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PJ/Case Laws/2012-13/1484

No need to discharge service tax liability cannot be equated with non admissibility of refund claim.

Case:- TATA CONSUTANCY SERVICE LTD. VS COMM. OF C.EX. & ST (LUT), MUMBAI

Citation:- 2013 (29) S.T.R.393 (Tri.-Mumbai)

Brief Facts:- These appeals are directed against Order-in-Appeal Nos. RT/22-29/LTU/MUM/2010, dated 26-8-2010 and No. RT/32/LTU/MUM/2010, dated 15-9-2010 both passed by the Commissioner of Central Excise & Service Tax (Appeals), LTU, Mumbai. The appellant M/s. Tata consultancy Services Ltd., Mumbai (Special Economic Zone Developer and Special Economic Zone Units) filed nine refund claims towards the Service Tax paid on services consumed within the SEZ and services which were used in the authorized operations of the SEZ units. The refund claims were considered and partly sanctioned vide the order passed by the jurisdictional Assistant Commissioner against which the appellant preferred an appeal before the Commissioner (Appeals) who further partly allowed the refund claims and rejected the refund claims partly. We are concerned with the refund claims rejected by the lower appellant authority amounting to Rs. 19,80,569/-. This amount consists of two components, namely Rs.6,66,794/-, which were rejected on the ground that the service tax paid on various services pertaining to this amount does not bear a direct nexus with the authorized operations undertaken by the appellant. The second component is of Rs.13,13,775/- which relates to service tax on services wholly consumed within the SEZ during the period from July to Septemer,2009.
Appellant Contentions:- The learned Chartered Accountant for the appellant makes the following submissions. As regards the nexus between services rendered and the authorized operation conducted, these services have been approved by the Approval Committee and the certificate issued in this regard by the Development Commissioner in-charge of the IT/ITTES SEZ, dated 22-6-2009 clearly specifies the services received by the SEZ and jurisdiction for use of such service in relation to authorized operations.  Once the Approval Committee has approved the various services, the question of the Assistant Commissioner or any other authority going into the nexus between services rendered and the authorized operations conducted becomes totally irrelevant and therefore, refund could not have been rejected on the ground that the services in the respect of which refund claim has been made has been wholly consumed and, therefore, the provisions of clause (c) of the Notification No. 9/2009-S.T.,dated 3-3-2009 would come into picture as held by the lower adjudicating and appellate authority, the learned consultant submits that the very same notification exempts the taxable services provided in the relation to the authorized operations in a SEZ and received by a developer or a unit in the SEZ. Therefore, payment of service tax was not warranted in the case of services consumed wholly within the SEZ. Merely because service tax was paid on the services consumed, it does not disentitle them from the benefit of exemption which they have claimed by way of refund. He also relies on the order of this Tribunal in the case of Wardha power company Ltd. v. CCE reported in (2012)14 GSTR 233 (Tri.-Mum.) in support of the above contentions.

Respondent Contentions:- The learned Additional Commissioner (A.R) appearing for the Revenue reiterates the findings of the lower appellate authority.        

Reasoning of Judgment:- We have considered the submission from both sides. As regards the refund claim of Rs. 6,66,794/- , the 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 appellant and jurisdiction 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. Coming into the next question, whether in respect of the services which were wholly consumed and which were fully exempt from payment of duty, whether the appellants can be granted refund under Notification No.9/2009-S.T., dated 3-3-2009 as amended by Notification No. 15/2009-S.T., dated 20-5-2009 through which amendment a condition was inserted stating that the refund procedure prescribed under the said notification shall apply only in the case of services used in relation to the authorized operations in the SEZ except for services consumed wholly within the SEZ. This view of the department is also incorrect. Notification No. 9/2009-S.T., “exempts” the taxable services specified in the Clause (105) of Section 65 of Finance Act, 1994 which are provided in relation to the authorized operations in a SEZ and received by a developer or units of a SEZ, whether or not the said taxable service provided inside the SEZ, from the whole of the service tax leviable thereon under Section 66 of the Finance Act. The refund procedure given below for operationalising the exemption applies to the services which are procured from outside in respect of which the service tax liability has to be discharged first and the refund claims subsequently. In the case of services which are wholly consumed within the SEZ, there is no necessity to discharge the service tax liability ab initio. That does not mean that in case where service tax liability has been discharged, the appellant is not eligible or not entitled for refund of service tax paid under the provisions of Section 11B of the Central Excise Act, 1944 read with the Section 83 of the Finance Act, 1994. If the appellant is eligible for refund under Section 11B, then the same cannot be denied on the ground that the claim was made under notification No. 9/2009-S.T. In this case, there is no dispute that the services were provided in relation to the authorized operations of the appellant within the time period provided for in Section 11B and the appellant has borne the incidence of taxation. Services provided to SEZ or unit in the SEZ is deemed as export as per the provisions of Section 2(m)(ii) of the SEZ Act,2005 and as per Rule 31 of the SEZ Rules,2006, the appellants are entitled for exemption from payment of service tax on the services which are used or provided to a unit in the SEZ. As per Section 51 of the said SEZ Act, the said provisions prevail over the provisions contained in any other law for the time being in force. It is the avowed policy objective of the Government of India that exports should not bear the burden of taxes. If this policy objective has to be sub-serve and the objective realized broader view of the provisions relating to refund has to be taken. Therefore, even if the appellant was not eligible for refund under Notification No. 9/2009-S.T., dated 3-3-2009, the appellants were certainly eligible for refund under Section 11B of the Central Excise Act, 1944.  In this view of the matter, rejection of service tax refund is not sustainable in law. In view of the above, we find that the impugned order is not sustainable in law and accordingly we set aside the same and allow the appeals with consequential relief.

Decision:-  Appeals allowed.

Comment:-The essence of this case is that even if the assessee was not required to pay service tax, and if service tax is paid, refund will be admissible. In the instant case, although refund claim of the assessee was not governed by the notification no. 9/2009-ST dated 3.3.2009, yet refund was allowed under section 11B of the Central Excise Act, 1944 because assessee cannot be made liable to pay what is not required to be paid.
 

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