2019 (1) TMI 180 - AT - Service Tax

SEZ Act Prevails: Tribunal Grants Relief, Emphasizes Legal Interpretation

The Tribunal ruled in favor of the appellant, holding that the SEZ Act provisions override other laws. The rejection of the refund claim based on ... Refund of service tax paid - SEZ unit - specified input services used for the services exported by them during the period from January 2016 to March 2016 - denial of refund on the ground that approval of the list of taxable services from Unit Approval Committee is mandatory and the said input services have not been approved by the Unit Approval Committee of SEZ - Held that:- The appellant is a SEZ unit and as per Section 26 read with Rule 31 of SEZ Rules 2006 along with Section 51 of SEZ Act, the SEZ Act has overriding impact over other laws and SEZ units are exempt from payment of service tax for any service which is used for their authorized operations. This issue is no more res integra and has been settled by Tribunal in the case of Mast Global Business Services India Pvt. Ltd. [2018 (9) TMI 258 - CESTAT BANGALORE], wherein on similar set of facts, this Tribunal held that even if the services are not mentioned in the Unit Approval Committee’s list, refund is to be sanctioned. Refund allowed - appeal allowed - decided in favor of appellant. Issues:Refund of service tax paid on input services used for exported services by SEZ unit under Notification No. 12/2013-ST dated 01.07.2013 - Applicability of SEZ Act overriding other laws - Approval of list of taxable services from Unit Approval Committee for SEZ units.Analysis:1. Refund Claim Discrepancy:The appeal concerns a refund claim by a SEZ unit for service tax paid on input services used for exported services. The Assistant Commissioner sanctioned a partial refund and rejected a portion of the claim, leading to an appeal before the Commissioner who partly allowed the refund. The appellant contested the rejection of a significant amount and sought a complete refund.2. SEZ Act Override:The appellant argued that the SEZ Act, along with relevant rules, has an overriding impact over other laws, exempting SEZ units from service tax for services used for authorized operations within the SEZ. Citing legal precedents, the appellant emphasized that SEZ benefits prevail as long as input services are consumed within the SEZ, even if not listed by the Unit Approval Committee.3. Procedural Compliance - List of Approved Services:The Department contended that the refund claim was rightly rejected as the input services in question were not approved by the Unit Approval Committee for SEZ units. Specifically, services like Business Auxiliary Service and Management Consultancy were not included in the approved list, leading to the rejection of the refund claim.4. Judicial Interpretation and Precedents:The Tribunal analyzed past decisions, including the case of Mast Global Business Services India Pvt. Ltd., emphasizing that procedural lapses in listing approved services by the Development Commissioner cannot be grounds for rejecting refund claims. The Tribunal highlighted that the SEZ Act's overriding effect on other laws supersedes procedural requirements related to the approval of service lists.5. Decision and Ruling:After considering arguments from both parties and reviewing the legal framework, the Tribunal ruled in favor of the appellant. It held that the SEZ Act's provisions indeed override other laws, and the rejection of the refund claim based on non-approval of services by the Unit Approval Committee was deemed procedurally incorrect. The Tribunal set aside the impugned order, allowing the appeal of the appellant and granting consequential relief.In conclusion, the judgment underscores the primacy of SEZ Act provisions in exempting SEZ units from service tax for authorized operations, emphasizing the importance of legal interpretation and adherence to established precedents in resolving disputes related to refund claims and SEZ benefits.