2024 (7) TMI 478 - AT - Service Tax

CESTAT allows appeal by remand in SEZ service tax refund case rejecting technical objections

CESTAT Chennai allowed appeal by remand in service tax refund case. Appellant sought refund for services used in SEZ operations during 2012-2013. Lower ... Refund of service tax - specified services used in relation to the authorized operations in the SEZ during the period from 01.04.2012 to 30.12.2012 and from 01.01.2013 to 30.9.2013 - Services consumed wholly within SEZ - Invoice addressed to corporate office - Rejection of refund due to no signature, wrong date in invoice and no payment proof - Xerox copy of invoices produced at the time of filing of refund claim - Exchange rate fluctuations - Rejection of refund on tax paid on container repair charges. Services consumed wholly within SEZ - HELD THAT:- In UNICHEM LABORATORIES LTD. VERSUS COLLECTOR OF CENTRAL EXCISE, BOMBAY [2002 (9) TMI 110 - SUPREME COURT] the hon’ble Apex Court held 'There can be no doubt that the authorities functioning under the Act must, as are duty-bound, protect the interest of the Revenue by levying and collecting the duty in accordance with law—no less and also no more. It is no part of their duty to deprive an assessee of the benefit available to him in law with a view to augment the quantum of duty for the benefit of the Revenue. They must act reasonably and fairly' - The appellant who has paid the duty which was exempted, hence cannot be denied a refund stating that such services are exempt ab-initio, and that the taxpayer has no option to pay tax and claim refund. The order hence merits to be set aside. Invoice addressed to corporate office - HELD THAT:- The department could have verified the proper use / receipt of the input services by the appellant. Trade facilitation involves taking such an extra step. In case dual use of invoice or non-provision any service was detected, or the appellant was not able to discharge the burden of proof regarding the admissibility of the CENVAT credit, then a reasoned decision could have been taken to deny the credit. Merely rejecting a valid invoice since it is addressed to the corporate office was not warranted. Further there is no allegation that the input services were not received or utilised by the Appellant. In absence of any such dispute, denial of refund solely on ground that the Invoice is in the name of Corporate Office is unjustified and is set aside. Rejection of refund due to no signature, wrong date in invoice and no payment proof - HELD THAT:- There is no reason why government finances and tax payment should be handled differently and in a cavalier manner. A signature placed on an invoice inculcates faith in the document and gives it credibility and value in matters of taxation, business operations and day to day transactions. Dishonesty in the issue of such an instrument is an offence under relevant statutes. It is on the basis of this trust that day to day business thrives. The menace of fake invoicing and its deleterious effect on the economy is well known. Hence the stand taken by the department cannot be faulted - The procedure for verification of refund as per Commissionerate’s Public Notice, if any, can be followed. The issue hence merits to be examined denovo with the appellant given one more opportunity to prove his case. Xerox copy of invoices produced at the time of filing of refund claim - HELD THAT:- Rule 9(1) of the CENVAT Credit Rules, 2004 lists the documents on the basis of which CENVAT credit shall be taken by the manufacturer or the provider of output service or input service distributor. These documents are original documents, as they represent the best evidence of the payment of duty, in different circumstances and it also prevents a double claim of credit or refund. This can be done by defacement of the original document on the basis of which a refund claim has been settled. A photocopy or duplicate invoice carries the threat of misuse - The Supreme Court, in the case of SAMBHAJI VERSUS GANGABAI [2008 (11) TMI 393 - SUPREME COURT], has held that procedure cannot be a tyrant but only a servant. It is not an obstruction in the implementation of the provisions of the Act, but an aid. The procedures are handmaid and not the mistress. It is a lubricant and not a resistance. Hence the rejection of a part of the claim on this ground that photo copies of invoices have been filed along with the refund claim, even though the original documents were produced at a later stage was not proper and merits to be set aside. Claim may be verified with the original invoices submitted. In case of any discrepancy in documents that is noticed the matter can be examined. Exchange rate fluctuations - HELD THAT:- As per the conditions prescribed in Notifications (Paragraph 2(d)(f) of Notification No. 40/2012-ST dated 20.06.2012), they are eligible to claim refund of the service tax which they have paid to the service provider. It is found that the legal position has been correctly stated by the appellant on both the issues and hence, refund can’t be denied on the said issue. Rejection of refund on tax paid on container repair charges - HELD THAT:- It would be relevant to state that as per the Apex Court’s judgment in PEEKAY RE-ROLLING MILLS (P) LTD. VERSUS ASSISTANT COMMISSIONER AND ANOTHER [2007 (3) TMI 356 - SUPREME COURT], exemption does not negate a levy of tax altogether. Despite an exemption, the liability to tax remains unaffected, only the subsequent requirement of payment of tax to fulfil the liability is done away with. Moreover, an exemption notification should be interpreted strictly; the burden of proving applicability would be on the assessee to show that his case comes within the parameters of the exemption clause or exemption notification. Section 26(1)(e) of the Special Economic Zones Act, 2005 states that subject to the provisions of sub-section (2) thereof, every developer and entrepreneur shall be entitled to exemption from Service Tax under Chapter (V) of the Act on taxable services provided to a developer or unit to carry on the authorised operations in a SEZ. It is hence for the appellant to demonstrate to the Proper Officer that repair of containers is an authorised operation. Such an activity does not prima facie fall within the scope of ‘commercial or industrial construction service’. The matter hence merits being examined de novo and the appellant given an opportunity to show evidence as required by law. The matter may be re-examined by the Original Authority on merits and a speaking order be passed, after affording the Appellant a reasonable time to submit their written submissions if they so desire and after hearing them afresh within ninety days of receipt of this order - appeal disposed off by way of remand. Issues Involved:1. Services wholly consumed in SEZ2. Invoice addressed to corporate office3. Rejection of refund due to no signature, wrong date in invoice, and no payment proof4. Xerox copy of invoices produced at the time of filing of refund claim5. Exchange rate fluctuations6. Rejection of refund on tax paid on container repair chargesDetailed Analysis:Services wholly consumed in SEZ:The Department's case was that the services were exempt ab-initio and that the taxpayer had no option to pay tax and claim a refund. The Tribunal found that SEZ units are exempt from Service Tax under Section 26(1)(e) of the SEZ Act. The appellant, having paid the duty which was exempted, cannot be denied a refund on the grounds that the services were exempt ab-initio. The order rejecting the refund on this ground was set aside.Invoice addressed to corporate office:The Department denied credit on the grounds that the invoice should be in the name and address of the assessee claiming the refund and not in the name of its Corporate Office. The Tribunal held that substantive justice must not be denied on procedural grounds and that there was no allegation that the input services were not received or utilized by the Appellant. Hence, the denial of refund solely on the ground that the invoice is in the name of the Corporate Office was unjustified and set aside.Rejection of refund due to no signature, wrong date in invoice, and no payment proof:The Department denied the refund on the grounds that some invoices had no signature, bore the wrong date, or did not show any proof of payment. The Tribunal emphasized the importance of invoices in taxation and business operations and held that discrepancies in invoices must be rectified by the appellant before filing a refund claim. The issue was remanded for re-examination, giving the appellant another opportunity to prove their case.Xerox copy of invoices produced at the time of filing of refund claim:The Department rejected the claims because photocopies of invoices were filed instead of originals. The Tribunal held that if original invoices are submitted at a subsequent stage with sufficient reason, they should be processed normally. The rejection of the claim on this ground was set aside, and the claim was to be verified with the original invoices submitted.Exchange rate fluctuations:The Tribunal found that the impugned orders had traveled beyond the scope of the Show Cause Notice (SCN) as there was no allegation regarding exchange rate fluctuations in the SCN. The appellant's legal position was upheld, and the refund could not be denied on this ground.Rejection of refund on tax paid on container repair charges:The Department denied the refund on the grounds that container repair services were a non-SEZ activity. The Tribunal held that the appellant must demonstrate that the repair of containers is an authorized operation within the SEZ. The issue was remanded for re-examination, giving the appellant an opportunity to show evidence as required by law.Conclusion:The Tribunal remanded the issues related to no signature, wrong date in invoices, no payment proof, and container repair charges for re-examination by the Original Authority. The appellant was given a reasonable time to submit written submissions and evidence. The appellant was found eligible for a refund on other issues as per law. The appeals were disposed of accordingly.