2019 (9) TMI 1691 - AT - Service Tax

Tribunal grants refund of service tax on SEZ input services, overturning authority's rejection.

The Tribunal allowed the appeal, setting aside the Order-in-Appeal and granting the Appellant a refund of service tax paid on various input services used ... Refund of service tax for SEZ authorized operations - approved list of services by approval committee - nexus between input service and output service - input services wholly consumed within SEZ - application of precedent to refund claimsRefund of service tax for SEZ authorized operations - approved list of services by approval committee - Refund of service tax paid on Club or Association service which was not in the approved list at the time of export but was subsequently approved by the approval committee. - HELD THAT: - The Tribunal applied the principle in M/s Bicon Ltd and held that subsequent approval of a service by the approval committee disentitles neither the SEZ unit nor its claim for refund of service tax paid earlier on that service when it is later found to be part of the approved list required for authorized operations. The impugned denial of refund on the ground that the service was not originally listed was therefore set aside. [Paras 5]Refund allowed in respect of Club or Association service; the denial on the ground of non-inclusion in the list at the time of export is unsustainable.Refund of service tax for SEZ authorized operations - nexus between input service and output service - approved list of services by approval committee - Refund of service tax paid on Life Insurance service of employees which was covered in the approved list but denied by the authorities for want of nexus with output service. - HELD THAT: - Relying on Tata Consultancy Services Ltd and the principle that once a service is included in the approval committee's list of services required for authorized operations, denial of refund on the basis of lack of nexus is not sustainable, the Tribunal concluded that the service tax paid on employee life insurance (being in the approved list) is refundable. The appellate authority's rejection on nexus grounds was therefore set aside. [Paras 5]Refund allowed in respect of Life Insurance service; denial for lack of nexus is unsustainable where service is approved for authorized operations.Refund of service tax for SEZ authorized operations - input services wholly consumed within SEZ - Refund of service tax paid on various input services which were wholly consumed within the SEZ. - HELD THAT: - Following the principle in Barclays Technology Centre India (P) Ltd , the Tribunal held that service tax paid on input services that are wholly consumed within the SEZ in carrying out authorized operations is eligible for refund. The impugned order denying such refunds was therefore found to be without merit and set aside. [Paras 5]Refund allowed for input services wholly consumed within the SEZ; denial of refund on such services is not sustainable.Final Conclusion: The impugned order is set aside; the appeal is allowed and refunds are directed in respect of the Club or Association service, Life Insurance service and input services wholly consumed within the SEZ for the period March 2009 to July 2009, with consequential relief as per law. Issues:Entitlement to refund of service tax paid on various input services used in SEZ for authorized operation.Analysis:The appeal was filed against Order-in-Appeal rejecting a refund claim for service tax paid on specified services used in SEZ. The Adjudicating authority rejected a portion of the claimed amount. The Appellant, a SEZ unit manufacturing semiconductors, sought refund for the period March 2009 to July 2009. The rejected amount included service tax on Club or Association service, Life Insurance Service, and input services wholly consumed in the SEZ. The Chartered Accountant argued that subsequent approval of services cannot disentitle refund, citing relevant judgments. The Tribunal's precedent in similar cases supported the Appellant's claim for refund.The Revenue, represented by the A.R., reiterated the findings of the Commissioner (Appeals). After hearing both sides and examining the records, the main issue was whether the Appellants were entitled to a refund of service tax paid on input services used for authorized operation in the SEZ. The Tribunal found that the Club or Association service, though initially not included in the approved list, later became part of it. Therefore, the refund could not be denied based on the Biocon Ltd judgment. Similarly, the service tax paid on employees' life insurance service, included in the approved list, could not be denied based on the Tata Consultancy Services Ltd's case. Regarding input services wholly consumed within the SEZ, the Tribunal relied on the principle established in the Barclays Ltd's case to rule that the service tax paid on such services was refundable.Based on the precedent and legal principles, the Tribunal concluded that the impugned order lacked merit. Consequently, the order was set aside, and the appeal was allowed with any consequential relief as per law. The decision was pronounced in the open court, granting relief to the Appellant in line with the legal analysis and judgments referenced during the proceedings.