SEZ units entitled to service tax refund on input services via ISD invoices under section 26 exemption but no interest on delayed refunds

CESTAT New Delhi held that SEZ units are entitled to refund of service tax paid on input services received through ISD invoices. The tribunal ruled that SEZ Act section 26 provides statutory exemption from service tax, overriding Finance Act 1994 provisions due to section 51 of SEZ Act. Exemption notification conditions under service tax law are irrelevant as Parliament already exempted SEZ operations. However, appellant was denied interest on delayed refunds since SEZ units fall outside Finance Act 1994 purview. Refund applications were allowed but without interest compensation.

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Issues Involved:
1. Entitlement to refund of service tax.
2. Entitlement to interest on the refunds.

Summary of Judgment:

Issue 1: Entitlement to Refund of Service Tax
The appellant, Cummins Turbo Technology, located in a Special Economic Zone (SEZ), sought refunds for service tax paid on input services received through its corporate office. The SEZ Act, 2005, particularly sections 26 and 51, exempts services provided to SEZ units from service tax. The appellant filed eight refund applications under Notification No. 12/2013-ST. Four claims were rejected as time-barred, and this rejection was upheld by the Commissioner (Appeals) in the first impugned order (Service Tax Appeals 50349/2018, 50350/2018, 50351/2018, and 50352/2018). Four other claims were sanctioned but without interest, which was challenged by both the appellant and the Revenue, resulting in the second and third impugned orders (Service Tax Appeals 50368/2021, 50369/2021, 50370/2021, 50371/2021, 50213/2021, 50214/2021, 50215/2021, and 50216/2021).

The Tribunal held that the SEZ Act overrides other laws, including the Finance Act, 1994, due to section 51. Therefore, service tax was not applicable to services provided to SEZ units, making the exemption notifications redundant. Consequently, the appellant was entitled to a refund of service tax paid, and the conditions in the exemption notifications, including the time limit, were irrelevant.

Issue 2: Entitlement to Interest on the Refunds
The appellant also sought interest on the delayed refunds under section 11BB of the Central Excise Act, 1944, as applicable to service tax by section 83 of the Finance Act, 1994. The Tribunal found that since the SEZ units are outside the purview of the Finance Act, 1994, the provisions for interest on refunds under this Act do not apply. Therefore, the appellant was not entitled to interest on the refunds.

Final Orders:
1. The appellant is entitled to refunds in all eight applications.
2. Refunds must be sanctioned and paid where not already done.
3. The appellant is not entitled to interest on any of the refunds.
4. Service Tax Appeals 50349/2018, 50350/2018, 50351/2018, and 50352/2018 are allowed, and the first impugned order is set aside with consequential refunds.
5. Service Tax Appeals 50368/2021, 50369/2021, 50370/2021, and 50371/2021 are dismissed.
6. Service Tax Appeals 50213/2021, 50214/2021, 50215/2021, and 50216/2021 are allowed, and the third impugned order is set aside with consequential refunds.

(Order pronounced in open court on 30/10/2023.)

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