TaxTMI 
TaxTMI 
2016 (3) TMI 231
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.... in brief, are that M/s Adani Power Ltd, (hereinafter referred to as "the Assessee"), by letter dt.31.08.2006, applied to the Chairman, Board of Approval and Special Secretary, Department of Commerce, Ministry of Commerce and Industry, Government of India for approval as Developer to set up a Power Sector, Specific Special Economic Zone (SEZ) at Mundra, Kuchh, Gujarat and approval of Authorised Operation. By letter dt.19.12.2006, the Director of Ministry of Commerce & Industry informed that Government of India was pleased to grant formal approval to their proposal as applied by the Assessee. A notification dt.10.05.2007 was issued by the Ministry of Commerce & Industry, as per proposal of the Assessee to set up a power sector for supply to SEZ, EOU and others and notified the area as Special Economic Zone (SEZ). Further, by letter dt.19.06.2007, the Director of Ministry of Commerce & Industry conveyed the Assessee, approval for the Authorised Operation in SEZ for supply of power. By letter dt.27.02.2009, the Ministry was pleased to approve the proposal as Co-Developer for providing infrastructure facility in the multi product SEZ at Mundra. The Officer on Specified Duty, Mundra Por....
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.... Notification No.17/2011-ST, dt.01.05.2011, which is similar to other notifications. 7. The learned Authorised Representative on behalf of the Revenue reiterates the grounds of appeals. He submits that the Explanation (iii) of Paragraph 2(a) of the notification No.17/2011-ST (supra), provides that the expression wholly consumed, in the said notification, would not be applicable, if a developer or unit of SEZ own or carry on any business other than operation in SEZ. In that case, the refund shall be restricted to the extent of the ratio of export turnover and will be calculated as per the formula in Paragraph 2(d) of the said notification. He submits that the Commissioner (Appeals) failed to appreciate the fact that the Assessee constructed the transmission line outside SEZ for supply of surplus power to DTA and has supplied the power to unit other than SEZ unit. He submits that the Assessee used the surplus power in DTA and carried out separate business and therefore, the Adjudicating authority correctly rejected the refund claims. 8. He further submits that the Commissioner (Appeals) proceeded on the basis of Rule 47(3) of the SEZ Rules, 2006 which actually supports the Re....
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....der sub-section (2) of section 4 and sub-section (9) of section 15; . . . (f) "Co-Developer" means a person who, or a State Government which, has been granted by the Central Government a letter of approval under sub-section (12) of section 3; (g) "Developer" means a person who, or a State Government which, has been granted by the Central Government a letter of approval under sub-section (10) of section 3 and includes an Authority and a Co-Developer; . . . (i) "Dome....
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....p; . . SECTION 26. Exemptions, drawbacks and concessions to every Developer and entrepreneur. - (1) Subject to the provisions of sub-section (2), every Developer and the entrepreneur shall be entitled to the following exemptions, drawbacks and concessions, namely :- . . . (e) exemption from service tax under Chapter V of the Finance Act, 1994 (32 of 1994) on taxable services provided to a Developer or Unit to carry on the authorised operations in a Special Economic Zone; . .&nb....
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....notify restrictions, as it deems fit on all or any class of such goods mentioned under this clause. (2) . . . . . . (3) Surplus power generated in a Special Economic Zones?Developers Power Plant in the SEZ or Unit's captive power plant or diesel generating set may be transferred to Domestic Tariff Area on payment of duty on consumables and raw materials used for generation of power subject to the following conditions, namely :- (a) proposal for sale of surplus power received by the Development Commissioner shall be examined in consultation with the State Electricity Board, wherever considered necessary : Provided that consultation with State Electricity Board shall not be required for sale of power within the same Special Economic Zone; (b) norms for production of a unit of power shall be approved by the Approval Committee; (c) sale of surplus power to other Unit or Developer in the same or other Special Economic Zone or to Export Oriented Unit or to Electronic Hardware Technology Park Unit or to Software Technology Park Unit or Bio-technology Park Unit, shall be without payment of duty; (d) for sale of surplus power in Domest....
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....trial, commercial, residential, institutional and recreational occupants of the SEZ is one of the most important infrastructure services. The capacity of the proposed project in SEZ is to be about 2000 MW, to be developed on modular basis. Necessary project development activities like identification of land, engagement of technical consultants, carrying out studies including environmental impact studies, geotechnical investigations, contour and topography, bathymetry, etc. have been completed. Also, selection of the main plant (Boiler, Turbine and Generator) supplier and contractor is over and order has already been placed for the first phase. The Power generated by the Developer will be supplied to the Units and Developers of SEZs in Gujarat and other SEZs, EOUs and others as permitted by SEZ Rules. We hereby submit our application in Form A for your consideration and for according approval to Adani Power Private Limited, as Developer of a Power sector specific SEZ at Mundra, Kutch district in Gujarat, so that the necessary infrastructure facilities can be created at the earliest." ii) By letter dt.19.12.2006, the Director of the Ministry of Commerce & Industries....
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....mic Zones Rules, 2006, the Central Government hereby notifies the following area at Villages Tunda and Siracha, Taluka Mundra, District Kutch in the State of Gujarat, comprising of the Survey numbers and the area given below in the Table, as a Special Economic Zone, namely:-" iv) By letter dt.19.06.2007, the Director of the Ministry of Commerce and Industry, Department of Commerce, conveyed the approval of the authorised operation to be carried out by the Assessee. The relevant portion of the letter dt.19.06.2007 is reproduced below:- "Sub: Authorised operations in respect of sector specific Special Economic Zone for power sector for supply of power to SEZs, EOUs in Gujarat and other SEZs, EOUs and others at Village Tunda and Siracha, Taluka Mundra, District Kutch, Gujarat M/s Adani Power Private Limited Reg. Sir, I am directed to refer to your letter dt.31.08.2006, on the above mentioned subject and to convey the approval for the authorized operations to be carried out in the power sector Special Economic Zone for supply of power to SEZs, EOUs in Gujarat and other SEZs, EOUs and others at Village Tunda a....
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....No.17/2011-ST as well as Notification No.40/2012-ST. This is for your information please. Sd/- (A.G. Pipalia) Specified Officer, APSEZ, Mundra" 12. Clause (e) of Section 26(l) of SEZ Act, as quoted above, provides exemption from Service Tax under Finance Act, 1994 on taxable services provided to Developer or Unit to carry on the authorized operation in a SEZ. As per sub-section (2) of Section 26 of SEZ Act, the Central Government may prescribe the manner of exemption shall be granted to the Developer under sub-section (1). Hence, in exercise of powers conferred by Section 93(1) of the Finance Act, 1994, the Central Government, exempts the taxable services, which are provided in relation to the authorized operation in a SEZ and received by a developer or units of a SEZ, whether or not the taxable services are provided inside the SEZ from the whole of Service Tax leviable thereon under Section 66 of the Act, 1994 and issues notifications time to time, being Nos.9/2009-ST, dt.03.03.2009, amended by 15/2009-ST, dt.20.05.2009, 17/2011-ST, dt.01.03.2011 etc. For the purpose of proper appreciation of the case, the relevant portion of the Notification No.17/20....
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....s, 2005, as are wholly performed within the SEZ; or (iii) services other than those falling under (i) and (ii) above, provided to a Developer or Unit of SEZ, who does not own or carry on any business other than the operations in the SEZ; (b) for the purpose of claiming exemption, the Developer or Unit of SEZ shall obtain a list of taxable services as are required for the authorised operations approved by the Approval Committee (hereinafter referred to as the specified services) of the concerned SEZ; (c) the Developer or Unit of SEZ who does not own or carry out any business other than SEZ operations, shall furnish a declaration to that effect in Form A-1, verified by the Specified Officer of the SEZ, in addition to obtaining list under condition (b) above, for the purpose of claiming exemption; (d) where the specified services received by Unit or Developer, are not wholly consumed within SEZ, i.e., shared between authorised operations in SEZ Unit and Domestic Tariff Area (DTA) Unit, refund shall be restricted to the extent of the ratio of export turnover to the total turnover for the given period to which the claim relates, i.e., Maximum....
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.... Service Tax paid on the specified services is available for the services, received by a unit located in a Special Economic Zone or Developer of SEZ for the authorized operations. In the present case, the claimant has constructed transmission line outside SEZ for supply of surplus power to DTA and has supplied the power to units other than SEZ units. The claimant has also supplied power to DTA unit. Therefore, the services received by the claimant cannot be considered as wholly consumed services, in terms of the said notification. Further, the services received by the SEZ do not fulfill the criteria of wholly consumed services as defined in explanation (i), (ii) or (iii) to Para 2(a) of the notification, since in the present case, the claimant is engaged in SEZ operations as well as DTA operations. Therefore, the services, on which the claimant has filed refund claim are not covered under explanation (iii) and cannot be considered as 'wholly consumed' services within the SEZ unit. 6.4 Commissioner (A) has held that power generation and supply is one of the activities of authorized operation. However, even though power generation and supply is authorized operation, construc....
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....., shared between authorized operation in SEZ Unit and Domestic Tariff Area (DTA) Unit' in Para 2(d), of the notification, if read harmoniously, make it clear that the expression 'wholly consumed' referred to the in the Explanation, would be applicable to sharing of business between authorized operation in SEZ Unit and DTA Unit. Thus, it is required to be ascertained sharing of business of specified services between SEZ Unit and DTA Unit. On perusal of the grounds of appeal filed by Revenue, we do not find any averment that there is a DTA unit of the Assessee and therefore, Para 2(d) of notification cannot be invoked. 16. On perusal of the above correspondences, it is clear that the Assessee applied for approval as Developer to set up the power sector at Village Tunda and Siracha, Taluka Mundra, District: Kutch, for the purpose of generation of power to be supplied to SEZs, EOUs in Gujarat and other SEZs, EOUs and others as permitted by the SEZ Rules. Rule 47 of the SEZ Rules as quoted above, permitted sales in DTA. Sub-Rule (3) of Rule 47 of the SEZ Rules, 2006 provides surplus power generated in a SEZ may be transferred to DTA on payment of duty on consumable and raw material ....
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....rastructure for export production, expeditious and single window approval mechanism and a package of incentives to attract foreign and domestic investments for promoting export-led growth. While the policy relating to the Special Economic Zones is contained in the Foreign Trade Policy, incentives and other facilities offered to the Special Economic Zone developer and units are implemented through various notifications and circulars issued by the concerned Ministries/Departments. In the present case, notifications issued by Central Government as stated above, exempting the Service Tax on taxable services received by unit or developer of SEZ, are in consequence of Section 26 of the SEZ Act 2005. In terms of Section 2(c) of SEZ Act 2005 'Authorised operation' means operations which may be authorized under Section 4 (2) and Section 15(a) of SEZ Act. There is no dispute that the Assessee was granted Letter of Approval and authorization to operate in SEZ by BOA. Notification dt.10.05.2007 issued by the Ministry of Commerce & Industry as quoted above, the Assessee has been granted Letter of Approval for development, operation and maintenance of the sector specific SEZ for power sector for....
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....s to which this amount pertains do not have direct nexus with the authorized operations undertaken by the appellant, this stand of the department is totally incorrect. The Approval Committee which has examined this issue has issued a specific certificate to the appellant indicating the various services received by the appellant and justification for use of such services in relation to authorized operations. The jurisdictional Commissioner of Central Excise is also a member of this Approval Committee. Once the Approval Committee has given the nexus and the justification, it was totally unwarranted on the part of the adjudicating authority and the appellate authority to go into this question and come to their own findings in the matter. Therefore, rejection by the lower authorities of the refund claims of the service tax paid on various services on this ground is bad in law and is accordingly set aside." 20. Revenue also filed appeals against the impugned orders on the ground that the Commissioner (Appeals) has no power to remand the matter. The Hon'ble High Court of Gujarat in the case of Commissioner of Service Tax Vs Associated Hotels Ltd - 2015 (37) STR 723 (Guj.), on the ....