2025 (10) TMI 815 - AT - Service Tax

Appeal allowed; refund directed where adjudicator raised new service category not in SCN, Section 11B claim timely

CESTAT (HYD) - AT allowed the appellant's appeal and directed refund. The tribunal found the adjudicating authority had introduced a new service category ... Refund claim - input services for which payments were made to the service providers - rejection of refund on the ground that the services are wholly consumed within the SEZ - HELD THAT:- The adjudicating authority brought a new service viz., Management or Business Consultant service, which was not in the SCN, and pointed out that the said service is not approved service and thereby, the request for refund has been refused. Learned Counsel for appellant argued that the adjudicating authority has travelled beyond the scope of the SCN and that is not sustainable under law. The impugned order is based on the finding of the OIO and thereby, the impugned order is not sustainable under the law. Since no other category was suitable for the said service, the appellant had shown it under the relevant category. In such situation, the lower authority should not have refused the refund on this ground. Learned Commissioner has refused to refund that this type of activity is consumed within the SEZ and therefore, comes under wholly consumed category and therefore, not entitled for refund. The appellant relied on the decision of Coordinate Bench at Mumbai in the case of Tata Consultancy Service Ltd Vs CCE & ST, Mumbai [2012 (8) TMI 500 - CESTAT, MUMBAI], wherein, on the similar issue, the opinion expressed by the Bench in this regard is quite relevant to the present appeal where it was held that 'In this case, there is no dispute that the services were provided in relation to the authorized operations of the appellant within the SEZ. From the records it is seen that the appellant has filed the refund claim within the time period provided for in Section 11B and the appellant has borne the incidence of taxation.' The appeal is allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether refund of service tax paid under Notification No.09/2009-ST read with Section 11B is admissible for services procured in relation to authorized operations in an SEZ where the services were shown as consumed wholly within the SEZ. 2. Whether the adjudicating authority and Commissioner (Appeals) were justified in denying refund on the ground that certain services (notably 'Management or Business Consultant service') were not part of the approved list of SEZ services when the Approval Committee's list (and invoice descriptions) included corresponding services under the Finance Act. 3. Whether the adjudicating authority travelled beyond the scope of the show cause notice by raising a new ground (that a particular service category was not approved) and thereby rendered the impugned order unsustainable. 4. The proper construction of 'Management or Business Consultant service' under Section 65(65) of the Finance Act and whether 'Consulting Engineering' as described in the approved list and invoices properly falls within that definition for purposes of refund. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Refund admissibility under Notification No.09/2009-ST and Section 11B for services consumed wholly within SEZ Legal framework: Notification No.09/2009-ST exempts taxable services specified in Section 65 from service tax when provided in relation to authorized operations in an SEZ; Section 11B (read with Section 83) provides procedure for refund of tax paid. The refund procedure is directed to situations where tax has been discharged and a refund is subsequently claimed. Precedent Treatment: The Tribunal decision in Tata Consultancy Service Ltd (coord. bench) (referred to in the text) construed the notification as exempting services relating to authorized SEZ operations whether or not provided inside SEZ, and held that where tax has been discharged and the claimant bears incidence of taxation, refund under Section 11B is not barred merely because services are wholly consumed within SEZ. Interpretation and reasoning: The Tribunal reasons that the notification creates substantive exemption; the refund mechanism is procedural and meant to operationalize the exemption where tax was discharged. Consumption wholly within SEZ does not, by itself, defeat a refund claim where tax was paid and the claim is timely under Section 11B. Thus denial based solely on the fact of 'wholly consumed within SEZ' misconstrues the interplay between the exemption and refund procedure. Ratio vs. Obiter: Ratio - A claimant who has borne the incidence of service tax and files a timely claim under Section 11B is entitled to refund even if services were wholly consumed within the SEZ; the exemption's operationalization via refund procedure does not exclude such claims. (Supported as central to the decision.) Conclusion: The Court finds this issue in favour of the appellant and holds that denial of refund on the basis that services were wholly consumed within the SEZ is not sustainable where tax was paid and claim is within statutory time limits. Issue 2 - Validity of denial based on non-inclusion of certain service descriptions in the approved services list Legal framework: Approval Committee's list of approved SEZ services must be read in conjunction with corresponding services under the Finance Act; classification is determined by the substance of service and statutory definitions. Precedent Treatment: Earlier decisions (as relied upon by appellant) emphasize substance over form in classification and that invoice descriptions and actual nature of services are determinative. The Tribunal refers with approval to Tata Consultancy Service Ltd (supra) and also cites decisions emphasizing proper interpretation of approval-list entries. Interpretation and reasoning: The adjudicating authority misread the two columns of the approved-services table and treated differently worded descriptions as excluding services that, by substance and statutory correspondence, were approved. The Tribunal applies the statutory definition of 'Management or Business Consultant' under Section 65(65) to conclude that services described as 'Consulting Engineering' fall within that definition where they involve advice, consultancy or technical assistance in management-related areas. The Tribunal holds that where the Approval Committee's list contains the substance of the service and the corresponding Finance Act category aligns, the refund cannot be denied on a narrow lexical distinction. Ratio vs. Obiter: Ratio - Classification must rest on substance and statutory definition; a different or imprecise description by the supplier does not disentitle a claimant where the service falls within the approved list as mapped to Finance Act categories. (Central to the outcome.) Conclusion: The Court concludes that the services in question were in the approved list in substance and that rejection based on superficial differences in descriptions was incorrect; the refund must not be denied on this ground. Issue 3 - Raising a new ground beyond the scope of the show cause notice (SCN) Legal framework: Adjudication must be confined to issues raised in the SCN; introduction of new grounds at adjudication that were not the subject of the SCN can render the order unsustainable. Precedent Treatment: The principle that authorities cannot travel beyond the scope of the SCN is applied; the Tribunal notes the departmental practice and law that additional grounds not notified earlier cannot be used to reject claims without affording notice and opportunity on those grounds. Interpretation and reasoning: The adjudicating authority introduced a finding that 'Management or Business Consultant service' was not an approved service - a ground not set out in the SCN - and used that to refuse refund. The Tribunal finds that this constitutes travelling beyond the SCN and that reliance on such a new ground is legally impermissible without appropriate notice. The Tribunal further notes that the appellant had reasonably categorized its services under the relevant approved Finance Act headings. Ratio vs. Obiter: Ratio - An adjudication cannot be sustained where it is based on a new ground not raised in the SCN; such action is not sustainable under law. (Decisive for quashing that aspect of the order.) Conclusion: The Court holds the impugned order unsustainable to the extent it is based on a ground not contained in the SCN and allows the appeal on this ground. Issue 4 - Construction of 'Management or Business Consultant service' (Section 65(65)) and its application to 'Consulting Engineering' Legal framework: Section 65(65) defines 'Management or Business Consultant' to include persons providing advice, consultancy or technical assistance in relation to financial management, human resources, marketing, production, logistics, procurement, IT resource management or other similar areas of management. Precedent Treatment: Applied by the Tribunal to interpret whether diverse advisory/technical services fall within the Management or Business Consultant category; prior decisions recognize broad scope of the definition. Interpretation and reasoning: The Tribunal interprets the statutory definition broadly to include any person rendering advice or technical assistance in areas connected with management. Consulting Engineering, insofar as it involves consultancy or technical assistance related to management or operations of the SEZ developer/unit, falls within that definition. Therefore, labeling a service 'Consulting Engineering' does not remove it from the Management or Business Consultant category where the substance of the service matches the definition. Ratio vs. Obiter: Ratio - Section 65(65)'s definition covers services that render advice or technical assistance in management-related areas; therefore, consulting/engineering advisory services that serve management functions are encompassed within Management or Business Consultant service for exemption/refund purposes. Conclusion: The Court concludes that the description 'Consulting Engineering' as used in approvals/invoices properly maps to 'Management or Business Consultant service' under Section 65(65), supporting entitlement to refund where other conditions are met. Overall Disposition Cross-reference: Issues 1-4 interact: (a) substance of service (Issue 2 & 4) determines eligibility under Notification No.09/2009-ST (Issue 1); (b) procedural fairness constraint (Issue 3) precludes reliance on a ground not in the SCN. Applying these principles, the Tribunal allows the appeal and grants consequential relief.