20, 2009 for seeking exemption of service tax would have to be fulfilled. Learned authorized representative also submitted that a provision providing for exemption from service tax has to be construed strictly and a person who claims exemption has to establish that he is entitled to it. In support of this contention, learned authorized representative relied upon two decisions of the Supreme Court in M/s L R Brothers Indo Flora Ltd. vs. Commissioner of Central Excise 2020-TIOL-145-SC-CUS and Commissioner of Customs (Import), Mumbai vs. Dilip Kurmar Co. 2018 (361) ELT 577 (SC) . 13. The submissions advanced by learned counsel for the appellant and the learned authorized representative of the Department have been considered. . 14. In order to appreciate the contentions, it would be appropriate to refer to the relevant provisions of the SEZ Act and the SEZ Rules framed thereunder. . . 15. Section 26 of the SEZ Act deals with exemptions, drawbacks and concessions to every Deve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ations dated March 3, 2009 and May 20, 2009 would not be applicable to the case of the appellant as the appellant is exempted from payment of service tax under the provisions of section 26(1)(e) of the SEZ Act read with rule 31 of the SEZ Rules. The submission is that the appellant may have deposited the service tax pursuant to the notification dated March 3, 2009, but when the appellant is exempted from levy of service tax as the unit of the appellant is situated in SEZ and it had undertaken authorized operations only in accordance with the letter dated June 19, 2008 issued by the Development Commissioner, Noida Special Economic Zone, it is entitled to refund of the service tax. 22. It has, therefore, to be seen whether the conditions stipulated in the notifications dated March 3, 2009 and May 20, 2009 would at all apply to the appellant since the appellant claims that it is situated in a SEZ and has carried out authorized operations only. 23. Section 26(1) of the SEZ Act provides that subject to the provisions of sub-section (2), every Developer shall be entitled to exemptions and the exemption at (e) exempts every Developer from service tax under Chapter-V of the Finance A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation SEZ, entered into a sub-lease agreement with the first petitioner for rendering certain services. It, however, claimed exemption on the ground that under section 26(1)(e) of the SEZ Act, every Developer was entitled to exemption from service tax under Chapter-V on the Finance Act on taxable services provided to a Developer or unit to carry on the authorized operations in a SEZ and the same was not dependent upon the conditions stipulated in notifications issued under section 93 of the Finance Act. It is in this context that the Andhra Pradesh High Court observed that the notifications issued under section 93 of the Finance Act cannot be considered for determining whether a unit situated in SEZ qualifies for exemption. The observations are as follows: 22. It may be noted that sub-section (1) of section-26 begins with the words subject to the provisions of sub-section (2) . Sub-section (2) authorizes the Central Government to prescribe the manner in which and the terms and conditions subject to which exemptions shall be granted to the developer or entrepreneur under sub-section (1). 23. As rightly pointed out by Sri S. Niranjan Reddy, learned senior counsel appearing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is verb. Generally no enactment defines the word prescribe but the SEZ Act 2005 defines the word prescribe under section 2(w) to mean the rules framed by the Central Government under the SEZ Act, 2005. The space is also not left unoccupied, as the Central Government has issued a set of rules known as the Special Economic Zones Rules, 2006 , wherein the Central Government has prescribed the terms and conditions for grant of exemptions under rule 22. Therefore, there is no question of comparing the terms and conditions prescribed in rule 22 with the terms and conditions prescribed in the Notifications issued under any one of the five enactments listed in section 26(1) to find out whether there was any inconsistency. 34. The benefit of exemptions granted under the Notifications issued under section 93 of the Finance Act, 1994, are available to any one and not necessarily confined to a unit in a special economic zone. Section 93 of the Finance Act, in that sense is a general power of exemption available in respect of all taxable services. But, section 26(1) is a special power of exemption under a special enactment dealing with a unit in a special economic zone. Therefore, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt, the word prescribe would mean prescribed by rules made by the Central Government under the SEZ Act, in view of the definition of prescribed under section 2(w) of the SEZ Act. The Notification dated March 3, 2009, which has been issued under section 93 of the Finance Act, therefore, has no application. (emphasis supplied) 26. Learned authorized representative of the Department has, however, placed reliance upon sub-rule (5) of rule 47 of the SEZ Rules that was inserted w.e.f August 5, 2016 to contend that the aforesaid two notifications issued under Finance Act would be applicable. 27. This submission of learned authorized representative of the Department cannot be accepted. It is by a notification dated August 5, 2016 that in rule 47, sub-rule (5) was inserted after rule (4) and the same is reproduced below: 47(5) Refund, Demand, Adjudication, Review and Appeal with regard to matters relating to authorized operations under Special Economic Zones, Act, 2005, transactions and goods and services related thereto, shall be made by the Jurisdictional Customs and Central Excise Authorities in accordance with the relevant provisions contained in the Customs Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able on record. . 33. The input service invoice register contained details of the mode of payment, cheque number, cheque realisation date/date of online transfer and the appellant had also highlighted the relevant bank entries from the bank statements to establish the co-relation. The TDS challans and TDS returns establishing the TDS deduction were also available and could be verified. Thus, the refund claim should not have been rejected on this ground and in case of any doubts, the Commissioner (Appeals) could have sought a clarification from the appellant. During the course of hearing of the appeal, the appellant also submitted a certificate issued by a chartered accountant regarding co-relation between the input service invoice register and the bank statements. It is for this reason that the learned counsel for the appellant stated that an opportunity may now be granted to the appellant to establish the co-relation before the Commissioner (Appeals). 34. This certificate dated May 8, 2019 issued by the chartered accountant may be placed by the appellant before the Commissioner (Appeals) for establishing the co-relation between the input service invoice register and the bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... limit for filing of refund In absence of admissible documentary evidence, it could not be established that 4 refund claims (except 2nd refund claim) were filed within stipulated time of 6 months. 4. No documentary evidence to satisfy condition no. 2(a) of Refund Notification On a perusal of provisions of notification, it is clear that SEZ unit is eligible for exemption only in cases where they are the same person who are liable to pay service tax under section 68(2) of Finance Act 1994 and who have actually paid the service tax 5. Nexus of input services with the authorized operations i. Condition No. 2(h) of refund notification provides that exemption is available only where services are actually used in relation to authorized operations; ii. Mere approval by the Unit Approval Committee is not enough to establish nexus; iii. It is impossible to segregate the admissible and inadmissible invoices. 6. Input service invoices are dated prior to the date of refund notification In respect of 1st refund ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervices used for rendition of such output services are available for claim of refund in terms of the substantive provisions of the SEZ Act. 44. In any case, the conditions imposed by the notifications issued under the provisions of the Finance Act are merely directory in nature. 45. This issue has been considered time and again. In Mast Global Business Services India Pvt. Ltd. Vs. Commissioner of Central Tax 2018-TIOL-3115-CESTAT-BANG , the Tribunal held that the SEZ Act had an overriding effect, in view of the provisions of section 51 of the SEZ Act, over all other laws and, therefore, the ground for rejecting the refund claims was not tenable in law and even otherwise, approval from UAC was only procedural in nature and not a mandatory condition. The relevant portion of the decision of the Tribunal is reproduced below: The other grounds on which the refund claims have been rejected by the impugned order is that the appellant has not produced the approved list of specified input services from the UAC to SEZ which is a mandatory condition as per the Commissioner (Appeals). In reply to this argument, the learned counsel submitted that in view of the settled legal positi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chennai) , a Division Bench of the Tribunal observed that in view of the provisions of section 26 of the SEZ Act, the notifications issued under the Finance Act cannot deprive a person from exemption of service tax. The Tribunal further held that the requirement for obtaining approval of UAC is only a procedural requirement for claiming the substantive benefit of exemption from service tax. The Department was, therefore, not justified in rejecting the claim. The relevant portion of the decision is reproduced below: 5. The issue that arises for consideration is whether the appellant is eligible for refund of service tax paid on Renting of Immovable Property Service. The original authority has rejected the refund on the ground that on the date offiling of the refund claim, the said services, viz; Renting of Immovable Property Services were not approved by the Development Commissioner, as required under Notification No. 9/2009 as amended. As per the notification, exemption is allowed in relation to authorised operations in SEZ, provided the developer or units of SEZ shall get the list of services which are required in relation to the authorised operations approved from the Appro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice and, therefore, the refund claim could not have been rejected on this ground. Learned counsel has also pointed out that CENVAT credit inadvertently taken had been reversed prior to the filing of the refund claim and since reversal of CENVAT credit before its utilization is equivalent to non-availment of CENVAT credit, the condition of non-availment of CENVAT credit stands fulfilled. 51. The contention advanced by learned counsel for the appellant deserves to be accepted. Reversal of CENVAT credit prior to its utilization is as good as not availing CENVAT credit. In Mast Global Business Services India Pvt. Ltd., the Tribunal observed that if CENVAT credit has been reversed without utilization, it would amount to not taking the credit. The observations are as follows : 6.2 Now, coming to the second ground on which the refund claims have been rejected by the impugned order is that the appellant has availed the cenvat credit and hence he is not entitled to file the refund claim. In this regard, I find that the appellant has already reversed the Cenvat credit without any utilization and it has been shown in ST-3 return filed for the period April 2015 to September 2015 and onc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 (81) E.L.T. 3] has held as under : 6. Drawing similar analogy we consider that subject to the reversal of Modvat credit taken with regard to the inputs which were utilized in the manufacture of duty free goods, the manufacturer could avail of the Modvat credit as well as full duty exemption under applicable small scale exemption notification with regard to some specified goods. Reference is answered accordingly. 7. As a result the impugned order-in-appeal dated 28-1-1999 passed by the Central Excise is set aside and the appeal of Franco Italian Company (supra) is allowed subject to the conditions that Modvat credit taken of the duty paid on the inputs which were utilized in the manufacture of duty free goods, is reversed. 18. In view of the above decision we are of the opinion that reversal of Modvat credit amounts to non-taking of credit on the inputs. Hence the benefit has to be given of the notification granting exemption/rate of duty on the final product since the reversal of the credit on the input was done at the Tribunal s stage. The relevant paragraph in the judgment of the Hon ble Apex Court in Precot Meridian Ltd., is noted as under: 3. We note that fiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice Tax to the vendor Date of filing the refund claim 1. 3 Mar to 19 May 09 Notification dated 3 Mar 09 13,70,050 29 Mar 09 25 Sep 09 2. 20 May to 30 Sept 09 Notification dated 20 May 09 2,556,766 20 May 09 19 Nov 09 3. Oct to Dec 09 1,128,484 10 Oct 09 08 Apr 10 4. Jan to Mar 10 1,845,467 04 Jan 10 02 July 10 5. Apr to Jan 10 1,308,361 01 Apr 10 30 Sep 10 Total 8,209,128 56. Though, this issue did not form part of the show cause notice, yet a perusal of the details contained in the aforesaid table clearly indicate that the refund claims have been filed within six months from the date of payment of the service tax. In such circumstance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant had carried out all the operations from the SEZ unit and, therefore, all the input services were used in relation to the authorized operations. Learned counsel also pointed out that no specific finding has been recorded in the impugned order about any input service having no nexus with the authorized operations. 64. There is no evidence on the record which may indicate that any operation was carried out by the appellant from any unit outside the SEZ. Thus, all input services were used in relation to the authorized operations. This issue was examined by the Tribunal in Reliance Industries Ltd.., vs. Commissioner of C. Ex., Mumbai-I 2016 (41) S.T.R. 465 (Tri.-Mumbai) . The Tribunal found as a fact that the unit of the appellant operating in SEZ was the sole undertaking of the appellant and the SEZ Act that provides for exemption of duties and taxes has an overriding effect when in conflict with other laws. The Tribunal, therefore, held that there can be no doubt that the services provided by the appellant were for authorized operations in SEZ. 65. In this connection, learned counsel for the appellant has also pointed out that a certificate issued by a chartered eng ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ification dated May 20, 2009 would be admissible only in cases where the services are not wholly consumed within the SEZ. 72. The Commissioner (Appeals) has referred to the Notification dated May 20, 2009 and concluded that refund can be claimed only in respect of services that are consumed outside SEZ. 73. Learned counsel for the appellant submitted the substantive benefit of the service tax exemption provided under section 26 of the SEZ Act and rule 31 of the SEZ Rules cannot be denied by any procedural requirement under a notification. 74. This submission of learned counsel for the appellant deserves to be accepted. 75. The substantive benefit of service tax exemption provided under section 26 of the SEZ Act read with rule 31 of the SEZ Rules cannot be denied on procedural grounds. It is not in dispute that the appellant was not required to deposit service tax under the notification dated May 20, 2009, but service tax was deposited. It cannot be urged that the appellant is not entitled to claim refund because of a mistake in depositing service tax even if it was not required to be deposited. This issue has been examined while dealing with the applicability of the sec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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