2025 (6) TMI 682 - AT - Service Tax

Service Tax Refund for SEZ Inputs Upheld: Section 11B Confirms Approval Committee's Certification as Conclusive

The SC affirmed the Tribunal's ruling that service tax paid on inputs used in SEZ operations is refundable under Section 11B, despite Notification ... Refund of service tax - rejection on the ground that the services do not bear a direct nexus with the authorised SEZ operations - HELD THAT:- The issue was considered by the Tribunal in the matter of Tata Consultancy Services Ltd. vs. CCE & ST [2012 (8) TMI 500 - CESTAT, MUMBAI] where the refund was permitted when service tax was paid on specified services wholly consumed during authorised operations of SEZ even after the amendment to the aforesaid Notification. The issue is squarely covered by the decision of this Tribunal in the matter of Tata Consultancy and decision rendered in appellant’s own case by this Tribunal. The appellant is eligible for refund as claimed by them. Appeal allowed. 1. ISSUES PRESENTED and CONSIDERED Whether the appellant is entitled to refund of service tax paid on inputs used in Special Economic Zone (SEZ) operations under Notification No.9/2009-ST dated 03.03.2009 and its amendment Notification No.15/2009-ST dated 20.05.2009. Whether service tax paid on services wholly consumed within SEZ qualifies for refund under the said notifications. Whether the refund claim can be rejected on the ground that the services do not bear a direct nexus with the authorised operations undertaken by the appellant. Interpretation and applicability of exemption provisions under Notification No.4/2004 dated 31.03.2004 and subsequent amendments. Whether refund claims filed within the prescribed time under Section 11B of the Central Excise Act, 1944 read with Section 83 of the Finance Act, 1994 are maintainable. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Entitlement to Refund of Service Tax under Notification No.9/2009-ST and its Amendment - Legal Framework: Notification No.9/2009-ST dated 03.03.2009 exempts taxable services specified in Clause (105) of Section 65 of the Finance Act, 1994, provided in relation to authorised operations in SEZ and received by developers or units of SEZ, from service tax under Section 66 of the Finance Act, 1994. Notification No.15/2009-ST dated 20.05.2009 amended the refund procedure. - Court's Interpretation: The Tribunal held that the exemption applies to services related to authorised SEZ operations, regardless of whether services are provided inside or outside the SEZ. The refund procedure applies to services procured from outside SEZ, where service tax is paid first and refunded later. - Key Findings: The appellant had paid service tax on inputs used for SEZ operations and filed refund claims within the prescribed time. The Tribunal found the appellant eligible for refund under the statutory provisions. - Application of Law to Facts: Since the appellant bore the incidence of service tax and the services were used in authorised SEZ operations, refund claims are maintainable. - Treatment of Competing Arguments: Revenue argued that refund should be denied based on the amended condition excluding services wholly consumed within SEZ. The Tribunal rejected this, clarifying that exemption and refund provisions are distinct and refund cannot be denied merely because the claim is under Notification No.9/2009-ST. - Conclusion: The appellant is entitled to refund of service tax paid on inputs used in SEZ operations under the relevant notifications. Issue 2: Refund of Service Tax Paid on Services Wholly Consumed Within SEZ - Legal Framework: Notification No.9/2009-ST as amended by Notification No.15/2009-ST excludes services consumed wholly within SEZ from refund procedure applicability. - Court's Interpretation: The Tribunal clarified that services wholly consumed within SEZ are exempt from service tax and no tax liability arises initially; hence, no refund procedure is necessary. However, if service tax was paid inadvertently, refund under Section 11B is available. - Key Evidence: The appellant's refund claims included service tax paid on such services. The Tribunal noted no dispute that services were related to authorised SEZ operations. - Application of Law to Facts: The Tribunal held that refund cannot be denied on the ground that the claim was made under Notification No.9/2009-ST, as the appellant is eligible for refund under Section 11B. - Treatment of Competing Arguments: Revenue contended that refund is barred for services wholly consumed within SEZ as per amended notification. The Tribunal rejected this, emphasizing the statutory right to refund where tax liability was discharged. - Conclusion: Refund of service tax paid on services wholly consumed within SEZ is admissible under Section 11B notwithstanding the exclusion in Notification No.9/2009-ST. Issue 3: Nexus of Services to Authorised SEZ Operations - Legal Framework and Precedents: Tribunal's earlier decision in the appellant's own case and in Tata Consultancy Services Ltd. vs. CCE & ST established that refund claims cannot be rejected on the ground of lack of nexus once the Approval Committee certifies the direct nexus of services to authorised SEZ operations. - Court's Interpretation: The Tribunal held that the adjudicating and appellate authorities erred in disregarding the Approval Committee's certificate confirming nexus and justification for use of services in authorised operations. - Key Findings: The Approval Committee, including the jurisdictional Commissioner of Central Excise, had examined and approved the nexus of services to SEZ operations. - Application of Law to Facts: The Tribunal set aside the rejection of refund claims on the ground of lack of nexus, as the statutory committee's approval is binding and conclusive. - Treatment of Competing Arguments: Revenue's stand that services lacked nexus was rejected as contrary to the Approval Committee's findings. - Conclusion: Refund claims cannot be denied on the ground of absence of nexus when the Approval Committee has certified such nexus. Issue 4: Timeliness and Validity of Refund Claims under Section 11B and Section 83 - Legal Framework: Section 11B of the Central Excise Act, 1944 and Section 83 of the Finance Act, 1994 govern refund of service tax paid erroneously or in excess, subject to prescribed time limits. - Court's Interpretation: Tribunal noted that the appellant filed refund claims within the prescribed time period and bore the incidence of service tax. - Key Findings: No dispute existed regarding timeliness or eligibility under the statutory provisions. - Application of Law to Facts: Since claims were timely and valid, refund was maintainable. - Treatment of Competing Arguments: Revenue did not challenge timeliness but opposed refund on substantive grounds. - Conclusion: Refund claims filed within the statutory time limits under Section 11B and Section 83 are maintainable. Issue 5: Applicability of Exemption Notifications No.4/2004 and Subsequent Amendments - Legal Framework: Notification No.4/2004 dated 31.03.2004 exempts certain services in SEZ from service tax. Notification No.15/2009-ST amended Notification No.9/2009-ST to clarify refund procedure and conditions. - Court's Interpretation: The Tribunal considered these notifications in conjunction and held that exemption and refund provisions operate together to ensure no double taxation on SEZ operations. - Key Findings: The appellant's refund claims were consistent with the exemption framework and amendments. - Application of Law to Facts: The Tribunal applied the exemption notifications to validate refund claims. - Treatment of Competing Arguments: Revenue's restrictive interpretation of the amended notification was rejected. - Conclusion: Exemption notifications and their amendments support the appellant's entitlement to refund of service tax paid on SEZ operations.