TaxTMI 
TaxTMI 
2016 (3) TMI 231
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....after 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 Port SEZ by letter dt.26.06.2009 and 24.05.2012 iss....
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....ar 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 Revenues case. It is contended that Rule 47(3) of the SEZ Rules....
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.... . . . (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) "Domestic Tariff Area" means the whole of India (including the territorial waters and continental shelf) but does not include the ar....
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....nbsp; 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; . . . (2) The Central Government may prescribe th....
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....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 Domestic Tariff Area, the Unit shall obtain permission from the Specified Officer and the State Government authority concerned; (e)duty on sale of surplus power to the Domestic Tariff Area shall be as provided for in this rule. (4) Valuation and assessment of the goods cleared into (4) Domestic Tariff Area shal....
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....vironmental 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, Department of Commerce, approved the proposal for setting up of a sector specific SEZ 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, Dist: kutch, Gujarat. The relevant portion of the said letter dt.19.12.2006 is reproduced below:- "With reference to your above mentioned, Government of India....
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....n 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 and Siracha, Taluka Mundra, District Kutch, Gujarat, proposed to be developed by M/s Adani Power Private Limited, as per the list attached at Annexure of this letter in terms of the Special Economic Zones Act, 2005 and the Special Economic Zones Rules, 2006. 2. Government has, on 27th October, 2006, notified the list of authorized operations that can be undertaken in the SEZs and these alone would qualify for exemptions, concessions and drawback. A copy of the notification No.S.O.....
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....n 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.17/2011-ST, dt.01.03.2011 is reproduced below:- "In exercise of the powers conferred by sub-section (1) of section 93 of the Finance Act, 1994 (32 of 1994) (hereinafter referred to as the Finance Act) read with sub-section 3 of section 95 of Finance (No. 2), Act, 2004 (23 of 2004) and sub-section 3 of section 140 of the Finance Act, 2007 (22 of 2007) and in supersession of the notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 9/2009-Service Tax, dated the 3rd March, 2009, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), ....
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.... 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 refund = service tax paid on specified services used for SEZ Authorised Operations shared with DTA Unit for the period X Export turnover of SEZ Unit for the period/Total turnover for the period 13. In the present appeals, the Assessee is approved for authorized operations and having status of unit for development, operation and maintenance of the sector specific SEZ for power sector for supply of power and received various input services used for the authorized operation. They filed refund claims as per Para 2(c) of the notification, in respect of Service Tax paid on specified services for authorized operation in SEZ. Show Cause Notices were issued periodically proposing to reject....
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....tification, 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, construction of transmission line outside SEZ for supply of power to DTA and supply of power in DTA cannot be considered as authorized operation within SEZ. There is no dispute regarding supply of surplus power outside SEZ. The only thing is that such services cannot be termed as 'wholly consumed' within SEZ, since the services have been shared between SEZ and DTA operations. Thus, Commissioner (A) has failed to appreciate the fact that the services received and consumed in respect of activities carried out by the claimant outside SEZ cannot be considered as received and consumed in authorized operation within SEZ." 15. We find that there is no dispute that the Assessee fulfilled the condition of Para 2(b) ....
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....or 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 used for generation of power. On a query from the Bench, the learned Senior Advocate submits that they have not availed the CENVAT Credit on goods used for transmission power and cables used for transmission outside SEZ. It is clear that the Assessee had not availed CENVAT Credit on the raw materials or consumables used in the transmission of power in DTA. The learned Senior Advocate stated that the Ministry of Commerce vide Letter No.6/3/2006-SEZ dt.27.02.2009 which has been superseded by letter dt.21.03.2012 dispensed with the condition of earning net foreign exchange in the Assessee case (generation of power within SEZ). This shows that the Assessee is not required to earn foreign exchange as it would....
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....ction 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 supply of power to SEZs, EOUs in Gujarat State and other SEZs and EOUs and others at Village Tunda and Siracha, Taluka Mundra, District Kutch, State of Gujarat. So, the Assessee would be entitled to supply powers to SEZs, EOUs in Gujarat State and other SEZs and EOUs and others. The learned Authorised Representative submits that the word 'others' in the said notification would apply to 'at Village Tunda and Siracha Taluka Mundra'. We are unable to accept the contention of the learned Authorised Representative. The expressions 'supply of power to Special Economic Zones (SEZs) and Export Oriented Units (EOUs) in Gujarat and other SEZs, EOUs and others' in Notification dt.10.05.2007 would be read together and ....
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....ngs 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 identical issue dismissed the appeal filed by the Revenue. In that case, the question raised before the Hon'ble High Court as to whether the CESTAT is correct in holding that in Service Tax matters, the Commissioner (Appeals) has power to remand the matter back to the Adjudicating authority for de-novo adjudication. The Hon'ble High Court held as under: "15. We, however, cannot accept the argument of Ms. Mandavia that by virtue of sub-section (5) of Section 85, the same limitation on the Commissioner (Appeals) to remand a proceeding contained in Section 35A(3) of the Central Excise Act, 1944 must apply in the appeals under Section 85 of the Finance Act, 1994 also. This is so because, sub-section (5) of ....