2015 (11) TMI 1048 - AT - Service Tax

Tribunal rules SEZ services eligible for tax refund under broader exemption scope

The Tribunal allowed the appeal, ruling in favor of the appellant's refund claim for service tax paid for services provided within the Special Economic ... Refund of service tax - developer unit in SEZ - claim of refund prior to the exemption notifications no 9/2009-ST issued - first appellant authority denied the refund for the reason that (a) the exemption is available only to service tax paid after the notification has come into force (paragraph 3 of notification 9/2009-ST dated 3 rd March 2009) and (b) that the applicant had not sought refund within six months of payment of tax (condition (f) in paragraph 2 of notification 9/2009-ST dated 3 rd March 2009) the objective of such an unambiguous procedure is amply clear. Held that:- Admittedly, the notification 9/2009-ST was not in existence and, hence, not the basis of the claim preferred by the appellant before the jurisdictional Central Excise officer. At the same time, it is, undoubtedly, the operational procedure put in place for implementing the provision in the Special Economic Zones Act, 2005 granting exemption of service tax for authorized operations. It is also the first such enabling procedure after the Special Economic 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 exempt a tax cannot be brooked under any circumstance. A harmonious construction of the exemption notification 4/2004-ST dated 31 st March 2004 that preceded the Special Economic Zones Act, 2005 with that Act must perforce be the facilitative mechanism in the absence of any other. A misconceived notion, as entertained by the lower authorities about that distinction between the corporate office address and the site address, should not be allowed to hold sway when confronted with the factual matrix of its exclusive existence in a Special Economic Zone; consequently, there can be no doubt that the services provided by M/s NSDL was for the authorized operations in a Special Economic Zone. - Decided in favour of assessee. Issues Involved:1. Eligibility for refund of service tax under Section 26 of the Special Economic Zones Act, 2005.2. Interpretation of 'authorized operations' within the Special Economic Zone (SEZ).3. Applicability of exemption notifications, specifically Notification No. 4/2004-ST and Notification No. 9/2009-ST.4. Procedural compliance for claiming service tax refunds.Issue-wise Detailed Analysis:1. Eligibility for Refund of Service Tax under Section 26 of the Special Economic Zones Act, 2005:The appellant, a developer in a Special Economic Zone (SEZ), claimed a refund of service tax paid for 'banking and other financial services' provided by M/s NSDL, arguing that Section 26 of the SEZ Act, 2005, exempts them from such taxes. The appellant contended that the refund should be granted as the service tax was borne by them and not covered under the narrower scope of Notification No. 4/2004-ST. The Tribunal noted that Section 26 of the SEZ Act provides a broader exemption scope than the notification and should be applied to grant the refund.2. Interpretation of 'Authorized Operations' within the SEZ:The impugned order rejected the refund on the grounds that the service tax was related to an Initial Public Offering (IPO) billed to the corporate office in Mumbai, not the SEZ unit in Jamnagar, and did not constitute 'authorized operations.' The Tribunal found this interpretation flawed, emphasizing that the IPO was intended for operationalizing the SEZ unit, thus falling within the scope of authorized operations. The Tribunal highlighted that the SEZ Act and its rules facilitate exemptions for services used in authorized operations, and the appellant's sole investment in the SEZ meant the services were indeed for authorized operations.3. Applicability of Exemption Notifications:The Tribunal reviewed the applicability of Notification No. 4/2004-ST and Notification No. 9/2009-ST. It was noted that Notification No. 9/2009-ST, effective from March 2009, provided a clear procedural framework for claiming service tax exemptions for services related to authorized operations in SEZs. The Tribunal concluded that the absence of such a notification at the time of the appellant's refund claim did not negate their entitlement under the SEZ Act. The Tribunal emphasized that the SEZ Act's statutory exemptions should prevail, and the procedural delays in issuing facilitating notifications should not deprive the appellant of their rightful exemption.4. Procedural Compliance for Claiming Service Tax Refunds:The Tribunal addressed the procedural aspects, noting that the refund application was made in May 2007, when only Notification No. 4/2004-ST was in force. The original authority's rejection was based on the service tax not being consumed within the SEZ, as the invoice was raised to the corporate office in Mumbai. The Tribunal found this reasoning inconsistent with the SEZ Act, which does not restrict exemptions to services consumed within the SEZ's physical boundaries. The Tribunal cited previous Tribunal decisions (Norasia Container Line, Tata Consultancy Services Ltd, Intas Pharma Ltd, and Reliance Ports & Terminal Ltd) to support the broader interpretation of the SEZ Act and the need for a harmonious construction of the relevant notifications.Conclusion:The Tribunal concluded that the provisions of Section 26 of the SEZ Act, 2005, take precedence and must be harmoniously construed with the exemption notifications. The appellant's refund claim was valid as the services provided were for authorized operations within the SEZ. The appeal was allowed, and the appellant was entitled to the refund of service tax as claimed.