- Whether refund of unutilized credit of ST admissible to SEZ where such services were unconditionally exempted?

PJ/Case Laws/2012-13/1292

Case:- GLOBAL ADVERTISEMENT SERVICES PVT. LTD VS COMMISSIONER OF CENTRAL EXCISE, PUNE-III

Citation: -2012-TIOL-1478-CESTAT-MUM

Brief facts: - The Appellant, M/s Global Advertisement Services Pvt. Ltd., is a unit in the Special Economic Zone and is registered with the Pune-III Commissionerate as a service provider under the category of "Business Auxiliary Services". They exported taxable output service under the Export of Service Rules, 2005 without payment of service tax. This resulted in accumulation of unutilized credit of service tax availed on input service for which they filed a refund claim for Rs.5,63.332/- for the period October to December, 2010 in terms of Rule 5 of the CENVAT Credit Rules, 2004 read with Notification no. 5/2006-CE(N.T) dated 14.03.2006, further read with Section 11B of the Act. The lower adjudicating authority held that the appellant had procured input service from the Domestic Tariff Area and such services are exempted unconditionally vide Notification no. 9/2009-ST dated 03.03.2009 and, therefore, the appellant should not have paid any duty. Seeking refund of input service tax credit for the activities undertaken within the SEZs is not consistent with the scheme of refund under rule 5 of the CENVAT Credit Rules, 2004 and accordingly, the refund claim is rejected.

The Appellant preferred an appeal before the lower appellate authority who held that the appellant being a SEZ unit cannot claim refund under rule 5 of the CENVAT Credit Rules, 2004. The SEZ unit is under the administrative control of the Development Commissioner and, therefore, CENVAT Credit Rules and the notification issued there under are not applicable to the appellant and they are not eligible for the refund. Accordingly, he dismissed their appeal.

Aggrieved by the order of lower adjudicating authority the appellant is before Tribunal.

Appellant Contentions: - The Learned counsel for the appellant submits that nowhere in Rule 5 of the CENVAT Credit Rules it is stated that a unit in the SEZ cannot apply for refund under the provisions of the said Rules. Similarly, Notification 5/2006-CE(N.T) dated 14.03.2006 also does not debar unit in the SEZ from filing a refund claim as per the procedure prescribed under the said notification. He also relies on the Board's Circular no. 105/8/2008 dated 16.09.2008 wherein the Board has clarified that respective jurisdictional authorities administering service tax should deal with the refund claims filed by the units in SEZ. He also relies on the judgment of the Hon’ble apex court in the case of HCL Ltd. vs. Collector of Customs, New Delhi 2001(130)ELT 405(SC) = (2002-TIOL-847-SC-CUS-LB) and Unichem Laboratories Ltd. vs. Collector of Central Excise, Bombay 2002(145)ELT 502 (SC). = (2002-7101.-237-SC-CX) wherein it has been held that when there are two exemptions available, the assessee is entitled to the benefit of that exemption notification which gives him greater relief regardless of the fact that the notification in general terms and the other notification is more specific to the goods.

Respondent Contentions:- The learned Dy. Commissioner (AR) appearing for the Revenue reiterates the findings of the lower authorities that appellant was not required to pay duty because of exemption notification in force and that the appellant was a SEZ that cannot file refund claim under Rule 5 of the Cenvat Credit Rules, 2004.
Reasoning of Judgment: The Tribunal held that there is no dispute about the fact that the appellant has received duty-paid input service and such input service have been utilized in rendering the output service which has been exported. Further, the appellant is also registered with the service tax authorities under the category of 'Business Auxiliary Service'. As clarified by the Board in the Circular no. 105/8/2008 dated 16.09.2008 it is for the jurisdictional Excise/Service Tax authorities to deal with the refund claims filed by the SEZ units. Therefore, it is very clear that the appellant is eligible for refund of service tax paid which was not required to be paid under section 11B of the Act itself, provided that the appellant has filed the refund claim within the prescribed time-limit and the bar of unjust enrichment does not apply. In the instant case, as the appellant has exported the output service, hence, the principle of unjust enrichment does not apply. Therefore, the only point that needs to be seen is whether the appellant has made the refund claim within a period of one year from the date of payment of duty and in respect of such duties, he would be rightly entitled for the benefit of refund under section 11B of the Act itself. In view of the above position, Tribunal set aside the impugned order and remand the case back to the original adjudicating authority to examine the claim of the appellant with respect to the time-limit involved and if the refund claim is in time, to sanction the refund in accordance with law.

Decision:- Matter remanded for verifying whether the refund claim was filed in time.

Comment: This case also lays the foundation that where service tax was paid irrespective of the fact whether the same was not required to be paid, the assessee can file the refund claim in that respect when it is clear that bar of unjust enrichment is not applicable. The department cannot compel the assessee to take benefit of a particular notification as when there are 2 notifications that are beneficial to the assessee, it is at the sole discretion of the assessee to opt for any one of them, which is most beneficial to the assessee.

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PJ/Case Laws/2012-13/1292

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