Refund limitation and SEZ turnover rules: condonation allowed, and DTA sales included for proportionate refund computation.

Refund under Notification No. 12/2013-ST was held not to be time-barred where the application was filed within one year from the end of the quarter and the notification itself allowed extension of the prescribed period; the delay could therefore be condoned and the claim not rejected on limitation. For proportionate refund of common input services, DTA sales made from an SEZ unit were treated as part of the unit's turnover because they formed part of authorised operations under SEZ law. The refund computation was thus required to include such turnover, and exclusion of DTA sales was held to be incorrect.

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Issues: (i) Whether the refund claim under Notification No. 12/2013-ST was barred by limitation and whether the delay could be condoned under the notification; (ii) whether DTA sales made from the SEZ unit formed part of the turnover of the SEZ unit for computing proportionate refund on common input services.

Issue (i): Whether the refund claim under Notification No. 12/2013-ST was barred by limitation and whether the delay could be condoned under the notification.

Analysis: The refund application covered services received by the SEZ unit for authorized operations and was filed within one year from the end of the quarter, though not within one year from the end of the month of payment. The notification contained overlapping procedural requirements in paragraph III clauses (e) and (f), and clause (e) empowered the Assistant Commissioner or Deputy Commissioner to permit filing beyond the prescribed period. The earlier authorities did not consider this extended-time provision and treated the claim as time-barred without addressing the overlapping nature of the conditions or the absence of any dispute regarding payment of service tax on the eligible services.

Conclusion: The delay was liable to be condoned and the refund claim could not be rejected as time-barred.

Issue (ii): Whether DTA sales made from the SEZ unit formed part of the turnover of the SEZ unit for computing proportionate refund on common input services.

Analysis: The refund scheme under Notification No. 12/2013-ST grants exemption by way of refund for services received by an SEZ unit and used for authorized operations. Services exclusively received in the name of the SEZ unit were treated as fully eligible, while common services were required to be distributed in the manner prescribed under Rule 7 of the Cenvat Credit Rules, 2004. DTA sales undertaken from the SEZ unit were held to be part of the authorized operations under the SEZ law and therefore part of the turnover of the SEZ unit for the purpose of proportionate computation. The lower authorities wrongly excluded such DTA sales and computed refund only with reference to physical exports.

Conclusion: DTA sales from the SEZ unit were includible in the SEZ turnover for refund computation, and the proportionate refund claimed by the appellant was correct.

Final Conclusion: The impugned orders were set aside and the appellant was held entitled to the refund claim with consequential benefit.

Ratio Decidendi: In a refund exemption scheme, substantive eligibility conditions must be satisfied, but procedural requirements that are overlapping or directory may be relaxed where the notification itself permits extension and the claim otherwise fulfils the object of the exemption; for proportionate refund, turnover of authorized operations includes DTA sales made from the SEZ unit where they form part of authorized operations.

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