Interest on belated refund of Service Tax for service rendered to SEZ Unit.

PJ/CASE LAW/2015-16/2769

Case:-RELIANCE INDUSTRIES LTD. VERSUS COMMISSIONER OF C. EX. & S.T., RAJKOT

Citation:- 2015 (37) S.T.R. 360 (Tri. - Ahmd.)

Brief Facts:-The brief facts of the case are that all these five appeals are directed against from OIA No. 498 To 502/2010/COMMR (A)/CMC/RAJ, dated 14-12-2010 hence are being disposed of by a common order. Aggrieved by the rejection of refund claims of interest, appellants preferred appeal before the First Appellate Authority. The First Appellate Authority after following the due process of law did not agree with the contentions raised by the appellant and rejected the appellant’s claims for interest on the belated refunds.

Appellants Contention:-Ld. Counsel appear on behalf of the appellant would draw our attention to the findings recorded by the lower authorities. It is the submission that the refund claims are allowed sanctioned but belatedly. It is the claim of the ld. Counsel that the Dept. is liable to pay interest of the appellants on his belated sanction of refunds. He relies of the judgement of Hon’ble Supreme Court in the case of Ranbaxy Ltd.v. UOI - 2012 (27) S.T.R. 193 (S.C.) = 2011 (273) E.L.T. 3 (S.C.), for the broader proposition that any amount to be refunded interest is payable if there is delay of sanctioned refund beyond 3 months from the date of the filing of the refund claim; they also rely on the decision of Hon’ble High Court of Gauhati in the case of Amalgamated Plantations Pvt. Ltd.v. UOI - 2013 (296) E.L.T. 13 for the proposition that any refund claims made in terms of Notification No. 33/1999 could be included under the provision of Section 11B of the Central Excise Act, 1944 and interest in accordance of the later needs awarded to the assessee.
It is also his submission that the First Appellate Authority has over looked the fact that C.B.E. & C. Circular No. 114/8/2009-S.T., dated 20th May, 2009 specifically qualifies that no Service Tax is payable on the services rendered to a SEZ unit and if any Service Tax is paid that has to be refunded within 30 days of in any case not beyond 45 days from the date of filing of refund claim. It is also the submission that Hon’ble High Court of Gujarat in the appellants own case as reported - 2010 (259) E.L.T. 356 (Guj.) has held that granting of refund of accumulated credit in terms of Rule 5 of Cenvat Credit Rules, 2004, if sanctioned belatedly, claim for the interests is payable as per the provision of Section 11BB of the Central Excise Act, 1944 even if the relevant Notification and rules did not expressly provide for such payment of interest.

Respondents Contention:-Ld. DR on the other hand would submit that the provisions of Notification No. 9/2009-S.T., as amended by Notification No. 15/2009-S.T., do not provide any payment of interest to the appellant. It is his submission that both the lower authorities were correct in coming to the conclusion that the refund claims filed under notification 15/2009 do not fall under the category of refund claims under Section 11B of the Central Excise Act, 1944 and provisions of Section 11BB of Central Excise Act, 1944 are not attracted.

Reasoning Of Judgement:-The tribunals have considered the submission made at length by both sides and records. The only issue which needs our consideration is whether the appellant is eligible for interest on the refunds sanctioned belatedly. It is undisputed that the appellant had filed the refund of Service Tax paid on the services rendered to them in an SEZ unit. The said refund claim was filed as per Notification No. 15/2009-S.T.
Both the lower authorities come to the conclusion that the provisions under Section 11B and 11BB of the Central Excise Act, 1944 are not attracted in the case for granting of interest to the appellant as the refund claims filed are under Notification No. 15/2009-S.T., and the said Notification does not provide for granting of interest in the belated interest claims. In tribunal considered view; lower authorities order are incorrect as the inconsonance of the latter for more than one reasons.
–       Firstly, it is to be noted that any services rendered in an SEZ units are exempted by SEZ Act, 2005 and the appeals which made Service Tax in excess what was in other ways liable is to be refunded as per the provisions. In the case in hand, undisputedly services were rendered to the appellant in an SEZ unit and Service Tax paid by the service provider. This basic fact has been overlooked by the lower authorities. In our considered view the Notification Nos. 9/2009-S.T., and 15/2009-S.T., are only putting into operations the exemptions/immunity available to an SEZ unit. This is the ratio which has been decided by us in the case of Reliance Ports and Terminals Ltd.- 2013-TIOL-1473-CESTAT-AHM. If this ratio is not applicable, appellant herein need not have paid any Service Tax to the service provider.
–       Secondly, the tribunal find that the First Appellate Authority has held that the appellant’s claim is contrary to the spirit of the Board circulars findings contrary to the spirit of both the circulars, dated 20th May, 2009 wherein the Board has categorically directed the formulation that the refund claim of the Service Tax paid on services rendered to SEZ units should be sanctioned within the maximum time of 30 days from the date of filing of refund claim and in any case beyond 45 days from the date of filing of the refund claim. Clear instructions of the board are not followed in the case in hand which is very evident from the delay which has occurred in sanctioning refund claim as indicted in Para 2 herein above. In our considered view, the time-limit which has been given out in place by the Board needs to have been followed failing which, in our considered view the liability to pay interest arises. The tribunal also find that the Circular, dated 20th May, 2009 has practically put the refund claims filed in terms of Notification of 9/2009 on a higher platform as compared to other types of refund claims filed under Section 11B for which 3 months period was prescribed for processing the claim from the date of filing of the refund claims. In tribunal considered view, expeditious sanction of refund claims was considered in true spirit of both the Circular May, 2009 which has been completely ignored by the lower authorities. To tribunal’s mind it was not necessary to provide interest in the belated sanction of refund claim as interest is statutorily payable in terms of the provisions of Section 11BB of Central Excise Act, 1944.
–       Thirdly, tribunal also find that the judgment of the Hon’ble High Court of Gujarat in the case of Reliance Industries Ltd. (supra) has clearly rejected the arguments of the Revenue that Cenvat Credit Rules that Notification 11/2002-C.E. (N.T.) did not specifically provide for interest on sanction of the refund claims. W]While rejecting the plea of the Revenue, Hon’ble High Court held as under :
“There is a basic fallacy in the premise on which the contention of Revenue is based. Cenvat credit is nothing else but credit for duty paid by the supplier of inputs, which are dutiable goods manufactured by the supplier or dutiable services rendered by the service provider. In principle such goods/services when utilised for further manufacture or providing service which are dutiable already carry the duty paid component as a part of its price/value, and hence the duty payable on the ultimately manufactured goods/services rendered stands reduced to the extent of duty already paid on the inputs. Thus the duty paid on inputs by the supplier has already been actually received by the exchequer. Therefore, this contention is, to say the least, misconceived.
On the facts and in the circumstances of the present case, admittedly the refund has been ordered under Rule 5 of the Rules and there was a delay in sanctioning the refund, in the circumstances, the provisions of Section 11BB of the Act would clearly be attracted and as such the Tribunal was justified in holding that the provisions of clause (c) of the proviso to sub-section (2) of Section 11B and consequently Section 11BB of the Act are clearly applicable to the facts of the present case and as such the respondent is entitled to interest on delayed refund of Cenvat credit as claimed by it.
Another aspect of the matter is that when Section 11BB of the Act had newly been inserted by the Finance Act, 1995, the Government of India, Ministry of Finance (Department of Revenue) has issued Circular : 130/41/95-CX., dated 30th May, 1995 (which finds reference in the impugned order of the Tribunal) issuing instructions regarding refunds claimed under Section 11BB of the Act. The Annexure thereto provides for the checklist of documents which are required to be filed with refund claims. Item No. 3 thereunder relates to “Refund of credit of duty paid on excisable goods used as input in accordance with Rule 57FD”. Thus, as per the instructions issued by the Central Government refunds under Rule 57F of the erstwhile Central Excise Rules, 1944 would be governed by the provisions of Section 11BB of the Act. Rule 57F of the said Rules made provision for the manner of utilisation of inputs and credit allowed in respect of duty paid thereon. Sub-rule (13) of Rule 57F made provision for refund of accumulated credit in case where for any reason it was not possible to adjust the same in the manner provided under the said sub-rule. Sub-rule (13) of Rule 57F of the said Rules is more or less in pari materia to the provisions of Rule 5 of the Cenvat Credit Rules, 2002/2004. Thus, the instructions issued by the Central Government under the aforesaid Circular would also be applicable to refunds under Rule 5 of the Rules, which instructions are binding on the revenue.”
In view of the foregoing, tribunal are of the considered view that the impugned orders rejecting the claim of interest of the appellant are incorrect and not in consonance with the law as settled by various judicial fora. Accordingly, tribunal set aside the impugned orders and allows the appeals with consequential relief if any.

Decision:- Appeal allowed.

Comment:- The essence of the case is that no service tax is payable when the services are rendered to SEZ unit and if paid then it has to be refunded within 30 days of in any case not beyond 45 days from the date of filing of refund claim. Furthermore, interest would be payable u/s 11BB if there is delay in sanctioning refund beyond the stipulated periods.

Prepared By:- Neelam Jain

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PJ/CASE LAW/2015-16/2769

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