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TMI Blog2023 (11) TMI 1077X X X X Extracts X X X X X X X X Extracts X X X X ..... SD]. The corporate office receives services and distributes the CENVAT credit of service tax paid on such services to its two units- the domestic unit and the SEZ unit through ISD invoices as per the Service Tax Rules. 3. It is undisputed that the services provided to the SEZ unit are exempted from service tax by section 26 read with section 51 of the SEZ Act. They were also exempted through Notification No. 12/2013 dated 01.07.2013 issued under the Finance Act, 1994 [Finance Act]. In respect of those services which were received at the corporate office and the credit was distributed to the SEZ unit through ISD invoices, the SEZ unit took CENVAT credit on these ISD invoices and then filed eight applications for refund of the service tax under Notification No. 12/2013- ST dated 1.7.2013. These applications for refund are the subject matter of dispute in these twelve appeals. 4. The Assistant Commissioner rejected four of the refund claims on the ground that the applications were submitted beyond one year from the date on which the service tax was paid to the service provider and hence were time-barred as per the conditions of the notification. Although the notification empowered t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Revenue and setting aside the sanction of refunds itself which are the subject matter of the third set of four appeals. 9. Service Tax Appeals 50213/2021, 50214/2021, 50215/2021 and 50216/2021 have been filed to assail this third impugned order. The details are as follows: Order in Appeal (impugned order) IND-EXCUS-000-APP-036-039-20-21 dated 02.09.2020 Orders in Original No. 1) 10/A.C./Refund/Div-II/2019-20 dated 06.03.2020 ; 2) 12/A.C./Refund/Div-II/2019-20 dated 06.03.2020 ; 3) 09/A.C./Refund/Div-II/2018-19 dated 06.03.2020 ; 4) 11/A.C./Refund/Div-II/2019-20 dated 06.03.2020 Show Cause Notices 1) Dated 20.12.2017 2) Dated 18.05.2018 3) Dated 17.08.2017 4) Dated 11.04.2017 Period of Dispute April 2016 to June 2017 Refund amount Interest on delayed sanction of refund. 10. Thus, the Orders in Original in the second and third sets of appeals are the same although the impugned orders are different- the second impugned order was passed in the appellant's appeal for interest on refunds and the third impugned order was passed allowing the Revenue's appeal and setting aside the appeal itself. Appellant's submissions 11. Shri B.L. Narasimhan, learned counsel for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l twelve appeals, therefore, deserve to be allowed and the refund and interest in each and every refund application needs to be sanctioned. Revenue's submissions 12. Ms. Jaya Kumari, learned authorised representative for the Revenue vehemently supported the impugned orders and submitted that they should be upheld and all twelve appeals may be dismissed. Findings 13. We have considered the arguments on both sides and perused the records. 14. The question which falls for our consideration is whether the appellant is entitled to refund of service tax paid on various input services which it had received from its corporate office through ISD invoices. The claims for refund were filed under the Service Tax exemption notification No. 12/2013-ST issued for services provided to the developers and units located in the SEZs. Four of the claims were rejected since they had been filed after one year from the date on which the service tax was paid to the service provider and hence they did not meet the time limit set in the exemption notification. Although the notification empowered the Assistant Commissioner to condone the delay, he did not condone it. The rejection of these four refund ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le services under section 65 of 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. 19. 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. 20. 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 are such prescriptions 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. There is no dispute in these appeals that the appellant was conducting authorised operations. Thus, the first requirement for exemption under section 26 viz., the authorisation of the operations is met. The second requirement is the manner, terms and conditions prescribed subject to which the exemptions are granted to the dev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a resolution of the Board of Directors of the company and shall be affixed with the common seal of the company; where the entrepreneur is a partnership firm, Bond-cum-Legal Undertaking shall be executed by all the partners or authorized partner(s); where the entrepreneur is a Hindu Undivided Family, the Bond-cum Legal Undertaking shall be executed by the Kartha; and where the entrepreneur is a proprietorship concern, the Bond-cum-Legal Undertaking shall be executed by the proprietor; (b) the value of the Bond-cum-Legal Undertaking shall be equal to the amount of effective duties leviable 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the Domestic Tariff Area, utilization of the same and the stock in hand, in Form E to the Development Commissioner and the Specified Officer and the Development Commissioner shall place the same before the Approval Committee. Rule 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. 22. 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 there any allegation that any of the conditions laid down in rules 22 and 31 were violated. 23. While the SEZ Act itself provided 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Developer or entrepreneur under sub-section (1)." 12. Section 51 of the SEZ Act further provides overriding effect to the provisions of the SEZ Act and it is reproduced below: "51. Act to have overriding effect - The provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any law other than this Act." 13. Section 55 of the SEZ Act gives power to the Central Government to make rules for carrying out the provisions of the Act. In exercise of the aforesaid powers, the Central Government made "The Special Economic Zones Rules, 2006 [SEZ Rules]". 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s consumed wholly within the Special Economic Zone;" 16. It would, therefore, be seen that prior to May 20, 2009 the exemption could be claimed by way of refund of service tax paid on the specified services used in relation to the authorized operations in the SEZ. However, proviso (c) was amended by Notification dated May 20, 2009. The amended proviso (c) stipulates that the exemption claimed by the developer or units of SEZ shall be provided by way of refund of service tax paid on the specified services, except for services 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 provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioner, the word "prescribe" appearing in sub-section (2) of section 26 has to be understood with reference to the definition of the word "prescribed" appearing in section 2(w) of the SEZ Act, 2005. Section 2(w) of the Act reads as follows: "prescribed means prescribed by rules made by the Central Government under this Act." 24. Therefore, the terms and conditions subject to which the exemptions are to be granted under sub-section (1) of section 26 should be prescribed by the Rules made by the Central Government 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 se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issued under section 93 of the Finance Act, 1994 cannot be pressed into service for finding out whether a unit in a SEZ qualifies for exemption or not." (emphasis supplied) 21. Thus, what follows is that the Commissioner was not justified in examining whether the conditions set out in the Notification dated March 3, 2009 were satisfied or not for grant of any exemption from service tax. Section 26(2) of the SEZ Act does provide that the Central Government may prescribe the manner in which, and the terms 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." 25. 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 SE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m, 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 on the authorised operations in a Special Economic Zone; ......... 29. Section 51 of the SEZ Act states that the provisions of SEZ Act override any other provisions of other laws. It reads as follows: 51. (1) The provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any law other than this Act. 30. Thus, insofar as supplies for authorised operations of SEZ developers and units are concerned, section 26 of the SEZ Act overrides the charging sections in all the three Acts. 31. The charging se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r to 1.6.2007. It was pleaded on behalf of the Revenue that abatements were given through various exemption notifications prior to 1.6.2007. The Supreme Court held as follows: 43. We need only state that in view of our finding that the said Finance Act lays down no charge or machinery to levy and assess service tax on indivisible composite works contracts, such argument must fail. This is also for the simple reason that there is no subterfuge in entering into composite works contracts containing elements both of transfer of property in goods as well as labour and services. 44. We have been informed by counsel for the revenue that several exemption notifications have been granted qua service tax "levied" by the 1994 Finance Act. We may only state that whichever judgments which are in appeal before us and have referred to and dealt with such notifications will have to be disregarded. Since the levy itself of service tax has been found to be non-existent, no question of any exemption would arise. With these observations, these appeals are disposed of. 34. In view of the aforesaid legal position, the exemption notifications issued under the Finance Act, 1994 are redundant because ..... X X X X Extracts X X X X X X X X Extracts X X X X
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