TMI Blog2022 (4) TMI 989X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. In these appeals there is no dispute that the operations of the appellant were authorised by the Development Commissioner under the SEZ Act nor is any allegation that any of the conditions laid down in Rules 22 and 31 were violated. While the SEZ Act itself provides for exemption from service tax (as well as Central Excise duty and Customs duty), 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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... den the charge in the other laws. 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 the head office to distribute proportionately, the service rendered at the head office to the field formations. For this purpose, the head office needs to register as an ISD and thereafter it can distribute the service rendered at the head office to the field formations. This enables the field offices which indirectly profit from these services to take CENVAT credit on the strength of the ISD invoices. In this case, the head office is located in Gurugram and it is not an SEZ unit. A portion of the services received in Gurugram are for the authorised operations of the appellant in its SEZ unit in Indore and to that extent, the ISD invoice issued by the head office distributes the serv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ications are ST-40/2012 dated 20.6.2013 and ST-12/2013 dated 1.7.2013. Its applications for refund were partly rejected by the original authority and the rejections were upheld by the Commissioner (Appeals). Aggrieved, 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/201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... head office proportionately to its field units through ISD invoices. The appellant's SEZ unit also received some credit from its head office in Gurugram and sought refund which was rejected on the ground that the refund should have been claimed by the head office. The appellant's submission is that its head office cannot claim refund of credit in ISD register as the CENVAT Credit Rules do not allow any refund, ISD can only distribute credit. Appellant seeks to rely on Tribunal's Final Order No. 51230/2019 dated 29.07.2019 in its own case that rejects the stand of the department. Appeal 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 ₹ 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 commi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stion were in the approved list dated 5.7.2013. It has further been submitted that refund of services not entirely consumed in the SEZ unit 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 service, cost accountant service, courier service internet telecommunication service, IT services, travel agent service etc. ISD itself is not a service but the ISD invoice covers various services and hence there is no need to get specific approval for ISD distribution. b) Legal service, cleaning service and transport of goods through pipeline service ₹ 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 ro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is the very raison de'etre of the very SEZ UNIT SCHEME. Also, the impugned order goes beyond the reason and findings of the adjudicating authority in Paragraph 13 wherein the adjudicating authority observed: -that the service was originally approved on 24.7.2009 but in the approval granted on 5.7.2013 all previous approvals issued under previous notifications stand cancelled and fresh approvals need to be taken - further that since the services were utilised before 5.7.2013 the claim was not admissible. OIA is thus not sustainable for going beyond the scope of the findings in the 0I0. b) Business Auxiliary Service - refund of ₹ 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r refund. Consequently, it does not matter whether the conditions of the exemption notification were fulfilled or not because SEZ Act itself has overriding provisions which prevail over any other law insofar as the service rendered to the SEZ unit is concerned. He relies on the following case laws; (i) Makers Mart vs. Commissioner of Central Excise ST.,- Jaipur II [2016 (44) STR 126 (Tri.-Del.)] (ii) Wardha Power Co. Ltd. vs. Commissioner of Central-Excise, Nagpur [2013 (30) STR 520 (Tri.-Mumbai)] (iii) Lupin Ltd. vs. Commissioner of Customs, CGST C.EX.,- Indore [2020 (41) GSTL 368(Tri.-Del)] (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 service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of any law other than this Act. Section 55 of the Act gives a Central Government the power to make the rules under the SEZ Act. The Special Economic Zones Rules, 2006 [ SEZ Rules ] have been famed under this Section. Rule 31 of the SEZ Rules provides the exemption from payment of service tax on taxable services under the Finance Act, 1994 rendered to a developer or a unit by any service provider shall be available for the authorised operations in special economic Zones. 13. Thus, the SEZ Act itself provides for exemption from payment of service tax in respect of 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 r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aggrieved by an order of the Approval Committee, made under sub-section (3), may prefer an appeal to the Board within such time as may be prescribed. (5) No appeal shall be admitted if it is preferred after the expiry of the time prescribed therefore: Provided that an appeal may be admitted after the expiry of the period prescribed therefore if the appellant satisfies the Board that he had sufficient cause for not preferring the appeal within the prescribed time. (6) Every appeal made 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 it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... granted to the developer or the unit. The term 'prescribed' has been defined in section 2(w) as follows: Section 2 (w) prescribed means prescribed by rules made by the Central Government under this Act; 18. Thus, the manner, terms and conditions can be prescribed under the Rules framed under SEZ Act, i.e., under the SEZ Rules. 19. To sum up, if a developer has to enjoy the exemptions available under 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on import or procurement from the Domestic Tariff Area of the projected requirement of capital goods, raw materials, spares, consumables, intermediates, components, parts, packing materials for three months as applicable but which will not be levied on account of admission of such goods into the Unit or the amount of effective duties leviable on import or 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 Unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perations of the appellant were authorised by the Development Commissioner under the SEZ Act nor is any allegation that any of the conditions laid down in Rules 22 and 31 were violated. 22. While the SEZ Act itself provides for exemption from service tax (as well as Central Excise duty and Customs duty), 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng out the provisions of the Act. In exercise of the aforesaid powers, the Central Government made The Special Economic Zones Rules, 20068 . Rule 31 deals with the exemption from payment of service tax and is reproduced below: 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 exercis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consumed wholly within the SEZ. 17. The Notification dated March 3, 2009 has been issued in exercise of the powers conferred by section 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 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... overnment under the SEZ Rules, 2006 issued in exercise of the power conferred by section 55 of 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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and conditions subject to which, the exemptions shall be granted to the 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 autho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll. 28. Thus, Central 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 the duti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se 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 (hereinafter referred to as the service tax) at the rate of fourteen percent. on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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; ....... (e) exemption from service tax under Chapter-V of the Finance Act, 1994 on taxable services provided to a Developer or Unit to carry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndant 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 Court was whether works contract service could have been taxed under various other heads prior to this date. The Supreme Court held that there was no ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave 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 the head office to distribute proportionately, the service rendered at the head office to the field formations. For this purpose, the head office needs to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion in the present case. 46. Refund has been denied in one case on the ground that the address of the SEZ unit was not on the invoice. However, learned counsel for the appellant has demonstrated to us with the corresponding Bill of Lading and other documents that the service was, indeed rendered for the SEZ unit only. Therefore, refund cannot be denied on this count. 47. In one case, the claim for refund was alleged to have been filed beyond one year from the date of the invoice and it was not filed in the same quarter as required under the exemption notification. So far as the requirement of filing in the quarter under the exemption notification is concerned, this condition is irrelevant as the exemption notification itself is not necessary and the service tax is exempted by Section 26 of the SEZ Act itself. As far as the period of one year for filing refund of service tax is concerned, learned counsel submits that although the invoice is dated 21.8.2014, it had paid the service tax only on 26.10.2015 before which it could not have claimed refund. The claim was made in January 2016. We, therefore, find that there was no delay in filing the refund claim. 48. Thus, as the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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