SEZ unit wins service tax refund appeal under Notification 40/2012-ST despite approved list restrictions

CESTAT Allahabad allowed appeals filed by SEZ unit challenging denial of service tax refund under Notification 40/2012-ST. Revenue denied refund claiming input services were not in approved list for SEZ operations and some invoices addressed premises outside SEZ. Tribunal held that if services were actually received and consumed by SEZ unit, refund cannot be denied merely because services not mentioned in approved list or invoices addressed to other premises. Matter remanded to original authority for reconsideration of refund claims in light of tribunal's observations.

---

---

Issues Involved:
1. Denial of CENVAT Credit/Refund due to non-approval of services by the Development Commissioner.
2. Refund claims denied for services used at unregistered premises outside SEZ.
3. Non-production of original invoices for claimed services.
4. Procedural requirements versus substantive benefits under SEZ Act.

Summary:

Issue 1: Denial of CENVAT Credit/Refund due to non-approval of services by the Development Commissioner:
The appellant's refund claims were primarily denied because the input services were not approved by the Development Commissioner as required by Notification No. 40/2012-ST and 12/2013-ST. The tribunal referenced multiple precedents, including EXL Services SEZ BPO Solutions Pvt. Ltd. [2023-TIOL-852-CESTAT-ALL], stating that the SEZ Act, 2005, has an overriding effect under Section 51, making procedural approval requirements non-mandatory. The tribunal emphasized that substantive benefits should not be denied for procedural lapses, as supported by cases like Metlife Global Operations Support Center (P) Ltd. [2021 (46) GSTL 418 (T-Del)] and Mast Global Business Services India Pvt. Ltd. [2018-TIOL-3115-CESTAT-BANG].

Issue 2: Refund claims denied for services used at unregistered premises outside SEZ:
The tribunal found that if services were received and consumed by the SEZ unit, the CENVAT Credit/Refund should not be denied even if invoices were addressed to premises outside SEZ. It referenced SRF Ltd. [2022 (64) GSTL 489 (T-Del)], which held that substantive benefits should not be denied based on the address on the invoice if the services were indeed for the SEZ unit.

Issue 3: Non-production of original invoices for claimed services:
The tribunal noted that mere technical discrepancies in invoices should not lead to denial of substantive benefits. It cited Vedanta Ltd. [2021 (44) GSTL 99 (T-Kol)], emphasizing that denial of refund claims on such grounds is unsustainable if the SEZ unit has paid service tax and received the services.

Issue 4: Procedural requirements versus substantive benefits under SEZ Act:
The tribunal reiterated that the SEZ Act provides overriding benefits and exemptions from taxes for units in SEZs. It referenced decisions like SE Forge Ltd. [2019 (365) ELT 560 (T-Chennai)] and ECLERX Service Ltd. [2023 (72) GSTL 99 (T-Mum)], affirming that procedural requirements should not negate substantive benefits granted by the SEZ Act.

Conclusion:
The tribunal allowed the appeals, remanding the matter to the original authority for reconsideration of the refund claims in light of the observations made, directing the finalization of refund claims within three months.

---