2020 (9) TMI 388 - AT - Service Tax

Appeal allowed for service tax refund under Reverse Charge Mechanism in SEZ

M/s Cummins Technologies India Pvt. Ltd. Versus Commissioner, Customs, Central Excise and Service Tax

The Tribunal allowed the appeal by M/s Cummins Technologies India Pvt. Limited, directing a refund of Rs. 11,23,911/- for service tax paid under Reverse ... Refund of service tax - service tax paid for the services received in the SEZ - Condition No. 3(f) (ii) under Notification No. 40/2012-ST - HELD THAT:- Condition No. 3(f) (ii) under Notification No. 40/2012-ST provides for the unit in a SEZ claiming exemption by way of refund, to have paid the amount indicated in the invoice/ bill or as the case may be, challan, including the service tax payable, to the person liable to pay the said tax or the amount of service tax payable under reverse charge, as the case may be, under the provisions of the said Act. The Court below have erred in misconstruing the condition in clause (f) of Sl. No.(ii) of the Notification No. 40/2-12-ST as the requirement is SEZ developer or unit has paid the service tax payable under reverse charge or as the case may be. Admittedly, appellant have paid the service tax under reverse charge and produced the challan, and further they have rightly discharged the service tax as recipient of service in terms of 2nd proviso to Rule 7 of the Point of Taxation Rules. Further, there is no such essential condition of payment of amount to the service provider. The Adjudicating Authority is directed to grant the refund of ₹ 11,23,911/- within a period of 45 days from the receipt of this order alongwith interest as per rules - appeal allowed - decided in favor of appellant. Issues Involved:1. Eligibility for refund of service tax paid under Reverse Charge Mechanism (RCM) for services received in SEZ.2. Compliance with the provisions of SEZ Act and Finance Act.3. Proper documentation and evidence for claiming refund.4. Determination of place of provision of service.5. Payment to service provider as a condition for refund.Issue-wise Detailed Analysis:1. Eligibility for refund of service tax paid under Reverse Charge Mechanism (RCM) for services received in SEZ:The appellant, M/s Cummins Technologies India Pvt. Limited, located in SEZ, engaged in manufacturing turbochargers, sought a refund of service tax paid under RCM for services received from Wuxi Cummins Turbo Technologies Limited, China. The refund claim was partially rejected by the impugned order-in-appeal.2. Compliance with the provisions of SEZ Act and Finance Act:Under the SEZ Act, units in SEZ are exempt from paying taxes, including service tax, for authorized operations. Section 26(1)(e) and Section 51 of the SEZ Act provide an overriding effect over other Acts. The appellant claimed exemption under these provisions and applied for a refund under Notification No. 42/2012-ST and Notification No. 12/13-ST.3. Proper documentation and evidence for claiming refund:The appellant submitted e-challans, a list of specified services approved by the SEZ Committee, a copy of the agreement with Wuxi CTT, and a letter of authorization. However, the Department raised concerns about the adequacy of these documents to prove that services were utilized for SEZ operations, given the appellant had another unit outside SEZ.4. Determination of place of provision of service:The appellant argued that under Rule 3 of the Place of Provision of Service Rules, 2012, the place of provision is the location of the service recipient (India). Hence, the services provided by Wuxi CTT to the appellant in India are taxable under Section 66B of the Finance Act.5. Payment to service provider as a condition for refund:The Assistant Commissioner sanctioned a partial refund based on the actual payment made to the service provider, rejecting the balance amount. The Commissioner (Appeals) upheld this, stating the appellant failed to prove services were received and utilized for SEZ operations. The appellant contended that under the second proviso to Rule 7 of the Point of Taxation Rules, service tax was rightly paid on accrual basis, and refund should be admissible regardless of payment to the service provider.Tribunal's Findings:The Tribunal found that the appellant had complied with the conditions under Notification No. 40/2012-ST, specifically Condition No. 3(f)(ii), which requires payment of service tax under reverse charge. The Tribunal held that the appellant correctly discharged service tax as per the second proviso to Rule 7 of the Point of Taxation Rules and that there was no essential condition for actual payment to the service provider. Consequently, the Tribunal allowed the appeal, directing the refund of Rs. 11,23,911/- with consequential benefits and interest.Conclusion:The Tribunal set aside the impugned order to the extent it disallowed the refund and directed the Adjudicating Authority to grant the refund within 45 days along with interest, emphasizing the overriding provisions of the SEZ Act and proper compliance by the appellant.