TaxTMI 
TaxTMI 
2022 (4) TMI 989
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....d, the appellant filed these five appeals assailing impugned orders for different periods as below: Sr No. Appeal No. Impugned order Period Involved Issue 1. ST/52449/2016 ST/52449/2016 Order-in-Appeal No. 09/ST/LTU/DLH/2016 dated 09.05.2016 July 2012 to September 2013 Issue pertains to rejection of refund claims for service tax paid by the appellant at Pitampur SEZ Zone, Madhya Pradesh 2. ST/52466/2016 Order-in-Appeal No. 11/ST/LTU/DLH/2015 dated 30.05.2016 3. ST/52488/2016 Order-in-Appeal No. 12/ST/LTU/DLH/2015 dated 30.05.2016 4. ST/52490/2016 Order-in-Appeal No. 13/ST/LTU/DLH/2015 dated 30.05.2016 5. ST/51804/2021 ST/51804/2021 Order-in-Appeal No. IND-EXCUS-000-APP- 144-19-20 dated 26.09.2019 January 2016 to March 2016 2. The specific grounds on which the refund claims have been rejected in these appeals and the submissions of the appellants before us in each of these appeals are in the paragraphs below. Appeal No. ST/52449/2016- 3. The appellant filed application seeking refund of service tax paid on twelve services of which refund was rejected on....
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....no. ST/52466/2016 period involved Jan 2013-Mar 2013- 4. In this case, refund was disallowed by the Revenue only on service tax paid on two services as follows: a) Proportionate Service tax distributed by the head office through the ISD mechanism Rs. 29,61,415- the refund was rejected on the ground the head office of the appellant had taken credit initially and if it was not able to utilise the credit it should have claimed the refund and Notification no. 40/2012 does not provide for such distribution through ISD. It was also rejected on the ground that the approval committee also deferred approval of ISD invoice mechanism. The appellant's submission is that the ISD mechanism is intended to distribute proportionately the input service tax paid by the Head office which is allowed to be distributed proportionately to various manufacturing units based on turnover. Most of the common services are in the approved list dated 5.7.2013. Refund of services not entirely consumed in the SEZ unit obviously means the services related to the unit but not entirely consumed in the unit such as for instance, advertising service, management consultant service, Chartered accountant ser....
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....ing service and transport of goods through pipeline service Rs. 3,45,449- The credit on these services were disallowed on the ground that they were approved subsequently on 5.7.2013. The appellant's submission is that subsequent approval of the list of services is not fatal to the claim for refund as SEZ Act has overriding effect and Tribunal's order dated 29.7.2019 covers both the above situations. Appeal No. 52490/2016 period involved July 2013-Sept. 2013- 6. This appeal assails rejection of refund in respect of the two services: a) Transport of goods by road services (GTA) for exports and for DTA clearances Rs. 1,13,84,384- Refund of service tax was rejected on the ground that CENVAT credit is admissible only for inward transportation of goods and credit of service tax paid for transport of goods beyond the factory gate is not admissible under the CENVAT Credit Rules. Further, Rs. 25,03,230 of Service tax was on GTA services valued at Rs. 88,81,153 was paid as per order of Commissioner of Central Excise Indore vide order-in-original no. 23/commr/ind/ST/2013 dated 22.8.2013 pertaining to the period October, 2008- March, 2012 and is not related to the author....
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....usiness Auxiliary Service - refund of Rs. 4178-. There is no finding in the impugned order, but order in original states that the address was not that of the SEZ unit on the invoice. The appellant's submission before us is that the tax was paid on the bill raised by the shipping agency which issued the invoice on the corporate office. The documents pertaining to the clearance of the goods from port evidenced by the shipping bill, bill of lading and the invoice raised give a clear correlation with the SEZ unit only. Appeal no. 51804/2021 period involved Jan 2016 March 2016 7. Refund was denied in this appeal only on two grounds as follows: a) Refund claim in respect of 8 services totalling Rs. 1,94,431 was disallowed on the services on the strength of ISD invoices on the ground that the services in the ISD invoice were not covered in the default list of approved services. The appellant's submission is that of the 8 services, 6 services were covered in the list of approved services as can be seen from the approved list. Only "other taxable services (Rs. 11,126) and sponsorship service (Rs. 22,289) were not in the approved list. Therefore, refund in respect of 6....
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....l)] (iv) SRF Limited vs. Commissioner of C. Ex., & ST(LTU),- Delhi [2017 (3) GSTL 347(Tri.-Del.)] (v) Wabco India Ltd. vs. Commissioner of GST & C.EX.,- Chennai [2021 (54) GSTL 37(Tri.-Chennai)] (vi) M/s. DLF Assets Pvt. Ltd. vs. The Commissioner, Service- Tax, Delhi I, Service Tax Appeal No. 50368 of 2016 [Final Order No. 50853 of 2020 dated 22.09.2020]. 9. Learned Departmental Representative submits that the Adjudicating Authority and the Commissioner (Appeals) have rejected the refund applications on the following grounds: (i) The list of services was not approved by the UAC of SEZ (ii) invoice pertaining to ISD are neither approved nor is a service; (iii) Branches of banks are outside the SEZ unit in case of refund application for banking service. (iv) Address do not pertain to SEZ unit (v) Services were not wholly consumed within the SEZ unit. 10. We have considered the arguments on both sides and perused the records. 11. The question which falls for our consideration is whether the appellant is entitled to refund of service tax paid on various input services provided for authorised op....
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....the services provided for authorised operations to either a developer or to any unit located in the SEZ. This exemption is subject to the manner and the terms and conditions which the Central Government may prescribe. 14. The questions which arise are what is the meaning of an "authorised operation" and what is the meaning of prescribed' under the SEZ Act and what such prescriptions are and whether they have been fulfilled. According to Section 2(c), "authorised operations" means operations which may be authorised under sub-section (2) of section 4 and sub-section (9) of section 15. For ease of reference, we reproduce these two sections below: 4. Establishment of Special Economic Zone and approval and authorisation to operate it to, Developer- (1) The Developer shall, after the grant of letter of approval under sub-section (10) of section 3, submit the exact particulars of the identified area referred to in sub-sections (2) to (4) of that section, to the Central Government and thereupon that Government may, after satisfying that the requirements, under sub-section (8) of section 3 and other requirements, as may be prescribed, are fulfilled, notify the speci....
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....e under sub-section (4) shall be in such form and shall be accompanied by a copy of the order appealed against and by such fees as may be prescribed. (7) The procedure for disposing of an appeal shall be such as may be prescribed: Provided that before disposing of an appeal, the appellant shall be given a reasonable opportunity of being heard. (8) The Central Government may prescribe,- (a) the requirements (including the period for which a Unit may be set up) subject to which the Approval Committee shall approve, modify or reject any proposal referred to in sub-section (3); (b) the terms and conditions, subject to which the Unit shall undertake the authorised operations and its obligations and entitlements. (9) The Development Commissioner may, after approval of the proposal referred to in sub-section (3), grant a letter of approval to the person concerned to set up a Unit and undertake such operations which the Development Commissioner may authorise and every such operation so authorised shall be mentioned in the letter of approval. 15. Thus, 'authorised operations' under the SEZ Act are those op....
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....r section 26 of the SEZ Act, its operations should be authorised by the Board under section 4 and it should meet the manner, terms and conditions laid down under the SEZ Rules. Similarly, if a unit located in the SEZ has to enjoy the exemptions available under Section 26, its operations must be authorised by the Development Commissioner under Section 9 and it should meet the manner, terms and conditions prescribed under the SEZ Rules. 20. For exemption from the service tax, the concerned SEZ Rules are Rules 22 and 31 which read as follows. Rule 22. Terms and conditions for availing exemptions, drawbacks and concessions to every Developer and entrepreneur for authorized operations (1) Grant of exemption, drawbacks and concession to the entrepreneur or Developer shall be subject to the following conditions, namely:- (i) the Unit shall execute a Bond-cum-Legal Undertaking in Form H, with regard to its obligations regarding proper utilization and accountal of goods, including capital goods, spares, raw materials, components and consumables including fuels, imported or procured duty free and regarding achievement of positive net foreign exchange earning; ....
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.... procurement from Domestic Tariff Area of the projected requirements of goods for the authorized operation by the Developer but will not be levied on account of admission of such goods into the Special Economic Zone; (c) where the value of Bond-cum-Legal Undertaking executed falls short on account of requirement of additional goods, the Unit or the Developer shall submit additional Bond-cum-Legal Undertaking; (d) there shall be no debit and credit, the Bond-cum-Legal Undertaking amount shall be monitored quarterly or yearly on the basis of Quarterly Progress Report or Annual Progress Report submitted by the Developer or Unit, as the case may be, and in case of any shortfall in the Bond-cum-Legal Undertaking amount, a fresh or additional Bond-cum-Legal Undertaking shall be furnished; (e) the original of Bond-cum-Legal Undertaking shall be maintained by the office of Development Commissioner and certified copies shall be given to the Specified Officer and Unit or Developer; (f) the value of the Bond-cum-Legal Undertaking in respect of gems and jewellery units shall be calculated on rates as notified by the Central Government, from time to time; ....
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...., exemption notifications were also issued by the Government under the respective laws. These exemption notifications were also issued with some conditions. Thus, there is duplication inasmuch as the goods and services provided to authorised operations of developers and units in the SEZs are exempted from Customs duty, Central Excise duty and the service tax by the SEZ Act itself (subject to the manner which may be prescribed) and there are also exemption notifications under the respective tax laws which are also subject to some conditions. The exemption notifications in dispute in this case are service tax exemption notifications ST-40/2012 dated 20.6.2013 and ST-12/2013 dated 1.7.2013. This contradiction and duplication of exemption under the two provisions viz, SEZ Act and Rules and the exemption notifications under the Finance Act, 1994 were discussed at length by a bench of the Tribunal in case of DLF Assets, the relevant extract of which is below. "10. According to the appellant, as the aforesaid services were utilized for authorized operations by the recipient SEZ units, there was no necessity to pay any service tax. The Department, however, alleged that though the ....
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....elow: "31. The exemption from payment of service tax on taxable services under Section 65 of the Finance Act, 1994 (32 of 1994) rendered to a Developer or a Unit (including a Unit under construction) by any service provider shall be available for the authorized operations in a Special Economic Zone." 14. The impugned order has confirmed the demand of service tax on the ground that for the period from March 3, 2009 upto May 19, 2009, exemption on services rendered to SEZ units was available only by way of refund and thus the appellant was not eligible for ab-initio exemption, which was introduced subsequently by amendment of Notification dated March 3, 2009 by Notification No. 15/2009-ST w.e.f May 20, 2009. It would, therefore, be necessary to reproduce the aforesaid two Notifications. The relevant portion of the Notification dated March 3, 2009 is reproduced below: Notification No. 09/2009-Service Tax : Dated March 3, 2009 G.S.R. 146 (E) - In exercise of the powers conferred by sub-section (1) of section 93 of the Finance Act, 1994 (32 of 1994), and in supersession of the Notification of the Government of India, Ministry of Finance (Department of....
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....ection 93 (1) of the Finance Act. It is for this reason that it has been contended by learned Counsel for the appellant that the said Notification dated March 3, 2009 would not have any relevance to the case of the appellant when it sought exemption from payment of service tax under the provisions of section 26(1)(e) of the SEZ Act read with rule 31 of the SEZ Rules. 18. The contention advanced by the learned Counsel for the appellant has force. As noticed above, section 26(1) of the SEZ Act provides that subject to the provisions of the sub-section (2), every Developer shall be entitled to exemptions and the exemption at (e) exempts every Developer from service tax under Chapter-V of the Finance Act on taxable services provided to a Developer or unit to carry on the authorized operations in a SEZ. Section 51 of the SEZ Act provides for an overriding effect to the provisions of the SEZ Act. The provisions of section 26 read with rule 31 of the SEZ Rules thus, have overriding effect over anything inconsistent contained in any other law for the time being in force, which would include the Finance Act. It needs to be noted that the Notification dated March 3, 2009 has been is....
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....f the SEZ Act. It is not necessary to extract rule 22, since there is no dispute about the fact (1) that the petitioners have complied with the prescriptions contained in rule 22 of the SEZ Rules, 2006, and (2) that rule 22 of the SEZ Rules, 2006 does not stipulate the filing of Forms A1 and A2 as prescribed in the three Notifications issued under section 93 of the Finance Act, 1994. 29. The contention of Smt. Sundari R. Pisupati, learned senior standing counsel is that there is no inconsistency between (i) the terms and conditions prescribed in the Notifications issued under section 93 of the Finance Act, 1994, and (ii) the terms and conditions prescribed in rules 22 and 31 of the SEZ Rules, 2006, and that therefore, section 51 of the SEZ Act, 2005 cannot be pressed into service. But this contention is unacceptable. 30. This is for the reason that section 26(1) of the SEZ Act made the entitlement to certain exemptions subject to provisions of sub-section (2) of section 26. Section 26(1) did not make the entitlement of a developer to certain exemptions, subject to the provisions of something else other than the provisions of sub-section (2). Therefore, the firth r....
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....e Developer under sub-section (1) but what is important to notice, and as was also observed by the Andhra Pradesh High Court, the word "prescribe" would mean "prescribed by rules made by the Central Government under the SEZ Act," in view of the definition of "prescribed" under section 2(w) of the SEZ Act. The Notification dated March 3, 2009, which has been issued under section 93 of the Finance Act, therefore, has no application." 23. Thus, the legal position is that SEZ Act overrides any other law because of Section 51 of the SEZ Act. The question is what part of the tax law have been overridden by the SEZ Act. To answer this question, we proceed to examine the requirement under the Constitution of India to levy taxes and the relevant legal provisions of the Central Excise Act and Customs Act and Chapter V of the Finance Act, 1994 under which Service Tax is levied. 24. Taxes can be levied only as per Article 265 of the Constitution of India which reads as follows: 265. Taxes not to be imposed save by authority of law.-No tax shall be levied or collected except by authority of law. 25. This authority of law to levy and collect taxes is in the form of charging sec....
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....al Excise duty leviable under section 3 at the rates specified in the Central Excise Tariff gets reduced to the extent any exemption notification is issued under section 5A of the Central Excise Act. 29. Section 12 of the Customs Act, 1962 is the charging section by which duties of Customs are charged at the rates set forth in the Customs Tariff. It reads as follows: Section 12. Dutiable goods.- (1) Except as otherwise provided in this Act, or any other law for the time being in force, duties of customs shall be levied at such rates as may be specified under the Customs Tariff Act, 1975 (51 of 1975), or any other law for the time being in force, on goods imported into, or exported from, India. (2) The provisions of sub-section (1) shall apply in respect of all goods belonging to Government as they apply in respect of goods not belonging to Government. 30. Some exceptions have been made to this levy under the Customs Act as follows: (i) Section 25 empowers the Central Government to, by notification, exempt the Customs duties wholly or partially and either conditionally or unconditionally. (ii) Sections 74 provides for drawback of th....
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....service received by him is otherwise than for the purpose of use in any business or commerce, the provisions of this sub-section shall not apply: Provided further that where the provider of the service has his business establishment both in that country and elsewhere, the country, where the establishment of the provider of service directly concerned with the provision of service is located, shall be treated as the country from which the service is provided or to be provided. (2) Where a person is carrying on a business through a permanent establishment in India and through another permanent establishment in a country other than in India, such permanent establishments shall be treated as separate persons for the purposes of this section. Explanation 1. - A person carrying on a business through a branch or agency in any country shall be treated as having a business establishment in that country. Explanation 2. - Usual place of residence, in relation to a body corporate, means the place where it is incorporated or otherwise legally constituted. SECTION 66B. Charge of service tax on and after Finance Act, 2012.- There shall be levied a tax (....
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....f SEZ Act prevail over any other law. Section 26 (1) of the SEZ Act, 2005 reads as follows: 26. (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:- (a) exemption from any duty of customs, under the Customs Act, 1962 or the Custom Tariff Act, 1975 or any other law for the time being in force, on goods imported into, or service provided in, a Special Economic Zone or a Unit, to carry on the authorised operations by the Developer or entrepreneur; (b) exemption from any duty of customs, under the Customs Act, 1962 or the Customs Tariff Act, 1975 or any other law for the time being in force, on goods exported from, or services provided, from a Special Economic Zone or from a Unit, to any place outside India: (c) exemption from any duty of excise, under the Central Excise Act, 1944 or the Central Excise Tariff Act, 1985 or any other law for the time being in force, on goods brought from Domestic Tariff Area to a Special Economic Zone or Unit, to carry on the authorised operations by the Developer or entrepreneur; ....... ....
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....s in the SEZ areas by virtue of the overriding provisions of the SEZ Act. Any exemption notifications and conditions therein are therefore, redundant because, the Parliament itself has, through section 51 of the SEZ Act, overridden the charge in the other laws. 41. The status of exemption notifications which are issued when the tax sought to be levied is out of the ambit of charging section itself was considered by the Supreme Court in Commissioner of Central Excise and Customs, Kerala vs. Larsen & Toubro Limited [2015 (39) STR 0913 (SC).] The case before the Supreme Court, in brief, was as follows. Service tax was levied under Chapter V of the Finance Act, 1994 on taxable services. The list of taxable services was defined under section 65(105) and this list was expanded from time to time. If the taxable service was provided as a part of a composite contract which involved both rendering the service and transfer or deemed transfer of goods, exemption notifications were issued by the Government towards abatement of the value of the goods used in the services. Later, on 1.6.2007, Works Contract Service, itself was introduced as a service. The question before the Supreme Cour....
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....e exemption from service tax under section 26 of the SEZ Act is for the services for authorised operations of the SEZ unit and NOT what the SEZ unit could have or should have used. How the SEZ unit or SEZ developer conducts its authorised operations is upto it and it is not open to others to either decide how the business could have been or should have been conducted nor can the exemption from service tax be denied on such views. 44. In respect of the refund claimed on the basis of the ISD invoices issued by the head office of the appellant in Gurugram, it has been rejected on the ground that the head office at Gurugram should have claimed the refund. It is necessary to discuss in a little detail about the ISD invoices. Usually when a service is rendered to a manufacturer or to a service provider, an invoice is raised in its name. Some services, however, are provided at the head office of the assessee. The head office usually is a corporate or registered office which neither manufactures any goods nor provides any services by itself. Only its field units do so. The Service Tax law considers the services provided in the head office as input services to the field units and permits....