Custom, Excise & Service Tax Tribunal
Cummins Turbo Technology(A Division Of ... vs Indore on 30 October, 2023
1 ST/50349 OF 2018 & 11 others
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
NEW DELHI
PRINCIPAL BENCH - COURT NO. I
Service Tax Appeal No. 50349 of 2018
(Arising out of Order-in-Appeal No. IND-EXCUS-000-APP-242-245-17-18
dated 11.10.2017 passed by the Commissioner of Customs (Appeals),
Customs, CGST & Central Excise, Indore)
M/s. Cummins Turbo Technology
(a division of Cummins Technologies
India Ltd.) Appellant
Plot No. M 5, Sector 3, SEZ Phase II,
Pithampur 454775 (M.P.)
VERSUS
Commissioner of Customs, Central
Excise & Central Tax, Indore Respondent
Manik Bagh Palace, Post Box No. 10
Indore 452001 (M.P.)
with
Service Tax Appeal No. 50350 of 2018
(Arising out of Order-in-Appeal No. IND-EXCUS-000-APP-242-245-17-18
dated 11.10.2017 passed by the Commissioner of Customs (Appeals),
Customs, CGST & Central Excise, Indore)
M/s. Cummins Turbo Technology
(a division of Cummins Technologies
India Ltd.) Appellant
Plot No. M 5, Sector 3, SEZ Phase II,
Pithampur 454775 (M.P.)
VERSUS
Commissioner of Customs, Central
Excise & Central Tax, Indore Respondent
Manik Bagh Palace, Post Box No. 10
Indore 452001 (M.P.)
and
2 ST/50349 OF 2018 & 11 others
Service Tax Appeal No. 50351 of 2018
(Arising out of Order-in-Appeal No. IND-EXCUS-000-APP-242-245-17-18
dated 11.10.2017 passed by the Commissioner of Customs (Appeals),
Customs, CGST & Central Excise, Indore)
M/s. Cummins Turbo Technology
(a division of Cummins Technologies
India Ltd.) Appellant
Plot No. M 5, Sector 3, SEZ Phase II,
Pithampur 454775 (M.P.)
VERSUS
Commissioner of Customs, Central
Excise & Central Tax, Indore Respondent
Manik Bagh Palace, Post Box No. 10
Indore 452001 (M.P.)
and
Service Tax Appeal No. 50352 of 2018
(Arising out of Order-in-Appeal No. IND-EXCUS-000-APP-242-245-17-18
dated 11.10.2017 passed by the Commissioner of Customs (Appeals),
Customs, CGST & Central Excise, Indore)
M/s. Cummins Turbo Technology
(a division of Cummins Technologies
India Ltd.) Appellant
Plot No. M 5, Sector 3, SEZ Phase II,
Pithampur 454775 (M.P.)
VERSUS
Commissioner of Customs, Central
Excise & Central Tax, Indore Respondent
Manik Bagh Palace, Post Box No. 10
Indore 452001 (M.P.)
and
Service Tax Appeal No. 50368 of 2021
(Arising out of Order-in-Appeal No. IND-EXCUS-000-APP-074-077-2020-21
dated 19.11.2020 passed by the Commissioner of Customs (Appeals),
Customs, CGST & Central Excise, Indore)
M/s. Cummins Turbo Technology
(a division of Cummins Technologies
India Ltd.) Appellant
Plot No. M 5, Sector 3, SEZ Phase II,
Pithampur 454775 (M.P.)
3 ST/50349 OF 2018 & 11 others
VERSUS
Commissioner of Customs, Central
Excise & Central Tax, Indore Respondent
Manik Bagh Palace, Post Box No. 10
Indore 452001 (M.P.)
and
Service Tax Appeal No. 50369 of 2021
(Arising out of Order-in-Appeal No. IND-EXCUS-000-APP-074-077-2020-21
dated 19.11.2020 passed by the Commissioner of Customs (Appeals),
Customs, CGST & Central Excise, Indore)
M/s. Cummins Turbo Technology
(a division of Cummins Technologies
India Ltd.) Appellant
Plot No. M 5, Sector 3, SEZ Phase II,
Pithampur 454775 (M.P.)
VERSUS
Commissioner of Customs, Central
Excise & Central Tax, Indore Respondent
Manik Bagh Palace, Post Box No. 10
Indore 452001 (M.P.)
and
Service Tax Appeal No. 50370 of 2021
(Arising out of Order-in-Appeal No. IND-EXCUS-000-APP-074-077-2020-21
dated 19.11.2020 passed by the Commissioner of Customs (Appeals),
Customs, CGST & Central Excise, Indore)
M/s. Cummins Turbo Technology
(a division of Cummins Technologies
India Ltd.) Appellant
Plot No. M 5, Sector 3, SEZ Phase II,
Pithampur 454775 (M.P.)
VERSUS
Commissioner of Customs, Central
Excise & Central Tax, Indore Respondent
Manik Bagh Palace, Post Box No. 10
Indore 452001 (M.P.)
and
Service Tax Appeal No. 50371 of 2021
(Arising out of Order-in-Appeal No. IND-EXCUS-000-APP-074-077-2020-21
dated 19.11.2020 passed by the Commissioner of Customs (Appeals),
Customs, CGST & Central Excise, Indore)
4 ST/50349 OF 2018 & 11 others
M/s. Cummins Turbo Technology
(a division of Cummins Technologies
India Ltd.) Appellant
Plot No. M 5, Sector 3, SEZ Phase II,
Pithampur 454775 (M.P.)
VERSUS
Commissioner of Customs, Central
Excise & Central Tax, Indore Respondent
Manik Bagh Palace, Post Box No. 10
Indore 452001 (M.P.)
and
Service Tax Appeal No. 50213 of 2021
(Arising out of Order-in-Appeal No. IND-EXCUS-000-APP-036-039-20-21
dated 02.09.2020 passed by the Commissioner of Customs (Appeals),
Customs, CGST & Central Excise, Indore)
M/s. Cummins Turbo Technology
(a division of Cummins Technologies
India Ltd.) Appellant
Plot No. M 5, Sector 3, SEZ Phase II,
Pithampur 454775 (M.P.)
VERSUS
Commissioner of Customs, Central
Excise & Central Tax, Indore Respondent
Manik Bagh Palace, Post Box No. 10
Indore 452001 (M.P.)
and
Service Tax Appeal No. 50214 of 2021
(Arising out of Order-in-Appeal No. IND-EXCUS-000-APP-036-039-20-21
dated 02.09.2020 passed by the Commissioner of Customs (Appeals),
Customs, CGST & Central Excise, Indore)
M/s. Cummins Turbo Technology
(a division of Cummins Technologies
India Ltd.) Appellant
Plot No. M 5, Sector 3, SEZ Phase II,
Pithampur 454775 (M.P.)
VERSUS
Commissioner of Customs, Central
Excise & Central Tax, Indore Respondent
Manik Bagh Palace, Post Box No. 10
Indore 452001 (M.P.)
5 ST/50349 OF 2018 & 11 others
and
Service Tax Appeal No. 50215 of 2021
(Arising out of Order-in-Appeal No. IND-EXCUS-000-APP-036-039-20-21
dated 02.09.2020 passed by the Commissioner of Customs (Appeals),
Customs, CGST & Central Excise, Indore)
M/s. Cummins Turbo Technology
(a division of Cummins Technologies
India Ltd.) Appellant
Plot No. M 5, Sector 3, SEZ Phase II,
Pithampur 454775 (M.P.)
VERSUS
Commissioner of Customs, Central
Excise & Central Tax, Indore Respondent
Manik Bagh Palace, Post Box No. 10
Indore 452001 (M.P.)
and
Service Tax Appeal No. 50216 of 2021
(Arising out of Order-in-Appeal No. IND-EXCUS-000-APP-036-039-20-21
dated 02.09.2020 passed by the Commissioner of Customs (Appeals),
Customs, CGST & Central Excise, Indore)
M/s. Cummins Turbo Technology
(a division of Cummins Technologies
India Ltd.) Appellant
Plot No. M 5, Sector 3, SEZ Phase II,
Pithampur 454775 (M.P.)
VERSUS
Commissioner of Customs, Central
Excise & Central Tax, Indore Respondent
Manik Bagh Palace, Post Box No. 10
Indore 452001 (M.P.)
APPEARANCE:
Shri B L Narasimhan, Shri Dhruv Tiwari and Shri S.C.
Vaidyanathan, Advocates for the Appellant
Ms. Jaya Kumari, Shri S K Meena, Authorized Representatives of
the Department
CORAM :
HON'BLE MR. JUSTICE DILIP GUPTA, PRESIDENT
HON'BLE MR. P. V. SUBBA RAO, MEMBER (TECHNICAL)
6 ST/50349 OF 2018 & 11 others
FINAL ORDER NO. 51450-51461/2023
Date of Hearing : 09.10.2023
Date of Decision : 30.10.2023
P.V. SUBBA RAO
All these twelve appeals pertain to the same appellant
and respondent and involve the same issue and, therefore, are
being decided together by a common order.
2. Cummins Turbo Technology (A Division Of Cummins
Technologies India Pvt. Ltd.) 1 is a unit located in Special
Economic Zone 2 as per the Special Economic Zones Act 3 ,
2005. The same company also has a unit which supplies to
domestic area and a corporate office which is registered as an
Input Service Distributor 4 . 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
1
Appellant
2
SEZ
3
SEZ Act
4
ISD
7 ST/50349 OF 2018 & 11 others
Finance Act, 1994 5 . 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 the Assistant Commissioner to condone any delay
in filing the applications for refund, the Assistant Commissioner
had not condoned the delays and rejected the refunds. On
appeal, the Commissioner (Appeals), through Order in Appeal
dated 11.10.20176 upheld the four orders in original passed by
the Assistant Commissioner.
5. Service Tax Appeals 50349/2018, 50350/2018,
50351/2018 and 50352/ 2018, have been filed to assail
this first impugned order. The details are as follows:
Order in Appeal IND-EXCUS-000-APP-242-245-17-18 dated
(impugned order) 11.10.2017
Orders in Original 1) 01/DC/Refund/ST/Pith/2016-17 dated
5
Finance Act
6
First impugned order
8 ST/50349 OF 2018 & 11 others
No. 06.04.2016
2) 27/DC/Refund/ST/16-17 dated 25.10.2016
3) 31/DC/Refund/ST/16-17 dated 18.11.2016
4) 30/DC/Refund/ST/16-17 dated 18.11.2016
Show Cause 1) Dated 26.02.2016
Notices 2) Dated 14.10.2016
3) Dated 25.10.2016
4) Dated 25.10.2016
Period of Dispute January 2015 to March 2016
Refund amount Rs. 9,57,44,311/-
6. In another four refund applications, the Assistant
Commissioner had sanctioned the refunds but did not pay
interest on the refunds under section 11BB. The appellant
appealed to the Commissioner (Appeals) assailing denial of
interest by the Assistant Commissioner. Revenue also filed
appeals before the Commissioner (Appeals) assailing the
sanction of the refund itself. The Commissioner (Appeals)
passed Order in Appeal dated 19.11.20207 rejecting the four
appeals filed by appellant seeking interest on the refunds
which are the subject matter of the second set of four appeals.
7. Service Tax Appeals 50368/2021, 50369/2021,
50370/2021 and 50371/2021 have been filed to assail this
second impugned order. The details are as follows:
Order in Appeal IND-EXCUS-000-APP-074-077-2020-21 dated
(impugned order) 19.11.2020
Orders in Original 1) 09/A.C./Refund/ST/Div-II/2018-19 dated
No. 06.03.2020 ;
2) 12/A.C./Refund/ST/Div-II/2019-20 dated
06.03.2020 ;
3) 11/A.C./Refund/ST/Div-II/2019-20 dated
06.03.2020 ;
4) 10/A.C./Refund/ST/Div-II/2019-20 dated
06.03.2020
7
Second impugned order
9 ST/50349 OF 2018 & 11 others
Show Cause 1) Dated 11.04.2017
Notices 2) Dated 17.08.2017
3) Dated 20.12.2017
4) Dated 18.05.2018
Period of Dispute April 2016 to June 2017
Refund amount Rs. 9,88,55,966/-
8. The Commissioner (Appeals) passed Order in Appeal
dated 2.9.20208allowing the four appeals filed by the 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 IND-EXCUS-000-APP-036-039-20-21 dated
(impugned order) 02.09.2020
Orders in Original 1) 10/A.C./Refund/Div-II/2019-20 dated
No. 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 1) Dated 20.12.2017
Notices 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
8
Third impugned order
10 ST/50349 OF 2018 & 11 others
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 appellant
made the following submissions:
11.1 Any services supplied to either a developer or a unit in
an SEZ is exempted from service tax by section 26 of the SEZ
Act and by virtue of section 51, this Act prevails over any other
law for the time being in force. Therefore, the appellant was
not required to pay any service tax at all. Since service tax
was paid on the services received through its corporate office
under the cover of ISD invoices, the appellant was entitled to
the refund and it cannot be rejected on technicalities.
11.2 The exemption notification No 12/2013-ST providing for
refund of service tax paid is an extra provision and even in its
absence, the appellant was not liable to pay service tax and
since it has been paid, it is entitled to refund. Therefore,
refund cannot be denied on the ground that some condition of
the exemption notification was not fulfilled.
11.3 Although the notification set a limit of one year to file an
application for refund, it also empowered the Assistant
Commissioner to condone any delay without any limit. In the
11 ST/50349 OF 2018 & 11 others
facts of the case, the Assistant Commissioner should have
condoned, the delay, if any, because the appellant could only
file a refund claim after receiving the ISD invoice and it did so
soon after receiving it.
11.4 The relevant date for computing the time limit of one
year is the date on which the SEZ unit paid the service tax to
the service provider. In this case, the SEZ unit had never paid
any service tax but its corporate office did so. Therefore, the
time limit cannot apply to ISD invoices at all. The notification
itself has two tables- one for normal invoices and another for
ISD invoices. The table for ISD invoices also requires the
proportion of the CENVAT credit distributed to the SEZ unit by
the ISD to be indicated. This will never be available until the
ISD invoices are issued. It has been held by this Tribunal in
Lupin Limited versus Commissioner 9 and CCE and ST
Rajkot versus Reliance Industries Ltd.10 that the time limit
under the notification does not apply to ISD invoices for this
reason. Even on this ground, the appellant is entitled to the
refund.
11.5 Since the refunds were sanctioned beyond three months
from the date of application, the appellant is entitled to
interest on refunds which may be sanctioned to it.
9
2023-VIL-283-CESTAT DEL-CE
10
2021(12) TMI 848-CESTAT, Ahmedabad
12 ST/50349 OF 2018 & 11 others
11.6. All 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
13 ST/50349 OF 2018 & 11 others
rejection of these four refund claims was upheld by the first
impugned order which is assailed in Service Tax Appeals
50349/2018, 50350/2018, 50351/2018 and 50352/
2018.
15. Four refunds were sanctioned but no interest was paid
by the Assistant Commissioner and the appeals against non-
payment of interest were rejected by the Commissioner
(Appeals) through the second impugned order which is
assailed in Service Tax Appeals 50368/2021, 50369/
2021, 50370/2021 and 50371/2021.
16. Assailing the sanction of the aforesaid four refund
claims, Revenue filed appeals before the Commissioner
(Appeals) who passed the third impugned order setting aside
the sanction of refunds on the ground that the applications
were filed beyond one year. This third impugned order is
assailed in Service Tax Appeals 50213/2021, 50214/
2021, 50215/2021 and 50216/2021
17. The two questions to be answered by us are:
a) Was the appellant entitled to refunds as claimed?
b) Was the appellant entitled to interest on the refunds?
14 ST/50349 OF 2018 & 11 others
18. To examine these, it is necessary to examine the
relevant laws. The Special Economic Zones are created under
the SEZ Act, which effectively treats the SEZ as if it is an area
outside India for the purpose of taxes. Section 26 of the SEZ
Act provides for exemptions drawbacks and concessions to
every developer and entrepreneur. Subject to sub-section (2)
of section 26 of this Act, clause (e) of sub-section (1) provides
exemption from service tax leviable under Chapter V of the
Finance Act, 1994 on the taxable services provided to a
developer or unit to carry on the authorised operations in a
Special Economic Zone. Sub-section (2) of this section states
the Central Government may prescribe the manner and the
terms and the conditions subject to which the exemptions,
concessions drawback or other benefits shall be granted to the
developer or entrepreneur under sub-section (1). Section 51 of
SEZ Act states that the provisions of this Act shall have effect
not withstanding in any inconsistent there with contained in
any other law for the time being in force or in any instrument
having affect by virtue 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, 200611 have been famed under this section. Rule 31 of
the SEZ Rules provides the exemption from payment of service
tax on taxable services under section 65 of the Finance Act,
1994 rendered to a developer or a unit by any service provider
11
SEZ Rules
15 ST/50349 OF 2018 & 11 others
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 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;
16 ST/50349 OF 2018 & 11 others
21. Thus, the manner, terms and conditions can be
prescribed under the Rules framed under SEZ Act, i.e., under
the SEZ Rules. 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 Developer shall be subject to the following
conditions, namely:--
(i) the Unit shall execute a Bond-cum-Legal
Undertaking in Form H, with regard to its obligations
regarding proper utilization and accountal of goods,
including capital goods, spares, raw materials,
components and consumables including fuels,
imported or procured duty free and regarding
achievement of positive net foreign exchange earning;
(ii) the Developer and Co-developer shall execute the
Bond-cum Legal Undertaking in Form D with regard to
their obligations regarding proper utilization and
accountal of goods, including goods procured or
imported by a contractor duly authorized by the
Developer or Co-developer, as the case may be;
(iii) the Bond-cum-Legal Undertaking shall be jointly
accepted by Development Commissioner and by the
Specified Officer: Provided that the Bond-cum-Legal
Undertaking executed by the Unit or the Developer
including Co-developer shall cover one or more of the
following activities, namely:--
(a) the movement of goods between port of
import or export and the Special Economic
Zone;
(b) the authorized operations, as applicable to
Unit or Developer;
(c) temporary removal of goods or goods
manufactured in Unit for the purposes of
repairs or testing or calibration or display or
processing or sub-contracting of production
process or production or other temporary
removals into Domestic Tariff Area without
payment of duty;
(d) re-import of exported goods.
(iv) The procedure for execution of Bond-cum-Legal
Undertaking shall be as under:--
(a) the Bond-cum-Legal Undertaking, where
the entrepreneur or Developer is a company
shall be executed by the Managing Director of
17 ST/50349 OF 2018 & 11 others
the company or the Director(s) or any person
who has or have been duly authorized for this
purpose by 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-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 Undertaking
shall be maintained by the office of
Development Commissioner and certified
copies shall be given to the Specified Officer
and Unit or Developer;
(f) the value of the Bond-cum-Legal
Undertaking in respect of gems and jewellery
units shall be calculated on rates as notified by
the Central Government, from time to time;
(g) duly completed Bond-cum-Legal
Undertaking executed by the Unit or
Developer, in accordance with the rules above,
as the case may be, shall be deemed to have
been accepted, if no communication is received
18 ST/50349 OF 2018 & 11 others
within seven working days from the date of its
submission.
(2) Every Unit and Developer shall maintain proper accounts,
financial yearwise, and such accounts which should clearly
indicate in value terms the goods imported or procured from
Domestic Tariff Area, consumption or utilization of goods,
production of goods, including by-products, waste or scrap or
remnants, disposal of goods manufactured or produced, by
way of exports, sales or supplies in the domestic tariff area
or transfer to Special Economic Zone or Export Oriented Unit
or Electronic Hardware Technology Park or Software
Technology Park Units or Bio-technology Park Unit, as the
case may be, and balance in stock: Provided that unit and
developers shall maintain such records for a period of seven
years from the end of relevant financial year: Provided
further that the unit engaged in both trading and
manufacturing activities shall maintain separate records for
trading and manufacturing activities.
(3) The Unit shall submit Annual Performance Reports in the
Form I, to the Development Commissioner and the
Development Commissioner shall place the same before the
Approval Committee for consideration.
(4) The Developer shall submit Quarterly Report on import
and procurement of goods from 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
19 ST/50349 OF 2018 & 11 others
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 notification in dispute in this case is
service tax exemption notification ST-40/2012 dated
20.6.2013.
24. 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 this bench in case of DLF Assets, the relevant
extract of which is reproduced below :
"10. According to the appellant, as the
aforesaid services were utilized for authorized
operations by the recipient SEZ units, there was
no necessity to pay any service tax. The
Department, however, alleged that though the
exemption provided under the SEZ Act is
contained in the Notification dated March 3,
2009, but the appellant did not follow the
conditions prescribed therein and, therefore,
was liable to pay service tax on renting of
immovable property services to SEZ units. The
Department also alleged that since the appellant
had classified signage as sale of space or time
for advertisement, it was not entitled to claim
exemption.
11. In order to appreciate the contentions
advanced by learned Counsel for the appellant
and the learned Authorized Representative of
20 ST/50349 OF 2018 & 11 others
the Department, it will be appropriate to refer to
the relevant provisions. Section 26 of the SEZ
Act deals with exemptions, drawbacks and
concessions to every Developer and
entrepreneur. The relevant provisions are
reproduced below:
―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:--
(a) **********
(b) **********
(c) **********
(d) **********
(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 authorized operations in a
Special Economic Zone;
(f) **********
(g) **********
(2) The Central Government may prescribe
the manner in which, and the terms and
conditions subject to which, the exemptions,
concessions, drawback or other benefits shall be
granted to the 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
21 ST/50349 OF 2018 & 11 others
Rules, 2006 12 ". 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 exercise of the powers
conferred by sub-section (1) of section 93 of the
Finance Act, 1994 (32 of 1994), and in
supersession of the Notification of the
Government of India, Ministry of Finance (
Department of Revenue), No. 4/2004-
ServiceTax, dated the 31st March, 2004,
published in the Gazette of India, Extraordinary,
Part II, Section 3, Sub-section ( i ) dated the
31st March, 2004, vide, G.S.R.248(E), dated
the 31st March, 2004, except as respects things
done or omitted to be done before such
supersession, the Central Government, on being
satisfied that it is necessary in the public
interest so to do, hereby exempts the taxable
services specified in clause (105) of
section 65 of the said Finance Act, which
are provided in relation to the authorised
12
. SEZ Rules
22 ST/50349 OF 2018 & 11 others
operations in a Special Economic Zone, and
received by a developer or units of a
Special Economic Zone, whether or not the
said taxable services are provided inside
the Special Economic Zone, from the whole
of the service tax leviable thereon under
section 66 of the said Finance Act:
Provided that-
(a) **********
(b) **********
(c) the exemption claimed by the developer
or units of Special Economic Zone shall be
provided by way of refund of service tax
paid on the specified services used in
relation to the authorised operations in the
Special Economic Zone;
(d) **********
(e) **********
(f) **********
(g) **********
2. **********
(emphasis supplied)
15. Proviso (c) to the aforesaid Notification
dated March 3, 2009 was amended by
Notification dated May 20, 2009. The amended
proviso (c) is reproduced below:
"(c) the exemption claimed by the developer or
units of Special Economic Zone shall be
provided by way of refund of service tax paid on
the specified services used in relation to the
authorised operations in the Special Economic
Zone except for services 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
23 ST/50349 OF 2018 & 11 others
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 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 being in force, which would include the
Finance Act. It needs to be noted that the
Notification dated March 3, 2009 has been
issued in exercise of the powers conferred by
section 93 of the Finance Act. Thus, when the
services rendered by the appellant are fully
exempted from service tax in terms of the
provisions of the SEZ Act, the condition of
exemption by way of refund imposed under the
Notification issued under the Finance Act would
24 ST/50349 OF 2018 & 11 others
be inconsistent with the provisions of the SEZ
Act. It also needs to be noted that the SEZ Act
was enacted in 2005, much after the enactment
of the Finance Act in 1994.
19. This issue was examined by the Telangana
and Andhra Pradesh High Court in GMR
Aerospace Engineering Limited and
another Vs. Union of India and Others 13 .
The second petitioner, a Developer of GMR
Hyderabad Aviation SEZ, entered into a sub-
lease agreement with the first petitioner for
rendering certain services. It, however, claimed
examination on the ground that under section
26(1)(e) of the SEZ Act, every Developer was
entitled to exemption from service tax under
Chapter-V on the Finance Act on taxable
services provided to a Developer or unit to carry
on the authorized operations in a SEZ and the
same was not dependent upon the conditions
stipulated in the Notification issued under
section 93 of the Finance Act.
20. It is in this context that the Andhra
Pradesh High Court observed as follows:
"22. It may be noted that sub-section (1) of
section-26 begins with the words "subject to the
provisions of sub-section (2)". Sub-section (2)
authorizes the Central Government to prescribe
the manner in which and the terms and
conditions subject to which exemptions shall be
granted to the developer or entrepreneur under
sub-section (1).
23. As rightly pointed out by Sri S.
Niranjan Reddy, learned senior counsel
appearing for 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."
13
2019(8)TMI 748
25 ST/50349 OF 2018 & 11 others
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 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
something else other than the provisions of sub-
section (2). Therefore, the firth respondent
cannot read section 26(1) to mean that the
exemptions listed therein are (1) subject to the
provisions of sub-section (2) of section 26, and
(2) also subject to the terms and conditions
prescribed in the Customs Act, 1962, the
Customs Tariff Act, 1975, the Central Excise
Act, 1944, the Central Tariff Act, 1985 and the
Finance Act, 1994. This is especially so, since
the authority of the Central Government to
prescribe the terms and conditions subject to
which exemptions may be granted under section
26(1), flows only out of sub-section (2) of
section 26. The word "prescribe" is verb.
Generally no enactment defines the word
"prescribe" but the SEZ Act 2005 defines the
word "prescribe" under section 2(w) to mean
26 ST/50349 OF 2018 & 11 others
the rules framed by the Central Government
under the SEZ Act, 2005. The space is also not
left unoccupied, as the Central Government has
issued a set of rules known as "the Special
Economic Zones Rules, 2006", wherein the
Central Government has prescribed the terms
and conditions for grant of exemptions under
rule 22. Therefore, there is no question of
comparing the terms and conditions prescribed
in rule 22 with the terms and conditions
prescribed in the Notifications issued under any
one of the five enactments listed in section
26(1) to find out whether there was any
inconsistency.
34. The benefit of exemptions granted under
the Notifications issued under section 93 of the
Finance Act, 1994, are available to any one and
not necessarily confined to a unit in a special
economic zone. Section 93 of the Finance Act,
in that sense is a general power of exemption
available in respect of all taxable services. But,
section 26(1) is a special power of exemption
under a special enactment dealing with a unit in
a special economic zone. Therefore, the
Notifications 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."
27 ST/50349 OF 2018 & 11 others
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 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.
26. 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.
27. This authority of law to levy and collect taxes is in the
form of charging sections of the Acts- such as section 3 of the
Central Excise Act, 1944, section 12 of the Customs Act, 1962
and sections 66, 66A and section 66B of Chapter V of the
Finance Act, 1994 (for collection of Service Tax). While section
66 provides for levy of service tax on forward charge basis by
the service provider, section 66A provides for charge of service
on reverse charge basis by the service recipient in case of
certain services. Section 66B provides for levy of service tax
on all services other than those in the negative list after 2012.
28 ST/50349 OF 2018 & 11 others
28. The levy and collection of these taxes and duties are
further modified by some machinery provisions of these Acts,
including those which enable the Government to issue
exemption notifications. The contradiction is between these
three charging sections under which duties or service tax are
levied and section 26 of the SEZ Act as per which they are
exempted. Section 51 of the SEZ Act overrides the provisions
of the other Acts and therefore, service tax is always
exempted for the services provided to developers and units in
SEZ regardless of any provisions of the Finance Act, 1994.
Section 26 of the SEZ Act reads as follows:
26. (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: -
(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 29 ST/50349 OF 2018 & 11 others 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 sections, having been overridden by the SEZ Act, no legal authority to levy and collect central excise duty, customs duty or service tax for goods or services supplied for authorised operations of SEZ developers and units covered by section 26 remains. Without such a legal authority, no tax or duty can be either levied or collected in view of article 265 of the Constitution of India.
32. Therefore, there is no need for any exemption notifications under any of these three Acts, nor is it necessary to fulfil any of the conditions laid down in the exemption notifications, if any, issued for the purpose. Thus, the charge of excise duty under section 3 of the Central Excise Act, the 30 ST/50349 OF 2018 & 11 others charge of customs duty under section 12 of the Customs Act and the charge of service tax under sections 66, 66A and 66B of the Finance Act, 1994 will not apply to goods and services supplied to developers and units for authorized operations in the SEZ areas by virtue of the overriding provisions of the SEZ Act. Any exemption notifications and conditions therein are therefore, redundant because, the Parliament itself has, through the SEZ Act, overridden the charge in the other laws.
33. The status of exemption notifications which are issued when the tax that is sought to be levied is out of the ambit of charging section itself was considered by the Supreme Court in the case of Larsen & Toubro14. The case before the Supreme Court, in brief, was as follows. Service tax was levied under Chapter V of the Finance Act, 1994 under section 66 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 works 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 14 2015 (39) STR 0913 (SC) 31 ST/50349 OF 2018 & 11 others was no charge on works contract service prior to 1.6.2007 because works contracts services were a separate specie of contract known to commerce and there was no levy on such contracts prior 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 service tax was already exempted by the Parliament by section 26 of the SEZ Act. Any conditions in such notifications are also, therefore, irrelevant and need not be fulfilled. Any amount paid as representing service tax either in the services provided directly to the SEZ units under invoices issued by the service providers or indirectly through the ISD invoices issued by the input service distributor are merely
32 ST/50349 OF 2018 & 11 others deposits and need to be refunded. They are like the amount deposited during investigations or before succeeding in appeals against demands or fine or penalty which are subsequently set aside. The question is, therefore, answered in favour of the appellant and the appellant is eligible to refund of service tax.
35. Since it has been found that the charging sections under the Finance Act, 1994 itself do not apply to SEZ units and therefore the exemption notification itself is redundant, the alternative submission of the appellant that it had fulfilled the conditions mentioned therein including filing it within time or that if there was delay, there was sufficient grounds for condoning it and that the Assistant Commissioner had sufficient powers and should have condoned the delay, need not be considered.
36. As far as the claim of interest by the appellant on delayed payment of refund under section 11BB of the Central Excise Act, 1944 as made applicable to service tax by section 83 of the Finance Act, 1994 is concerned, we find that once the SEZ unit is out of the purview of the Finance Act, 1994 itself, the provisions for payment of interest under it also do not apply to the refunds in question. The question of grant of interest is, therefore, answered against the appellant.
33 ST/50349 OF 2018 & 11 others
37. In view of the above, all the twelve appeals are disposed of as follows:
a) The appellant is entitled to refund in all the eight applications.
b) The refund must be sanctioned and paid in all cases where it has not already been paid.
c) The appellant is not entitled to interest on any of the refunds.
d) Service Tax Appeals No. 50349 of 2018, 50350 of 2018, 50351 of 2018 and 50352 of 2018 are allowed and the first impugned order is set aside with consequential refund to the appellant.
e) Service Tax Appeals No. 50368 of 2021, 50369 of 2021, 50370 of 2021 and 50371 of 2021 are dismissed.
f) Service Tax Appeals No. 50213 of 2021, 50214 of 2021, 50215 of 2021 and 50216 of 2021 are allowed and the third impugned order is set aside with consequential refund to the appellant.
(Order pronounced in open court on 30/10/2023.) (JUSTICE DILIP GUPTA) PRESIDENT (P.V. SUBBA RAO) MEMBER (TECHNICAL) PK