In the major relief to Reliance Industries, the Ahmedabad Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that delay in filing the refund claim is merely a procedural lapse and substantial benefit of the exemption notification cannot be denied.
The respondent, Reliance Industries being an SEZ Unit had filed refund claims under Notification No.12/2013-ST dated 01.07.2013 claiming refund of service tax paid to the service providers of taxable services received by them for carrying out authorized operations in their SEZ unit, service tax paid under reverse charge mechanism for the taxable services received for carrying out authorized operations in SEZ and also refund of service tax distributed to SEZ Unit under ISD Invoices under Rule 7 of Cenvat Credit Rules, 2004. The adjudicating authority vide Order-In- Original sanctioned refund claims for the entire amount claimed by the respondent.
As per the condition Para 3(III)(e) of notification, the claim for refund shall be filed within one year from the end of the month in which actual payment of service tax was made by such developer or SEZ Unit to the registered service provider. From this condition, it is mandatory that the payment of service tax has to be made by the SEZ Unit. In the present case, only the services covered under the Invoices which are exclusively used by the SEZ Unit and refund of which claimed under Table-I payment of service tax is directly made by the SEZ to the service provider. However, in case all the services which are attributed to the SEZ Unit as well as DTA Unit of the respondent company the payment was made by the Head Office of the respondent SEZ Unit and the credit related to service attributed to the SEZ unit was distributed through ISD Invoice to the respondent’s SEZ Unit. In this case payment was not made by the respondent’s SEZ Unit therefore, the condition of clause (e) of Para (III) of the notification shall not apply for the reason that the said clause is applicable only in a case where the payment of service tax is directly made by the SEZ to the service provider when the services are exclusively used in the SEZ unit.
Legislators intention is very clear that one year period is applicable only in case of payment directly made by SEZ Unit and not in a case where the Head Office of the SEZ unit is making the payment.
The coram of Judicial Member, Ramesh Nair and Technical Member, Raju held that there is a delay in filing the refund claim which as per the department is in violation of Clause (e) of Para 3 (III). This being a procedural lapse cannot be the ground for denying the substantial benefit of the exemption notification which is granted by way of refund of service tax in the SEZ.
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