Custom, Excise & Service Tax Tribunal
Dell International Services India Pvt ... vs Bangalore-Ltu on 14 November, 2024
ST/22105, 22106, 22107, 22109, 22110, 22111, 22112, 22117/2014
CUSTOMS, EXCISE & SERVICE TAX APPELLATE
TRIBUNAL
BANGALORE
REGIONAL BENCH - COURT NO. 1
Service Tax Appeal No. 22105 of 2014
(Arising out of Order-in-Appeal No. 31 to 38/2014 dated 24.03.2014
passed by the Commissioner (Appeals), Large Taxpayer Units,
Bangalore.)
M/s. Dell India Private Limited,
Divyashree Greens, Ground Floor, 12/1 Appellant(s)
12/2A, 13/1A, Challaghatta Village
Varthur Hobli
Bangalore - 560 071.
VERSUS
The Commissioner
Office of the Commissioner of Central
Excise and Service Tax
Large Taxpayer Unit, JSS Towers,
Banashankari III Stage,
Respondent(s)
100 Feet Ring Road, Bangalore - 560 085.
With
(i) Service Tax Appeal No. 22106 of 2014 (M/s. Dell India Private Limited)
(ii) Service Tax Appeal No. 22107 of 2014 (M/s. Dell India Private Limited)
(iii) Service Tax Appeal No. 22109 of 2014 (M/s. Dell Inida Private Limited)
(iv) Service Tax Appeal No. 22110 of 2014 (M/s. Dell Inida Private Limited)
(v) Service Tax Appeal No. 22111 of 2014 (M/s. Dell Inida Private Limited)
(vi) Service Tax Appeal No. 22112 of 2014 (M/s. Dell Inida Private Limited)
(vii) Service Tax Appeal No. 22117 of 2014 (M/s. Dell Inida Private Limited) (Arising out of common Order-in-Appeal No. 31 to 38/2014 dated 24.03.2014 passed by the Commissioner (Appeals), LTU, Bangalore.) APPEARANCE:
Mr. G. Shivadasa, Sr. Advocate with Mr. Rishab Advocates for the Appellant Mr. M.A. Jithendra, Assistant Commissioner (AR) for the Respondent CORAM: HON'BLE DR. D.M. MISRA, MEMBER (JUDICIAL) HON'BLE MRS R BHAGYA DEVI, MEMBER (TECHNICAL) Page 1 of 41 ST/22105, 22106, 22107, 22109, 22110, 22111, 22112, 22117/2014 Final Order No. 21103 - 21110 /2024 DATE OF HEARING: 15.07.2024 DATE OF DECISION: 14.11.2024 PER : R BHAGYA DEVI These eight (8) appeals have been filed by the Appellant M/s. Dell India Private Limited against the rejection of their refunds claims by the Commissioner (Appeals), Bangalore vide Order-in-Appeal No. 31 to 38/2014 dated 24.03.2014.
2. The appellant, M/s. Dell India Private Limited, provide services under the category of Management, Maintenance and Repair Service, Erection and Commissioning and Installation Service. They filed refund applications for refund of service tax paid on the input services which were used in the operations of manufacturing unit at Chennai, Special Economic Zone (SEZ) unit. The refund claims were pertaining to both wholly consumed services and other than wholly consumed services. On verification of the claims, it was found that the refund claims were not in the prescribed format and also had not fulfilled the conditions and procedures for availing the benefit of the exemption Notification No.17/2011-ST dated 01.03.2011. Since they do not fall under the category of a standalone unit, consequently, do not fall under the scope of wholly consumed category of the services as explained at Para 2(a) of the Notification No.17/2011 ST dated 01.03.2011. Further, they had not produced any proof to show that the services were used for the authorized operations within the SEZ, hence, the refund claims were rejected.
3. The learned Sr. Counsel on behalf of the appellant submitted that the Appellant is engaged in the manufacture and sale of different kinds of computer units like desktops, laptops, servers, etc., from their unit located in SEZ area and engaged in providing services such as Management consultant, Maintenance Page 2 of 41 ST/22105, 22106, 22107, 22109, 22110, 22111, 22112, 22117/2014 and Repair Service, Commissioning and Installation Service etc.;
from their locations in Domestic Tariff Area (DTA) and have obtained a Centralized Service Tax Registration, for discharging service tax. The Appellant had received services like Information Technology Software Services (ITSS), Banking and Other Financial Services (BOFS), Logistics Services, Courier Services, Chartered Accountant Services etc., from offshore service providers as well as service providers located in the DTA for carrying out its authorized operations. For the period March 2011 to June 2012, the Appellant filed 8 refund applications seeking refund of the service tax paid under Section 66 (forward charge) and Section 66A (reverse charge on import of service) of the Finance Act, 1994 in terms of Notification No.17/2011-ST dated 01.03.2011. In the refund applications, the Service Tax paid on services exclusively used by the SEZ location such as ITSS and Control Tower services were claimed in entirety under Table-A in Form - A2. In respect of other services like BOFS, Business Support Service (BSS), Freight Charges, etc., which were common to their SEZ and DTA units, they considered the same to be 'shared services' and claimed the refund on pro-rata basis, in terms of formula prescribed in Para 2(d) of the Notification 17/2011 ST dated 01.03.2011 as shown in the table below:
Sl. Services Category/Claim
No.
(a) Information Technology Exclusive used and refund
Software Service (ITSS) claimed in entirety under
(b) Control Tower Service Table - A in Form - A2
(c) Banking and Other Claimed on pro rata basis in
Financial Services (BOFS) terms of formula Prescribed
(d) Freight Forwarding in Para 2(d) of the
(e) Courier Services, etc. Notification 17/2011-ST
dated 01.03.2011
3.1 The Learned Sr. Counsel further states that the Respondent (Department) held that, according to Notification No.17/2011-ST dated 01.03.2011, the Appellant does not meet the definition of 'wholly consumed', as it is carrying out business from unit Page 3 of 41 ST/22105, 22106, 22107, 22109, 22110, 22111, 22112, 22117/2014 located in non-SEZ location and therefore, cannot seek for refund under Table-A provided under the said Notification and consequently, is eligible for refund under the category of 'shared services' only. That, when there are shared services between DTA and SEZ location, the only option available to the SEZ location is to claim refund under 'shared services' category and refund based on the formula in Clause 2(d) of the said Notification. It is further contended that the benefit not available in the Notification cannot be extended through the interpretation of the Circular and hence, the circular cannot be interpreted as claimed by the Appellant. In contrast to the above observation of the Department, the Appellant submits that in furtherance to the objective of Section 26(1)(e) of the SEZ Act, which entitles an SEZ developer/Unit to claim exemption from payment of service tax on services used for authorized operations, the Central Government issued Notifications under Section 93 of the Finance Act, 1994. Originally Notification No.9/2009-ST dated 03.03.2009 was issued for providing Service Tax exemption by way of refund to SEZ units for taxable services, under Section 65(105) of the Finance Act, received in relation to 'authorized operations in SEZ'. The benefit of this Notification was available to all 'SEZ units' for services used in relation to authorized operations regardless of the services being shared with DTA units. However, the refund of Service Tax was available only to the extent of the consumption in SEZ units. Later on, certain changes were proposed in respect of SEZ refunds, wherein a new criterion of 'wholly consumed' was introduced in line with Export of Service Rules, 2005, in order to provide an option of ab initio exemption apart from refund to SEZ units which did not have operations in DTA unit. Notification No.17/2011-ST dated 01.03.2011 was accordingly issued superseding the aforesaid Notification dated 03.03.2009 and a proviso was introduced under Para 2(a) of the Notification. Since appellant as an entity have both SEZ and DTA units, they are excluded from the definition of "wholly consumed" under Notification No.17/2011 dated 01.03.2011. Therefore, according to this Notification, they Page 4 of 41 ST/22105, 22106, 22107, 22109, 22110, 22111, 22112, 22117/2014 are not eligible for ab initio exemption from payment of Service Tax on the services received and only recourse for the Appellant is to apply for a refund of the Service Tax paid in respect of the services received by the SEZ unit. This exclusion from the ambit of 'wholly consumed' is not because the services were not exclusively used in the SEZ unit but because as an entity they have both SEZ and DTA operations. It is stated that under Notification No.9/2009-ST dated 03.03.2009, which provided refund mechanism as the default mechanism for claiming exemption for units located in SEZ, the present Notification No.17/2011 dated 01.03.2011 intended to additionally provide an ab initio exemption to units having operations only in SEZ location by considering them to be 'wholly consumed services', though the said phrase is intended to be covering the nature of service and not the nature of entity. Considering the ambiguity brought in by the said definition, the Circular dated 18.05.2011 was issued, wherein specific clarification was provided for a situation, where the SEZ unit also operated through a DTA unit but received services which were exclusively used by such SEZ location. In this respect, it was clarified that the said SEZ unit not satisfying the definition of 'wholly consumed services' cannot claim ab initio exemption, but refund in this scenario will be eligible, without requirement of apportionment as shared services under Table-A provided in Form A-2. The Appellant submits that in terms of insertion, apart from a refund, an option of claiming ab initio exemption was provided in respect of services which were 'wholly consumed' in the SEZ. It could be discerned from the language used in Notification No.09/2009-ST dated 03.03.2009 and Notification No.17/2011-ST dated 01.03.2011, that the exemption was aimed at providing relaxation to SEZ units from Service Tax for services received by them, in relation to their 'authorized operations'. The ab initio exemption that was introduced vide Proviso to Para 2(a) of Notification No.17/2011-ST dated 01.03.2011, only brought in an alternate method to exempt the service tax for services received by SEZ units and did not jeopardize the existing refund Page 5 of 41 ST/22105, 22106, 22107, 22109, 22110, 22111, 22112, 22117/2014 mechanism available to SEZ units regardless of the entity having DTA units. A table explaining the benefit of Notification No.17/2011-ST dated 01.03.2011 in different scenarios are provided below for ease of reference:
Sce- Nature of Nature of Benefit As per
nario units of the taxable available Notification/
Entity service Circular
consumption
1 Taxable Ab-initio Para 2(c) of
services in exemption Notification
relation to by declaring in 17/2011.
Solely SEZ 'authorized form A-1.
2 units of operation' Refund of Proviso to
entity used by the service tax by Para 2(a) of
SEZ units filing Table - A the
in form A - 2. Notification
17/2011
3 Taxable Refund of Clarification
services in Service Tax by provided to
relation to providing Question 2(i)
'authorized details as in Circular
operations' prescribed in No.142/11/2
used Table - A in 011 - ST.
exclusively by form A - 2.
SEZ units
SEZ units
having
and DTA
business
units
operations in
belonging
DTA.
to the
4 Taxable Refund of Para 2(d) of
same entity
services in Service tax on the
relation to pro-rata basis Notification
'authorized by providing read with
operation' requisite details Point 9.2 of
used by both in Table - B in Form A - 2
SEZ and DTA form A -2. provided in
units. the
Notification.
3.2 It is further stated that from the above Table, it could be
inferred that SEZ units are eligible for refund of service tax paid by them for services relating to 'authorized operations'. Only the manner of claiming the same, differs based on the nature of consumption such as sharing it with DTA units or wholly consuming the services and therefore, the Appellant has rightly claimed refund of service tax under Table - A in Form A-2, for the services exclusively used by the SEZ units which is the third scenario in above Table, which is also confirmed in the Circular Page 6 of 41 ST/22105, 22106, 22107, 22109, 22110, 22111, 22112, 22117/2014 No.142/11/2011-S.T. dated 18.05.2011 and the Circular is binding on the Respondent (Department) and the impugned order holding contrary to the same is liable to be set aside. The aspect of issuance of Circular within three months of issuance of Notification, clearly indicates that the Circular was intended to address ambiguities in the interpretation of the said Notification. Therefore, the Notification and the Circular should be read together as a whole. The Appellant in this regard placed reliance on the Hon'ble Supreme Court's decision in Commissioner of Central Excise and Service Tax Rohtak v Merino Panel Product Ltd: 2022-TIOL-103-SC-CX observed as follows:
"Thus, the starting point of our analysis on this question is that the CBEC Circular of 01.07.2002 is binding on the Revenue. If the show cause notice issued by the Revenue is found to be contrary to the Circular, it would prima facie result in abrogation of the uniformity and consistency which is strongly emphasized upon in Ranadey Micronutrients (Supra). It goes without saying that the Revenue's stance against its own circular can potentially lead to a chaotic situation where, with one hand, the Revenue would lay down instructions on how to interpret the relevant statutes and rules, and with the other hand, it would promptly disobey those very directions. Maintaining predictability in taxation law is of utmost importance and, for this reason, the Court should not accept an argument by the Revenue that waters down its own Circular as this would fall squarely within the contours of the prohibition outlined in Paper Products".
3.3 With respect to import of Software, it is submitted that the hardware devices cleared by the Appellant from SEZ unit have Microsoft Operating System installed in them and import of the licenses for such Software is undertaken only by the SEZ unit. The said services are hence exclusively used by the SEZ unit and supply of Information Technology products from an SEZ to a DTA unit is considered as export for the purpose of Net Foreign Exchange Earnings (NFE) calculation in terms of Rule 53A(l) of the SEZ Rules, 2006 and hence, the contention that undue benefit was claimed by the Appellant on the ground that about Page 7 of 41 ST/22105, 22106, 22107, 22109, 22110, 22111, 22112, 22117/2014 90% of the clearances made were to DTA unit is without any legal basis.
3.4 The Learned Sr. Counsel further claimed that apart from SEZ unit, the Appellant had units in DTA and hence, the proviso in Para 2(a) of the Notification providing ab initio exemption was not available to the Appellant as 'wholly consumed' required for such exemption was not satisfied. The Appellant, accordingly, reimbursed the Service Tax paid on the services received from suppliers in terms of Section 66 and also paid service tax under reverse charge mechanism in terms of Section 66A and claimed refund of such tax paid. The Appellant submits that Para 2(a) of the Notification per se provided exemption by way of refund, to all SEZ units in respect of services received for authorized operations. He reiterated that the 'proviso' is an alternate benefit provided to SEZ units of entities that do not have DTA units which shall not be of relevance to the present case. Hence, the Appellant is not covered under the proviso to claim upright exemption from payment of service tax as stipulated in the Notification. The Appellant submits that Table A to Form A-2 was required to be submitted for claiming refund of tax paid on services which were solely used by the SEZ unit and was not restricted to 'wholly consumed' as this was the only Table providing complete refund of the tax paid without apportioning the same between DTA and SEZ unit, which has been clarified vide Circular No.132/11/2011-ST dated 18.05.2011, wherein at Sl. No.2, it has been clarified that not 'wholly consumed' services can be categorized under the following 2 headings-
(a) Shared services;
(b) Exclusively used services.
3.5 In respect of exclusive services, there is no requirement to subject the tax amount to formula provided in Para 2(d) and the entire refund can be claimed by entering the value in Table-A. The Appellant submits that the aforesaid Circular clearly indicates that SEZ unit will be eligible for entire refund of Service Page 8 of 41 ST/22105, 22106, 22107, 22109, 22110, 22111, 22112, 22117/2014 Tax paid in respect of exclusive services received for authorized operations even if the entity has DTA businesses. The department ought to have harmoniously interpreted the Notification along with the circular which clarifies the position of law stated in the said Notification. Reliance in this regard is placed on the case Adani Power Ltd v. Commissioner of Service Tax - 2016 (44) S.T.R. 146 (Tri - Ahmd). The Appellant further submits that the impugned order while affirming the rejection of refund by the department also has the burden of proof to establish that the Appellant has not used the services in the SEZ units exclusively. However, the same has not been established by the department which defeats the very purpose of benefits being provided to SEZ units under the SEZ Act which was continued in the Notification. Reliance in this regard is placed on the case Wardha Power Company LTD v. Commissioner of C. EX., Nagpur -2018 (10) G.S.T.L 248 (Tri. - Mumbai).
3.6 The Appellant submits that the proviso to the Notification clearly indicates that a SEZ unit has an option either to claim ab initio exemption or claim refund of the tax paid. However, this shall apply only to 'SEZ units' of entities that do not have DTA units which also justifies the usage of wording 'wholly exempted' as there is no possibility of the services being consumed by non SEZ/DTA units. It is submitted that, in the present case, the department had completely misinterpreted the Notification and concluded that Appellant was eligible for exemption and should have opted for the same. Even assuming that such exemption was available to the appellant, it does not disentitle the SEZ unit to claim refund of service tax, if paid in respect of services used for authorized operations. It is further submitted that exemption granted to a SEZ unit under the SEZ Act, cannot be curtailed by a Notification issued under the Finance Act, 1994. In this regard, it is submitted that the department had contended that the impugned Notification is issued as per Section 26(2) of the SEZ Act, which empowers the Central Government to prescribe terms Page 9 of 41 ST/22105, 22106, 22107, 22109, 22110, 22111, 22112, 22117/2014 and conditions for availing exemption and the present Notification must be construed to be issued using such powers. The Appellant in this regard submits that the impugned Notification is issued under Section 93(1) of the Finance Act and not as per Section 26(2) of the SEZ Act. Hence, the restriction, if any, can be prescribed by the Central Government by virtue of Section 26(2) of the SEZ Act and not by issuing a Notification under the Finance Act. In this regard, the Appellant places reliance on the decision in the case of MetLife Global Operations Support Center (P.) Ltd. v. Commissioner of Service Tax, New Delhi, 2021 (46) G.S.T.L. 418 (Tri. - Del.), wherein the Principal Bench of the Tribunal at Delhi had held that a Notification referred to under Section 26(2) of SEZ Act, would refer to a Notification issued under the said Act and not any other legislation and the Tribunal refers to Hon'ble Supreme Court's decision in the case of Commissioner v Dilip Kumar and Company 2018 (361) ELT 577(SC) to distinguish it as not applicable with regard to the benefits granted under the SEZ Act. He further submits that when there are two options available to an assessee, then the assessee has the right to choose the option which is more beneficial to the assessee and the same cannot be denied on the ground of availability of alternate benefit. Reliance in this regard is placed on the case Share Medical Care v. Union of India - 2007 (209) E.L.T. 321 (S.C.) and Sandoz Pvt. LTD. v. Union of India - 2022 (379) E.L.T 279 (S.C.).
3.7 Learned Sr. Counsel submitted that the impugned order had held that Refund in terms of Para 3(a) is restricted to the amounts of tax paid under Section 66 of the Finance Act and no refund can be claimed in respect of taxes paid in terms of Section 66A of the Finance Act. The Appellant in this regard submitted that the preamble of the Notification clearly indicates that the exemption is provided in respect of tax paid under Section 66 and 66A on services used for authorized operations and Para 2(a) merely indicates that the exemption is being Page 10 of 41 ST/22105, 22106, 22107, 22109, 22110, 22111, 22112, 22117/2014 granted by way of refund of the tax paid. He further submitted that intention of the Notification was to provide refund of taxes paid under both Section 66 and 66A has been clarified vide Para 1 of Circular No.132/11/2011-ST dated 18.05.2011 and when the Circular had clarified that the refund shall extend to services under Section 66 as well as services under 66A for which service tax is paid on reverse charge basis, the department ought to have considered the same since circular is binding on them.
3.8 The learned Sr. Counsel submitted that the impugned order denies the refund of the tax paid on ITSS services on the ground that ITSS were not used within the SEZ premises; no Bill of Entry was filed in respect of the ITSS and the loading of software was a post-sale activity. The Appellant in this regard submits that the main activity undertaken by them in SEZ area was manufacture of computers and it is submitted that the manufacture and sale of computer involve installation of software in the final product. It is submitted that this software was downloaded online by the Appellant, for which there is no requirement to file Bill of Entry and the finding provided in the impugned order in this regard, is completely baseless. The Appellant further submitted that final product which is exported has this software loaded onto the machine and there is no post sale activity undertaken in respect of Software. The Appellant, hence, submits that the entire premise to deny refund of the service tax paid on ITSS is baseless and the Appellant had rightfully claimed refund of the said amounts and moreover, this issue was never raised in the show-cause notice, and the Appellant was never put to notice of any allegation in this regard.
3.9 Further, the learned Sr. Counsel submitted that notwithstanding the above, the Appellant is eligible for exemption in terms of Section 26(1)(e) read with Section 51 of the SEZ Act. The Appellant submits that the only criteria Page 11 of 41 ST/22105, 22106, 22107, 22109, 22110, 22111, 22112, 22117/2014 mentioned in Section 26(1)(e) for claiming exemption from payment of Service Tax under the Finance Act is that the same must be used for authorized operations. It is submitted that in the present case, it is not in dispute that the services in respect of which exemption is claimed by way of refund are used by the Appellant for authorized operations. Hence, a proposal to deny the refund would mean that the exemption provided under Section 26(1)(e) is being denied. In this regard, the Petitioner submits that Section 51 of the SEZ Act provides an overriding effect to SEZ Act over other Act, when there is contradiction. The Appellant submitted that denial of refund by applying restrictions in Notification is clearly beyond and contrary to Section 26(1)(e) of SEZ Act and hence, the same cannot be sustained. Reliance in this regard is placed on FCI OEN Connectors Ltd. v. C.C.E., C& S.T., Ernakulam, Cochin - 2019 (368) E.L.T. 840 (Ker.) and Eclerx Services Ltd v. Commissioner of CGST & Central Excise, Navi Mumbai - 2023 (72) G.S.T.L. 99.
4. The learned Authorized Representative on behalf of the Revenue submitted that appellant is not eligible for 100% refund as the input services are not wholly consumed by the SEZ unit. The calculation of eligible refund would be the ratio of Export and DTA clearances. The unit is not a standalone SEZ unit and has other DTA operations and hence, refund should have been filed under Table B and C in terms of the Notification No.17/2011-ST dated 01.03.2011 and the appellant has not been able to provide any evidence of actual usage in the SEZ, in as much as 90% to 97% of the total clearances out of the DTA and appellant had failed to produce any documentary evidence to prove the consumption of service for the authorised operations of SEZ. It is also submitted that para 3 of the Notification No.17/2011-ST dated 01.03.2011 specifies only taxes paid under Section 66 is eligible for refund and not taxes paid under Section 66A of the Finance Act, 1994. The requirement of filing Bill of Entry under Section 29(6) of the SEZ Act has not been fulfilled and the software was downloaded by the SEZ unit or others is not known Page 12 of 41 ST/22105, 22106, 22107, 22109, 22110, 22111, 22112, 22117/2014 and without consumption within the SEZ, the appellant would not be eligible for refund.
4.1 He further refers to Section 26(2) and Rule 31 of the SEZ Act, reads as :
"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 subsection (1)".
Rule 31 of SEZ Act 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 including a unit under construction by any service provider shall be available for the authorised operations in a special economic zone".
4.2 It is submitted that there is no conflict between the SEZ Act and the provisions of Finance Act, 1994 which govern the exemption from the Service Tax which would otherwise be leviable. Notification No.9/2009-ST dated 03.03.2009 lays down the procedure for claiming exemption. Rule 31 of SEZ Rules state that the exemption would be available to SEZ units and developer but it nowhere states that the conditions laid down in the exemption Notification would not be attracted to such exemption. Reliance is placed on the decision of the Hon'ble Supreme Court in the case of CCE vs. 3iInfotech: 2023 (8) TMI 746 observed as follows:
"11. Now, we come to the other three showcause notices. We have carefully perused the findings recorded by CESTAT. As stated earlier, the other three showcause notices mentioned the correct classification. Reliance is placed on the earlier order of remand passed by CESTAT. However, we find that said order of remand does not decide any issue on merits and therefore, after the remand, the issue was wide open. The issue to be considered was whether in respect of the particular transactions, service tax was payable under the classification mentioned in the show cause notices. After having perused the findings of CESTAT, Page 13 of 41 ST/22105, 22106, 22107, 22109, 22110, 22111, 22112, 22117/2014 we find that the findings rendered by the Tribunal call for no interference. The findings are based on careful consideration of the factual and legal aspects.
12. In paragraph no. 10.16, CESTAT dealt with the argument that an exemption was available to the assessee under SEZ Act in respect of services supplied to SEZ units. Subsection (2) of Section 26 of SEZ Act provides that the Central Government may prescribe the manner in which and the terms and conditions subject to which exemptions shall be granted to a developer or entrepreneur covered by subsection (1) of Section 26. Clause (e) of subsection (1) of Section 26 refers to exemption from service tax under the Finance Act on taxable services provided to a developer or unit to carry on authorised operations in SEZ. Under Subsection (1) of Section 51, SEZ Act prevails over other enactments which are inconsistent to the provisions contained therein. Thus, only when by exercising the power under subsection (2) of Section 26 of SEZ Act, an exemption is granted by the Central Government that the assessee can claim exemption. Otherwise, the exemption notification referred in paragraph 10.16 will apply.
13. On this issue, the CESTAT held thus:
" In terms of Notification No. 9/2009ST granted exemption to the specific services supplied to SEZ subject to condition that person liable to pay service tax shall pay service tax as applicable on the specified services provided to the developer or units of SEZ and SEZ shall claim refund of service tax on the services provided to the developer of SEZ. Notification No. 9/2009S. T was substituted by Notification 172011ST which provided exemption from service tax subject to condition specified therein. One of the conditions specified was that the exemption shall be provided by way of refund of service tax. Accordingly, during the entire period the service provider is not eligible for first stage exemption from payment of service tax. He was required to pay service tax and either SEZ developer or unit located in SEZ could have claimed the exemption by way of refund of service tax. Further in the present case, appellant has not produced any evidence to show that the services provided by them or only or partly consumed within the SEZ or outside. Thus, there is no dispute about the fact that said exemption or not available to the appellant during the relevant period. Since Commissioner has not considered the matter on this aspect the issue needs to be remanded back to him for consideration of the exemption in respect of services supplied to SEZ unit/developer."Page 14 of 41
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14. Therefore, we cannot find fault with the reasoning adopted by CESTAT. However, in the proceedings pursuant to remand, it will be open for the assessee to show that an exemption was available under subsection (2) of Section 26 of the SEZ Act".
4.3 It is submitted that the Notification No.17/2011-ST dated 01.03.2011 envisages only two types of SEZ units. One of the units which utilizes services which are considered as 'wholly consumed' in terms of the definition contained in the Notification and the other units, is other than wholly consumed. In terms of the definition in the Notification reproduced below, the Appellant does not qualify as a unit where services are wholly consumed and hence, would not be eligible for upfront exemption and the refund option as contained under Para 2(a) of Notification No.17/2011-ST dated 01.03.2011. There is no ambiguity on the issue in terms of the notification in view of the Explanation reproduced below:
Explanation. - For the purposes of this notification, the expression ―wholly consumed refer to following taxable services, received by a Developer or Unit of a SEZ, for the authorised operations, namely:-(i) services listed in clause(i) of sub-rule (1) of rule 3 of the Export of Services Rules, 2005 in relation to an immovable property situated within the SEZ; or
(ii) services listed in clause (ii) of sub-rule (1) of rule 3 of the Export of Services Rules, 2005, as are wholly performed within the SEZ; or
(iii) services other than those falling under (i) and (ii) above, provided to a Developer or Unit of SEZ, who does not own or carry on any business other than the operations in the SEZ;
4.4 The contention of the appellant that the Circular No.142/11/2011-ST dated 18.05.2011 clarifies the issue in their favor at Para 2 is not correct on the following grounds. The para 2 of the said circular which reads as follows:
Page 15 of 41ST/22105, 22106, 22107, 22109, 22110, 22111, 22112, 22117/2014
(i) In the notification, what is the All taxable services (under section treatment for service tax paid on 66 or section 66A) received by a taxable services which do not fall SEZ Unit/Developer for the in the category of "wholly authorised operations, have been consumed services", and also are exempted in the first paragraph of not 'shared services' ? Is refund notification 17/2011-ST, subject to available? (ii) Whether in the case conditions.
of category (iii) services referred in paragraph 2(a) of the notification, In Paragraph 2, conditions attached 'proportionate refund' applies to to this exemption are prescribed. In only 'shared services' i.e. services terms of paragraph 2(a), refund that are used both for SEZ (Special route is the default option for all Economic Zone) authorised who intend to claim the exemption operations as well as DTA granted by the notification in its first (Domestic Tariff Area) operations? paragraph. However, an exception is provided in the form of ab initio (upfront) exemption, to the 'wholly consumed' services.
Services which fall outside the definition of 'wholly consumed' services can be categorized as those which are used exclusively by the SEZ Unit/Developer, for the authorised operations in SEZ or shared with DTA operations.
Para 2(d) of the notification is applicable to refund arising from 'shared services' only. Thus exemption to services exclusively used for the authorised operations of SEZ Unit/Developer, will continue to be available by way of refund, as specified in paragraph 2(a) itself, subject to other conditions. To claim this refund, Table-A, provided in Form A-2 may be used. It is clarified that only such services shall be considered as exclusively used by SEZ Unit/Developer, for the authorised operations, as they satisfy the following criteria: (i) Invoice is raised in the name of the SEZ Unit/Developer or in the invoice, it is mentioned that the taxable services are supplied to the SEZ Unit/Developer for the authorised operations; (ii) Such services are approved by the 'Unit Approval Committee(UAC)', as required for the authorised operations; (iii) Receipt and use of such services in the authorised operations are accounted for in the books of accounts of the SEZ Unit/Developer.
Page 16 of 41ST/22105, 22106, 22107, 22109, 22110, 22111, 22112, 22117/2014 4.5 The above circular has envisaged two types of units which fall outside the definition of "wholly consumed" services, i.e., (i) the services are exclusively used in the SEZ operations and (ii) where the services are shared for DTA operations. It has been clarified that in cases where the unit falls outside the definition of "wholly consumed" but are exclusively used for SEZ operations then they would be eligible for refund as specified under 2(a) of the Notification. Where, there are shared services between SEZ and DTA such units, irrespective of number or quantum of such shared service, they would fall under the provisions as mentioned under 2(d) of the Notification, and would be eligible for refund based on the formula provided. As in the instant case of the Appellant, some of the services are shared, they would be eligible for refund as per Para 2(d) of the Notification No.17/2011-ST dated 01.03.2011. Further, what benefit is not available in the Notification cannot be extended through the interpretation of the Circular issued. The Circular cannot be interpreted dehors the Notification. Therefore, the Circular cannot be interpreted as claimed by the Appellant. From the notes on clauses in Section 26(2), it is clear that any exemption or concessions for an SEZ unit is granted subject to Rules, terms and conditions as specified by the Central Government. The terms and conditions for any exemption is specified under the Notifications issued under the subject Acts i.e., Customs Act, Central Excise Act or the Finance Act, therefore, the exemption provided in not unconditional just because they are SEZ unit. He submits that there is a clear finding in the impugned order as well as in the Order-in-Original that the appellant had not provided the documentary evidences as required and specified in the said Notification to prove that the services have been wholly/exclusively consumed in the SEZ. He places reliance on the decision of the Hon'ble Supreme court in the case of Dileep Kumar & Co. 2018 (7) TMI 1826 has laid down that:
Page 17 of 41ST/22105, 22106, 22107, 22109, 22110, 22111, 22112, 22117/2014 "(1) Exemption notification should be interpreted strictly; the burden of proving applicability would be on the assessee to show that his case comes within the parameters of the exemption clause or exemption notification.
(2) When there is ambiguity in exemption notification which is subject to strict interpretation, the benefit of such ambiguity cannot be claimed by the subject/assessee and it must be interpreted in favour of the revenue.
(3) The ratio in Sun Export case (supra) is not correct and all the decisions which took similar view as in Sun Export Case (supra) stands overruled".
5. Heard both sides and perused the records. The following appeals are being taken up as the issues are common in all these appeals.
Sl. Appeal No. Period OIO & date Refund
No. Amount
1 ST/22105/2014 March 2011 148R/2013 (May ₹. 14,75,62,194
to July 2011 17, 2013)
2 ST/22106/2014 August 2011 149R/2013 (May ₹. 4,07,03,152
17, 2013)
3 ST/22109/2014 Sept. 2011 to 151R/2013 ₹. 6,29,25,316
Oct. 2011 (May 17, 2013)
4 ST/22107/2014 Sept. 2011 to 150R/2013 ₹. 71,80,705
Oct. 2011 (May 17, 2013)
5 ST/22110/2014 November 147R/2013 ₹. 6,29,11,046
2011 (May 17, 2013)
6 ST/22111/2014 December 152R/2013 ₹. 3,73,93,698
2011 to (May 17, 2013)
January 2012
7 ST/22112/2014 February 296R/2013 ₹. 9,67,56,360
2012 to (August 26/29,
March 2012 2013)
8 ST/22117/2014 April 2012 to 297R/2013 ₹. 13,45,52,582
June 2012 (August 26/29,
2013)
Total ₹. 58,99,85,053
5.1 There is no dispute that the appellant in addition to the
authorised operations undertaken by them in the SEZ area also have DTA operations of their own and clearances are undertaken and duty paid as per the provisions of the Law. The Appellant has obtained centralized registration for business which are outside the SEZ and the following services are rendered in DTA.
Page 18 of 41ST/22105, 22106, 22107, 22109, 22110, 22111, 22112, 22117/2014
i) Erection, Commissioning and Installation Services
ii) Information Technology Software Service
iii) Business Auxiliary Service
iv) Business Support Services
v) Banking and Other Financial Services
vi) Manpower Recruitment Agency
vii) Commercial Training and Coaching
viii) Sponsorship Service 5.2 In view of having operations both in SEZ and DTA, it is alleged that the services rendered by the appellant cannot be considered as 'Wholly Consumed Services' as defined at Para 2(a) of the Notification No.17/2011-ST dated 01.03.2011. Admittedly, the SEZ units who do not have DTA operations are eligible for 'Nil' rate of duty on all the inputs and inputs services, if used for the authorised operations within the SEZ area and they are either allowed to avail upfront tax benefit or claim refund on the taxes paid. However, Notification No.17/2011-ST dated 01.03.2011 has introduced certain restrictions for all those SEZ units who also have DTA operations. This Notification is to restrict refund to the extent of actual exports since there is no exemption for DTA clearances.
5.3 The Commissioner (Appeals) in the impugned order observes that the appellant's case is distinguishable from the standalone units since they have DTA operations. The Board Circular No. 142/2011 dated 18.05.2011 had clarified that merely having an office in the DTA unit only for the purpose of liaison/business promotion does not dis-entitle any SEZ unit being treated as standalone unit. Since, the appellant has DTA clearances for various services, they will not fall under the definition of 'Wholly Consumed Services' as explained at Para 2(a) of the Notification No.17/2011-ST dated 01.03.2011. The appellant though claimed has not Wholly Consumed Services refused to furnish turnover details and other mandatory details as specified under Para 2(d) of the said Notification for Page 19 of 41 ST/22105, 22106, 22107, 22109, 22110, 22111, 22112, 22117/2014 processing the claim. They have also not provided any proof regarding downloading of software and utilizing the same within the SEZ area and in view of the above, upheld the rejection of the refund claims.
5.2 The issue involved in all the above appeals is interpretation of Para 2(a) read with Para 2(d) of the Notification No.17/2011- ST dated 01.03.2011 which defines the eligibility and quantum of refund. For better understanding Notification No.17/2011-ST dated 01.03.2011 is reproduced below:
Notification No. 17/2011-S.T., dated 1-3-2011 Exemption to taxable services received by unit or developer of Special Economic Zone --
In exercise of the powers conferred by sub-section (1) of section 93 of the Finance Act, 1994 (32 of 1994) (hereinafter referred to as the Finance Act) read with sub-section 3 of section 95 of Finance (No. 2), Act, 2004 (23 of 2004) and sub-section 3 of section 140 of the Finance Act, 2007 (22 of 2007) and in supersession of the notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 9/2009-
Service Tax, dated the 3rd March, 2009, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide G.S.R. 146(E), dated the 3rd March, 2009, 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 Finance Act, chargeable to tax under section 66 or section 66A of the Finance Act, received by a Unit located in a Special Economic Zone (hereinafter referred to as SEZ) or Developer of SEZ for the authorised operations, from the whole of the service tax, education cess and secondary and higher education cess leviable thereon.
2. The exemption contained in this notification shall be subject to the following conditions, namely :-
(a) the exemption shall be provided by way of refund of service tax paid on the specified services received for the authorised operations in a SEZ :
Provided that where the specified services received and used for authorised operations are wholly consumed within the SEZ, the provider of such services or the receiver of such services on reverse charge basis, Page 20 of 41 ST/22105, 22106, 22107, 22109, 22110, 22111, 22112, 22117/2014 as the case may be, has the option not to pay the service tax ab initio instead of the Unit or Developer claiming exemption by way of refund in terms of this notification.
Explanation.- For the purposes of this notification, the expression "wholly consumed" refer to following taxable services, received by a Developer or Unit of a SEZ, for the authorised operations, namely :-
(i) services listed in clause (i) of sub-rule (1) of rule 3 of the Export of Services Rules, 2005 in relation to an immovable property situated within the SEZ; or
(ii) services listed in clause (ii) of sub-rule (1) of rule 3 of the Export of Services Rules, 2005, as are wholly performed within the SEZ; or
(iii) services other than those falling under (i) and (ii) above, provided to a Developer or Unit of SEZ, who does not own or carry on any business other than the operations in the SEZ;
(b) for the purpose of claiming exemption, the Developer or Unit of SEZ shall obtain a list of taxable services as are required for the authorised operations approved by the Approval Committee (hereinafter referred to as the specified services) of the concerned SEZ;
(c) the Developer or Unit of SEZ who does not own or carry out any business other than SEZ operations, shall furnish a declaration to that effect in Form A-1, verified by the Specified Officer of the SEZ, in addition to obtaining list under condition (b) above, for the purpose of claiming exemption;
(d) where the specified services received by Unit or Developer, are not wholly consumed within SEZ, i.e., shared between authorised operations in SEZ Unit and Domestic Tariff Area (DTA) Unit, refund shall be restricted to the extent of the ratio of export turnover to the total turnover for the given period to which the claim relates, i.e., Maximum service tax paid on Export turnover of refund = specified services used for SEZ Unit for the SEZ Authorised Operations X period shared with DTA Unit for the period Total turnover for the period Explanation.- For the purposes of condition (d), - (1) "total turnover" means the sum total of the value of, -
(i) all output services and exempted services provided, including the value of services exported;Page 21 of 41
ST/22105, 22106, 22107, 22109, 22110, 22111, 22112, 22117/2014
(ii) all excisable and non-excisable goods cleared, including the value of the goods exported;
(iii) bought out goods sold, during the period to which the invoices pertain and the exporter claims the facility of refund under this notification. (2) "turnover of SEZ Unit'' shall mean the sum total of the value of final products and output services exported during the period of which the invoices pertain and the exporter claims the facility of refund under this notification;
(e) any Developer or Unit of SEZ claiming the exemption shall declare that the specified services on which exemption and/or refund is claimed to have been actually used for the authorised operations;
(f) the Developer or unit of SEZ claiming the exemption, by way of refund has actually paid the amount indicated in the invoice, bill or as the case may be, challan, including the service tax payable, to the person liable to pay the said tax or the amount of service tax payable under reverse charge, as the case may be, under the provisions of the Finance Act;
(g) no CENVAT credit of service tax paid on the specified services used for the authorised operations in a SEZ has been taken under the CENVAT Credit Rules, 2004;
(h) exemption or refund of service tax paid on the specified services other than 'wholly consumed' services used for the authorised operations in a SEZ shall not be claimed except under this notification;
(i) the developer or unit of a SEZ, who intends to avail exemption and or refund under this notification, shall maintain proper account of receipt and use of the specified services on which exemption is claimed, for authorised operations in the SEZ.
3. The following procedure should be adopted for claiming the benefit of the exemption contained in this notification, namely :-
(a) the Developer or Unit of a SEZ, who has paid the service tax under sections 66 of the Finance Act, shall avail the exemption by filling a claim for refund of service tax paid on specified services used for the authorised operations;
(b) the Developer or Unit of a SEZ who is registered as an assessee under the Central Excise Act, 1944 (1 of 1944) or the rules made thereunder, or the said Finance Act or the rules made thereunder, shall file the claim for refund to the Assistant Commissioner of Central Excise Page 22 of 41 ST/22105, 22106, 22107, 22109, 22110, 22111, 22112, 22117/2014 or the Deputy Commissioner of Central Excise, as the case may be, having jurisdiction over the SEZ or registered office or the head office of the Developer or Unit, as the case may be, in Form A-2;
(c) the Developer or Unit of a SEZ who is not so registered under the provisions referred to in clause (b), shall, before filing a claim for refund under this notification, file a declaration with the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be, having jurisdiction over the SEZ or registered office or the head office of the Developer or Unit, as the case may be, in Form A-3;
(d) the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be, shall, after due verification, allot a service tax code number to the Developer or Unit of SEZ, referred to in clause (c), within seven days from the date of receipt of the said declaration, in Form A-3;
(e) 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 unit to the registered service provider or such extended period as the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be, shall permit;
(f) the refund claim shall be accompanied by the following documents, namely :-
(i) a copy of the list of specified services as are required for the authorized operations in the SEZ, as approved by the Approval Committee; wherever applicable, document specified in 2(c), i.e. , declaration in Form A-1;
(ii) invoice or a bill or as the case may be, a challan, issued in accordance with the provisions of Finance Act or rules made thereunder, in the name of the Developer or Unit of a SEZ, by the registered service provider, along with proof of payment for such specified services used for the authorised operations and service tax paid, in original;
(iii) a declaration by the Developer or Unit of SEZ, claiming such exemption, to the effect that--
(A) the specified services on which refund of service tax claimed, has been actually used for the authorized operations in the SEZ; (B) proper account of the specified services received and used for the authorised operations are maintained by the developer or unit of the SEZ and the same shall be produced to the officer sanctioning refund, on demand;Page 23 of 41
ST/22105, 22106, 22107, 22109, 22110, 22111, 22112, 22117/2014 (C) accounts or documents furnished by the Developer or Unit as proof of payment of service tax claimed as refund, based on the invoice, or bill, or as the case may be challan issued by the registered service provider indicating the service tax paid on such specified services, are true and correct in all respects;
(g) the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be, after verifying that,-
(i) the refund claim is complete in all respects;
(ii) the information furnished in Form A-2 and in supporting documents correctly indicate the service tax involved in the specified services used for the authorised operations in the SEZ, which is claimed as refund, and has been actually paid to the service provider, shall refund the service tax paid on the specified services;
(h) a service provider, shall provide the specified services falling under 'wholly consumed' category, under exemption granted by this notification, to a Developer or Unit of SEZ, for authorised operations, subject to the production of documents specified in sub-para (b) of para 2 and in addition wherever applicable, documents specified in sub-para (c) para 2, i.e., declaration in Form A-1;
(i) where any refund of service tax paid on specified services is erroneously refunded for any reasons whatsoever, such service tax refunded shall be recoverable under the provisions of the said Finance Act and the rules made thereunder, as if it is recovery of service tax erroneously refunded;
4. Words and expressions used in this notification and defined in the Special Economic Zones Act, 2005 (28 of 2005) or the rules made thereunder, shall apply, so far as may be, in relation to refund of service tax under this notification as they apply in relation to a SEZ. Explanation.- For the purposes of this notification, "statutory auditor"
refers to a Chartered Accountant who audits the annual accounts of the Developer or Unit of a SEZ for the purposes of the Companies Act, 1956 (1 of 1956) or the Income Tax Act, 1961 (43 of 1961).
Form A-1 Declaration by Developer or Unit of SEZ Who does not own or carry on any Business other than Operations in the SEZ, for availing Exemption under Notification No._____ dated ____ [Refer paragraph 2(c)]
1. Name of the SEZ Unit/Developer:Page 24 of 41
ST/22105, 22106, 22107, 22109, 22110, 22111, 22112, 22117/2014
2. Address of the SEZ Unit/Developer with Telephone and Email:
3. Permanent Account Number (PAN) of the SEZ Unit/Developer:
4. Import and Export Code Number:
5. Jurisdictional Central Excise/Service Tax Division:
6. Service Tax Registration Number/Service Tax Code:
7. Declaration: I/We hereby declare that-
(i) The information given in this application form is true, correct and complete in every respect and I am authorised to sign on behalf of the SEZ Unit/Developer;
(ii) I/We maintain proper account of specified services, as approved by the Approval Committee of SEZ, received and used for authorised operations in SEZ; I/we shall make available such accounts and related records, at all reasonable times, to the jurisdictional Central Excise Officers for inspection or scrutiny.
(iii) I/We shall use/have used specified services for authorised operations in the SEZ.
(iv) I/We declare that we do not own or carry out any other business of providing taxable service or manufacture, in the domestic tariff area; I/We are aware that the Declaration is valid only for the purpose specified in Notification _______ dated ______ and is subject to conditions.
(v) This declaration is intended for submission to the following DTA service provider(s):
Sl. No. Description of DTA Service provider(s) who provide(s) the Specified specified service(s), for SEZ authorised Service(s) to be operations received from Name and address Service Tax Registration the DTA service No. provider(s) (1) (2) (3) (4) Form A-2 Application For Claiming Refund of Service Tax paid on Specified Services used for Authorised Operations in SEZ To The Assistant/Deputy Commissioner of Central Excise/Service Tax ________Division, _________Commissionerate Sir, I /We claim refund of Rs._________ (Rupees in words) Page 25 of 41 ST/22105, 22106, 22107, 22109, 22110, 22111, 22112, 22117/2014
(a) in respect of service tax paid on 'wholly consumed' specified services used for the authorized operations in SEZ, as approved by the Unit Approval Committee of the ______ SEZ [ Rupees_______]
(b) in respect of service tax paid on specified services, other than those that are wholly consumed, used for the authorized operations of SEZ Unit/Developer, as approved by the Unit Approval Committee of the ______ SEZ [ Rupees _______].
1. Name of the SEZ Unit/Developer :
2. Address of the SEZ Unit/Developer with Telephone and Email :
3. Address of the Registered/Head Office with Telephone and Email :
4. Permanent Account Number (PAN) of the SEZ Unit/Developer :
5. Import and Export Code Number :
6. Jurisdictional Central Excise/Service Tax Division :
7. Service Tax Registration Number/Service Tax Code :
8. Information regarding Bank Account (Bank, Address of Branch, Account Number) in which refund amount should be credited/to be deposited
9. Details regarding Service Tax refund claimed :
9.1. Refund arising out of 'wholly consumed' specified services :
TABLE-A No. Details regarding specified services used in the Amount Document authorized operations of SEZ, as approved by the of enclosed as Unit Approval Committee Service proof of Descrip Classificat Name Service Invoice/Bill/Chall Amoun tax payment of tion of ion under and Tax an (original t of claimed service tax taxable section addre Registrat enclosed) Service as by the SEZ service 65(105) ss of ion Numb Dat Value tax Refund Unit/Develo used in of the Servic Number er e of paid (includi per, (sl. no the Finance e of taxabl (includi ng and date of Authori Act, 1994 Provid Service e ng Educati invoice/ zed er Provider service educati on bill/ operati (Rupe on cess) challan) ons of es) cess) (Rupee SEZ (Rupee s)
s) (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11)
1.
2.
TOTAL --
9.2. Refunds arising out of specified services, other than those are 'wholly consumed' :
I/We request refund of service tax paid on specified services, other than those that are 'wholly consumed',-
(a) used in the manufacture of final products exported from SEZ
(b) used in providing output services exported from SEZ Page 26 of 41 ST/22105, 22106, 22107, 22109, 22110, 22111, 22112, 22117/2014 I/We furnish following true and correct particulars, in Tables 'B' and 'C', for the purpose of above refund :
TABLE - B No. Specified services used for authorised operations in SEZ Documen Unit shared with Domestic Tariff Area Unit during the t period for which refund is claimed [para 2(d) of the enclosed notification] as proof Descripti Classifica Name Servic Invoice/Bill/Challa Amount of on of tion and e Tax n original of payment taxable under Addre Registr enclosed) Service of service service section ss of ation Numbe Dat Value tax paid tax (sl.
used in 65(105) Servic Numbe r e of (includin no and
the of the e r of Taxab g date of
authoriz Finance Provid Servic le Educatio invoice/bi
ed Act, er e servic n cess) ll/challan)
operatio 1994 Provid e (Rupees
ns of er (Rupe )
SEZ es)
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)
1.
2.
TOTAL --
(TABLE - C)
Details Details for the period to which the invoices
pertain and refund is claimed
Export turnover of Turnover of Total
SEZ Unit(s) DTA unit(s) turnover
(1) (2) (3) =(1) +
(2)
Final products (a)
Output services (b)
Others (Bought out (c) ____
goods sold)
Total (a)+(b)+(c)=(d)
Instructions for compilation of the above statistical table :
(i) To calculate the export turnover of SEZ, in the case of export of goods, FOB value provided in Shipping Bills or Bills of Export, should be taken into account, which have been duly certified by the officer of customs to the effect that the goods have in fact been exported;
(ii) To calculate the export turnover of SEZ, in the case of export of services, value of output services exported shall be on the basis of certificates issued by the bank certifying realization of export proceeds.
(iii) Amount of service tax claimed as refund, under Table B read with Table C : Rupees ____________ Page 27 of 41 ST/22105, 22106, 22107, 22109, 22110, 22111, 22112, 22117/2014
(iv) Particulars filled in the Table C should be verified and certified as true by the statutory auditor of the SEZ Unit
10. I/We Declare that-
(i) information given in this application for refund is true, correct and complete in every respect and that I am authorised to sign this application for refund of service tax;
(ii) the specified services, as approved by the Approval Committee of SEZ, on which exemption/refund is claimed are actually used for the authorised operations in a SEZ;
(iii) refund is being claimed only on the service tax actually paid on the specified services used for the authorised operations in a SEZ; we have not claimed nor received any refund of service tax earlier, on the basis of above documents/information.
(iv) We have not taken any CENVAT credit of service tax paid on the specified services under the CENVAT Credit Rules, 2004;
(v) accounts or documents furnished as proof of payment of service tax being claimed as refund, as per the invoice, bill or challan of the service provider indicating the service tax paid on such specified services, are true and correct in all respects;
(vi) proper account of receipt and use of the specified services on which exemption/refund is claimed, for the authorised operations in the SEZ, is maintained and the same shall be produced to the Officer sanctioning refund, on demand.
FORM A-3 Declaration for Obtaining Service Tax Code [Refer paragraph 3(c)]
1. Name of the SEZ Unit/Developer :
2. Address of the SEZ Unit/Developer with Telephone and Email :
3. Address of the Registered/Head Office :
4. Permanent Account Number (PAN) of the SEZ Unit/Developer :
5. Import and Export Code Number :
6. Jurisdictional Central Excise/Service Tax Division :
7. Service Tax Registration Number/Service tax Code :
8. Details of Bank Account (Bank, Address of Branch, Account Number)
9. (a) Constitution of SEZ Unit/Developer [proprietorship/partner- ship/Registered Private Limited Company/Registered Public Limited Company/Others (specify)] Page 28 of 41 ST/22105, 22106, 22107, 22109, 22110, 22111, 22112, 22117/2014
(b) Name, Address, Telephone number of Proprietor/partner/director(s)
10. Name, designation and address of the authorised signatory/signatories
11. I/We hereby declare that-
(i) The information given in this application form is true, correct and complete in every respect and that I am authorised to sign on behalf of the SEZ Unit/Developer;
(ii) I/We shall maintain proper account of specified services as approved by the Approval Committee of SEZ, received and used for authorised operations in SEZ; and shall make available such accounts and related records, at all reasonable times, to the Department for inspection or scrutiny.
(iii) I/We shall use/have used specified services for authorised operations in the SEZ.
5.3 The following emerges from the above Notification :
➢ Exempts the taxable services specified in clause (105) of Section 65 of the Finance Act, used for the authorised operations within the SEZ unit.
➢ The appellant either has an option not to pay tax ab initio or claim refund of service tax paid, provided they are 'Wholly Consumed' services.
➢ Services specified under clause (iii) of Clause 2(a) cannot be considered as wholly consumed, if the SEZ has a DTA unit with business operations.
5.4 Therefore, Notification No.17/2011-ST dated 01.03.2011 from Clauses 2(a) and 2(d), it is clear that for the services used for the authorised operations which are wholly consumed within the SEZ unit, option exists not to pay the service tax ab initio or claim refund in terms of this Notification. The Wholly Consumed concept has been defined at Para 2(a)(iii) as an SEZ unit who does not own or carry on any business other than the operations in the SEZ. In other words, any SEZ unit who has DTA operations cannot be considered as using the services wholly consumed within the SEZ area, for the specified services other than Clause (i) and (ii) as defined under Clause 2(a) of the Page 29 of 41 ST/22105, 22106, 22107, 22109, 22110, 22111, 22112, 22117/2014 Notification No.17/2011-ST dated 01.03.2011. In the present case, the appellant having a DTA unit for the specified services under clause (iii) of Clause 2(a) cannot be considered as wholly consumed services unless proved. When the specified services are shared between the SEZ unit and DTA unit, the refund is restricted to the extent of the ratio of export turnover to the total turnover for the given period to which the refund claim is filed. In view of the above, it is necessary for the appellant to prove that the specified services are used within the SEZ area and the services which are shared with DTA units will have to be processed in accordance with the formula as given below:
Maximum service tax paid on Export turnover refund = specified services used of SEZ Unit for for SEZ Authorised X the period Operations shared with DTA Unit for the period Total turnover for the period 5.5 Since there is no dispute that there have been DTA clearances and the appellant has also claimed specified services as not wholly consumed services, cannot claim refund under Table-A which is meant only for those units who do not have DTA operations. The Commissioner (Appeals) in the impugned order clearly indicates that the appellant initially indicated as 'Wholly Consumed' and subsequently claimed as 'Not Wholly Consumed' and refused to produce turnover details as is required for processing the refund claim as per the formula prescribed under Para 2(d) of the Notification. As seen from, the Form A-1 declaration, it is meant for those SEZ units who do not have DTA operations and Table-A is meant for refund arising out of Wholly Consumed specified services. In other words, it is meant only for those units who do not have DTA operations.
Table-B is meant for refund arising out of specified services other than those that are wholly consumed, since the appellant has a DTA unit they necessarily fall under this category and Page 30 of 41 ST/22105, 22106, 22107, 22109, 22110, 22111, 22112, 22117/2014 hence, the production of turnover details as per the formula needs to be provided for processing the refund claim.
5.6 Subsequent to Notification No.17/2011-ST dated 01.03.2011, Circular No. 142/11/2011-S.T., dated 18-5-2011 was issued, which reads as:
Refund of Service tax to SEZ units/developers -- Clarifications Circular No. 142/11/2011-S.T., dated 18-5-2011 F.No. 354/30/2011-TRU Government of India Ministry of Finance (Department of Revenue) Central Board of Excise & Customs, New Delhi Subject : SEZ - Service Tax Refund - Regarding.
Subsequent to the issuance of Notification 17/2011-S.T., dated 1-3- 2011, representations have been received seeking clarification on certain doubts. These doubts and clarifications are as follows :
Sl. Questions Clarifications
No.
1. To claim the refund arising out In the notification, there is no of service tax paid under difference in treatment of section 66A, no proforma is service tax paid under section prescribed in the notification; 66 and section 66A of Finance how to claim it? Act, 1994. Where refund arises, Table-A, in Form A-2 can be used for making a refund claim.
2. (i) In the notification, what is All taxable services (under the treatment for service tax section 66 or section 66A) paid on taxable services which received by a SEZ do not fall in the category of Unit/Developer for the "wholly consumed services", authorised operations, have and also are not 'shared been exempted in the first services? Is refund available? paragraph of notification
(ii) Whether in the case of 17/2011-S.T., subject to category (iii) services referred conditions.
in paragraph 2(a) of the In Paragraph 2, conditions notification, 'proportionate attached to this exemption are refund' applies to only 'shared prescribed. In terms of services' i.e. services that are paragraph 2(a), refund route is used both for SEZ (Special the default option for all who Economic Zone) authorised intend to claim the exemption operations as well as DTA granted by the notification in its Page 31 of 41 ST/22105, 22106, 22107, 22109, 22110, 22111, 22112, 22117/2014 Sl. Questions Clarifications No. (Domestic Tariff Area) first paragraph. However, an operations? exception is provided in the form of ab initio (upfront) exemption, to the 'wholly consumed' services.
Services which fall outside the definition of 'wholly consumed' services can be categorized as those which are used exclusively by the SEZ Unit/Developer, for the authorised operations in SEZ or shared with DTA operations.
Para 2(d) of the notification
is applicable to refund
arising from 'shared
services' only. Thus
exemption to services
exclusively used for the
authorised operations of SEZ
Unit/Developer, will
continue to be available by
way of refund, as specified in
paragraph 2(a) itself,
subject to other conditions.
To claim this refund, Table-
A, provided in Form A-2 may
be used.
It is clarified that only such
services shall be considered
as exclusively used by SEZ
Unit/Developer, for the
authorised operations, as
they satisfy the following
criteria :
(i) Invoice is raised in the
name of the SEZ
Unit/Developer or in the
invoice, it is mentioned that
the taxable services are
supplied to the SEZ
Unit/Developer for the
Page 32 of 41
ST/22105, 22106, 22107, 22109, 22110, 22111, 22112, 22117/2014 Sl. Questions Clarifications No. authorised operations;
(ii) Such services are
approved by the 'Unit
Approval Committee (UAC)',
as required for the
authorised operations;
(iii) Receipt and use of
such services in the
authorised operations are
accounted for in the books of
accounts of the SEZ Unit/
Developer.
3. Meaning of the expression The expression refers to an
'who does not own or carry on entity which is carrying out
any business other than the business operations in SEZ and operations in the SEZ' also DTA. Merely having an appearing in paragraph office in the DTA for purpose of 2(a)(iii) of the notification, liaison/business promotion, does which creates a difference not restrict a SEZ Unit from between 'standalone' and availing benefit extended to a 'non-standalone' SEZ standalone unit.
Unit/Developer, may be
clarified.
4. Whether Approval by UAC is Yes. Unit Approval Committee necessary, to claim benefit (UAC) of the SEZ determines under the notification? goods and services required for the authorised operations of a Unit/Developer, under the SEZ law. Hence approval of the UAC is necessary for availing the notification benefit, on the taxable services.
5. (i) Does condition (c) In respect of category (i) and prescribed in paragraph 2 of (ii) services listed in paragraph the notification, restrict the 2(a), upfront exemption is made non-standalone Units/ available to all SEZ Developers, from availing Units/Developers, who fulfill the upfront exemption for wholly conditions of notification; only consumed services, which fall in the case of category under category (i) and (ii) of (iii), difference is created para 2(a) of the notification? between standalone and non-
Page 33 of 41ST/22105, 22106, 22107, 22109, 22110, 22111, 22112, 22117/2014 Sl. Questions Clarifications No.
(ii) For whom and for what standalone SEZ purpose, Declaration in A-1 is Units/Developers.
required? Declaration in Form A-1 is
required to be produced, to a
service provider, to claim
upfront exemption (after
striking out the inapplicable
portion). This is a one-time
Declaration. Original Declaration
can be retained with the SEZ
Unit/Developer for business
record or for production to the
jurisdictional Central
Excise/Service Tax authorities, if
need be, for any verification; a
copy has to be retained by SEZ
Specified Officer; self-attested
photocopies of the Declaration
can be submitted to service
provider to avail upfront
exemption, subject to fulfillment
of other conditions mentioned in
the notification.
6. Meaning of the expression Total turnover includes turnover
"total turnover" found in of DTA Unit and also export
paragraph 2(d) of the turnover of SEZ Unit. This is the
notification is not clear: way to calculate proportionate
whether it refers to turnover refund. Table-C in Form A-2, of SEZ Unit or the entity illustrates this aspect. (including DTA and SEZ Unit).
This may be clarified.
7. A Developer may not have Generally, SEZ Developers will export turnover; therefore, he be using category (i) services cannot get refund of service listed in paragraph 2(a), relating tax based on the formula to immovable property located provided for shared services in within SEZ; upfront exemption paragraph 2(d) of the is available for these services, notification: therefore, it may and category (ii) services, be explained how a Developer irrespective of whether the can claim exemption under Developer is standalone or not. the notification? As another option, refund route Page 34 of 41 ST/22105, 22106, 22107, 22109, 22110, 22111, 22112, 22117/2014 Sl. Questions Clarifications No. is also available. In the case of category (iii) services if Developer is standalone, upfront exemption is available. If Developer is not standalone, on service tax paid on category (iii) services, which are exclusively used for the authorised operations in SEZ, he can avail exemption through refund route. 'Exclusive use' explained in clarification for question No.
2. may also be referred in this connection.
8. Whether proportionate Yes. Available.
amount of service tax paid on shared services that have not been refunded after applying the formula in paragraph 2(d), shall be available to the DTA Units of the entity as cenvat credit?
9. Whether consolidated refund If an entity is having multiple claim under 17/2011-ST can SEZ Units with a centralized be filed by an entity having service tax registration, more than one SEZ unit and a consolidated refund claim can be centralized service tax filed, provided separate registration. accounts are maintained for receipt and use of services for the authorised operations in SEZ Unit.
5.6 The above Board Circular No. 142/2011-ST dated 18.05.2011 clarifies that "All taxable services (under Section 66 or Section 66A) received by a SEZ Unit/Developer for the authorised operations, have been exempted in the first paragraph of Notification 17/2011-S.T., subject to conditions. It is also clarified that "Para 2(d) of the notification is applicable to refund arising from 'shared services' only. Thus, exemption to services exclusively used for the authorised operations of SEZ Page 35 of 41 ST/22105, 22106, 22107, 22109, 22110, 22111, 22112, 22117/2014 Unit/Developer, will continue to be available by way of refund, as specified in paragraph 2(a) itself, subject to other conditions. To claim this refund, Table-A, provided in Form A-2 may be used. It is clarified that only such services shall be considered as exclusively used by SEZ Unit/Developer, for the authorised operations, as they satisfy the following criteria:
(i) Invoice is raised in the name of the SEZ Unit/Developer or in the invoice, it is mentioned that the taxable services are supplied to the SEZ Unit/Developer for the authorised operations;
(ii) Such services are approved by the 'Unit Approval Committee (UAC)', as required for the authorised operations;
(iii) Receipt and use of such services in the authorised operations are accounted for in the books of accounts of the SEZ Unit/ Developer.
In view of the above, even for the non-standalone units such as the appellant, can avail the benefit of refund under Table-A meant for wholly consumed services provided that they prove that the specified services were supplied to SEZ unit and the services are exclusively used for the authorized operations within the SEZ units. From the impugned order, it is seen that the appellant had not produced any records to prove their claim that they are wholly consumed within the SEZ area and hence, the matter needs to be reexamined.
5.7 The Tribunal in the case of M/s. 3i Infotech Ltd. Vs. Commissioner of Service Tax, Mumbai II vide Final Order No. A/87362/2018 18.09.2018 observed as follows:
"10.16 In the adjudication order, number of issues with regards to various services as provided to SEZ has been raised. It is settled law that the exemption in respect of supplies to SEZ has to be updated by way of refund. In the present case it is seen that during the period 01.09.2010 Page 36 of 41 ST/22105, 22106, 22107, 22109, 22110, 22111, 22112, 22117/2014 to 29.03.2011, the Notice have raised 44 invoices for a total amount of Rs.13,60,00,000/- on M/s. Geodesic Ltd., situated in SEEPZ, Mumbai, towards services names as 'Maintenance Management Module', 'Inventory & Purchase Module', 'Sales & Marketing Module', 'Production Management Module', 'Quality Management Module' and 'Project Management Module'. Specifically, these services are in relation to the software services and hence are leviable to service tax. In terms of Notification No. 9/2009-ST granted exemption to the specific services supplied to SEZ subject to condition that person liable to pay service tax shall pay service tax as applicable on the specified services provided to the developer or units of SEZ and SEZ shall claim refund of 73 Appeal No. ST/85707/14 service tax on the services provided to the developer of SEZ. Notification No. 9/2009- S.T was substituted by Notification 17-2011-ST which provided exemption from service tax subject to condition specified therein. One of the conditions specified was that the exemption shall be provided by way of refund of service tax. Accordingly, during the entire period the service provider is not eligible for first stage exemption from payment of service tax. He was required to pay service tax and either SEZ developer or unit located in SEZ could have claimed the exemption by way of refund of service tax. Further in the present case, appellant has not produced any evidence to show that the services provided by them or only or partly consumed within the SEZ or outside. Thus, there is no dispute about the fact that said exemption or not available to the appellant during the relevant period. Since Commissioner has not considered the matter on this aspect the issue needs to be remanded back 74 Appeal No. ST/85707/14 to him for consideration of the exemption in respect of services supplied to SEZ unit/ developer".
This order has been upheld by the Hon'ble Supreme Court as reported at 2024 (388) E.L.T. 272 (S.C.). Therefore, the question of extending the benefit of exemption to the appellant unless the conditions of the notifications are satisfied cannot be accepted as claimed by the appellant. Moreover, the Notification No.17/2011-ST dated 01.03.2011 read with Board Circular No. 142/11/2011-ST dated 18.05.2011 is only restricting the benefit of exemption to the authorised operations within the SEZ as is the terms of the SEZ policy. Therefore, we do not find any deviation as such.
Page 37 of 41ST/22105, 22106, 22107, 22109, 22110, 22111, 22112, 22117/2014 5.8 The Tribunal in the case of Adani Power Ltd. Versus Commissioner of Service Tax, Ahmedabad: 2016 (44) S.T.R. 146 (Tri. - Ahmd.) dated 02.02.2016 observed as follows:
"15. We find that there is no dispute that the assessee fulfilled the condition of Para 2(b) of the notification, as the assessee obtained a list of taxable services as required for authorized operation approved by the Approval Committee of the concerned SEZ. The learned Senior Advocate submits that the assessee does not own or carry out any business other than SEZ operation and furnished the declaration as per condition Para 2(c) of the notification. He has also referred to letter dated 4-10-2012 of the Specified officer of APSEZ, Mundra as quoted above, directing the assessee to file the refund claim of Service Tax in terms of Para 2(c) of the notification. Revenue is of the view that the specified services used for authorized operation were not wholly consumed within the SEZ in terms of Explanation (iii) of Proviso to Para 2(a) of the notification. We find that as per Para 2(a) of notification, the exemption shall be provided by way of refund of Service Tax paid on the specified services received for the authorized operation in a SEZ. Proviso to Para 2(a) had given option where the specified services received and used for authorized operation are wholly consumed within the SEZ, the assessee may not pay the Service Tax. The learned Senior Advocate submits that they have not availed the option as per proviso to Para 2(a) and filed refund claim of Service Tax paid on the specified services. The contention of the Revenue is that the services were not wholly consumed within the SEZ and the refund shall be restricted as per Para 2(d) of the notification. The expression "who does not own or carry on any business other than the operations in the SEZ" in the Explanation (iii) of proviso to Para 2(a), and the expression "are not wholly consumed within SEZ, i.e., shared between authorized operation in SEZ Unit and Domestic Tariff Area (DTA) Unit" in Para 2(d), of the notification, if read harmoniously, make it clear that the expression "wholly consumed" referred to the in the Explanation, would be applicable to sharing of business between authorized operation in SEZ Unit and DTA Unit. Thus, it is required to be ascertained sharing of business of specified services between SEZ Unit and DTA Unit. On perusal of the grounds of appeal filed by Revenue, we do not find any averment Page 38 of 41 ST/22105, 22106, 22107, 22109, 22110, 22111, 22112, 22117/2014 that there is a DTA unit of the assessee and therefore, Para 2(d) of notification cannot be invoked.
16. ....
17. There is a distinction between the expression "Sales in DTA" as referred in Rule 47 of SEZ Rules and the words "carry on any business other than operations in SEZ" and "sharing between authorised operation in SEZ Unit and DTA Unit" as referred in Para 2(a) and 2(d) of the notification. The word "business" is one of wide amplitude and it means an activity carried on continuously and systematically by a person by application of his labour or skill with a view to earning an income. The Hon'ble Supreme Court in the case of Commissioner of Income Tax, West Bengal v. Kolkata National Bank Ltd. - AIR 1959 SC 928, observed that the term "business" is of wide import and each case is to be determined with reference to particular kind of activity or occupation of the concerned person. In the present case, the assessee is engaged in authorized operation in SEZ as per approval of BOA. The surplus electricity supplied in DTA as per Rule 47 of SEZ Rules, which cannot be treated as a business. There is no material available on record that the assessee has a DTA Unit, it cannot be construed that the assessee is carrying out business other than operations in SEZ. So, we do not find any merit in the grounds of appeal filed by the Revenue.
18. ............. Thus, it is clearly evident that Ministry of Commerce and Industry had approved supply of power in DTA. It is already observed that the supply of surplus power in DTA is not the business of assessee. Rule 47 of SEZ Rules permitted to transfer surplus power in DTA, which is within the purview of authorized operation. So, the contention of the learned Authorised Representative that the assessee supplied the power to DTA is beyond the authorized operation, cannot be accepted.
19. It is significant to note that mere supply of surplus power in DTA as mentioned in Rule 47 of SEZ Rules, cannot be construed that the assessee carries on business, as there is no DTA Unit of the assessee".
There is no dispute that the appellant, in the present case, has exclusive DTA operations and therefore, the above decision relied upon by the appellant is clearly against them as far as the present facts are concerned.
Page 39 of 41ST/22105, 22106, 22107, 22109, 22110, 22111, 22112, 22117/2014 5.9 The reliance placed on by the appellant in the case Wardha Power Company LTD v. Commissioner of C. EX., Nagpur (Supra) is not at all relevant, to the present facts of the case, in as much as the presence of a DTA unit was not the criteria for denying the refund in the above case.
5.10 The reliance placed on by the appellant in the case MetLife Global Operations Support Center (P.) Ltd. v. Commissioner of Service Tax, New Delhi (Supra), the facts are on different issues, which are irrelevant to the present case. The Tribunal had observed that the refund cannot be rejected only for the reason that the appellant had not claimed ab initio exemption but had filed refund after payment of service tax. The Tribunal observed that:
"the substantive benefit of service tax exemption provided under Section 26 of the SEZ Act read with Rule 31 of the SEZ Rules cannot be denied on procedural grounds. It is not in dispute that the appellant was not required to deposit service tax under the notification dated May 20, 2009, but service tax was deposited. It cannot be urged that the appellant is not entitled to claim refund because of a mistake in depositing service tax even if it was not required to be deposited. This issue has been examined while dealing with the applicability of the Section 26(1) of the SEZ Act".
5.11 In view of the above, its pertinent to note that the substantial benefit of the exemption is not being denied to the appellant. The fact that the appellant is an SEZ unit with DTA operations, it goes without saying that the appellant is not eligible for any benefit for the DTA operations. Therefore, it is necessary for the appellant to prove that the specified services are exclusively used for the authorized operations within the SEZ area. In the present case, admittedly, the appellant used specified services in both the SEZ area and the DTA operations as shown in the table below:
Page 40 of 41ST/22105, 22106, 22107, 22109, 22110, 22111, 22112, 22117/2014 Sl. Services Category/Claim No.
(a) Information Technology Exclusive used and refund Software Service claimed in entirety under
(b) Control Tower Service Table A in Form A2
(c) Banking and Other Financial Claimed on pro rata basis in Services terms of formula Prescribed in
(d) Freight Forwarding Para 2(d) of the Notification
(e) Courier Services, etc. 17/2011 St Dated 01.03.2011 5.12 Therefore, there is no dispute that the appellant is eligible for the benefit of exemption or refund of service tax paid on the specified services. However, the fact that they also have a DTA unit will not entitle them the benefit of exemption or refund unless it is proved that the specified services are used for the authorised operations within the SEZ area and for all the services shared with the DTA they have to necessarily follow the formula as per the Notification No.17/2011-ST dated 01.03.2011. In view of the above observations, the matter stands remanded to the Original Authority for processing the refund claims based on the above terms. It is needless to say that the appellant have to produce requisite documents in support of their claim as discussed above and the Original Authority to provide an opportunity to the appellant of being heard.
6. The impugned order is set aside and all the appeals stand remanded on the above terms.
(Order pronounced in Open Court on 14.11.2024.) (D.M. MISRA) MEMBER (JUDICIAL) (R BHAGYA DEVI) MEMBER (TECHNICAL) rv Page 41 of 41