Custom, Excise & Service Tax Tribunal
M/S Zydus Technologies Ltd vs Cst Ahmedabad on 5 February, 2015
In The Customs, Excise & Service Tax Appellate Tribunal West Zonal Bench At Ahmedabad Appeal No.ST/468,525/2011, ST/143,144,166/2012, ST/12939,13621/2013 (Arising out of OIA-97/2011/STC/KANPAZHAKAN /COMMR-A-/AHD, dt.25/04/2011, OIA-131/2011/STC/KANPAZHAKAN /COMMR-A-/AHD, dt.27/05/2011, OIA-318/2011/STC/KANPAZHAKAN /COMMR-A-/AHD, dt.20.12.2011, OIA-314/2011/STC/KANPAZHAKAN /COMMR-A-/AHD, dt.19.12.2011, OIA-322/2011-STC/KANPAZHAKAN /COMMR-A-/AHD, 22.12.2011, OIA-104/2013/STC/SKS/COMMR-A/AHD, dt.05.06.2013, OIA-165/2013-STC/SKS/COMMR-A-/AHD, dt.31.07.2013 passed by CST Ahmedabad) M/s Zydus Technologies Ltd Appellant CST Ahmedabad Respondent
Represented by:
For Appellant: Shri J.C. Patel, Advocate For Respondent: Dr. Jeetesh Nagori, Addl.Commissioner (AR) For approval and signature:
Mr. P.K. Das, Honble Member (Judicial) Mr. R.K. Singh, Honble Member (Technical)
1. Whether Press Reporters may be allowed to see the No Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3. Whether their Lordships wish to see the fair copy of Seen the order?
4. Whether order is to be circulated to the Departmental Yes authorities?
CORAM:
MR. P.K. DAS, HONBLE MEMBER (JUDICIAL) MR. R.K. SINGH, HONBLE MEMBER (TECHNICAL) Date of Hearing/Decision:05.02.2015 Order No. A/10108-10114/2015, dt.05.02.2015 Per: P.K. Das
1. A common issue is involved in these appeals and therefore, all are taken up for disposal.
2. The relevant facts of the case, in brief, are that the appellants are engaged in the manufacture of Pharmaceutical products in Pharmaceutical Special Economic Zone, under the Special Economic Zone Act, 2005 read with Special Economic Zone Rules, 2006. The appellants, during the period of setting up of the plant, before starting the commercial production, received various services and paid the service tax. The appellant obtained a letter of approval from the Development Commissioner for setting up of the plant for manufacturing of the Medicaments. Notification No.4/2004-ST, dt.31.03.2004, provides exemption from payment of service tax of any taxable service procured by a unit or a developer situated in a Special Economic Zone. The said notification was superseded by Notification No.9/2009-ST, dt.03.02.2009, directing that any taxable service procured by a unit or a developer in SEZ would liable to pay the service tax at appropriate rate and file a refund claim after following the procedure laid down therein. Notification No.9/2009-ST was amended by Notification No.15/2009-ST dt.28.05.2009 provided unconditional exemption to services within SEZ without filing refund claims. The present appeals relate to the refund claims filed under Notification No.9/2009-ST (supra) which were rejected by the lower authorities on various grounds. The Commissioner (Appeals) upheld the adjudication orders except in Appeal No.E/12939/2013 and E/13621/2013, where the appeal was partly allowed/rejected and partly remanded. Hence, the appellants filed these appeals before the Tribunal.
3. The ld.Advocate for the appellants submits that the main issue involved in these appeals is that the appellant paid the service tax before the commercial production and therefore, they are not eligible to claim the refund under the Notification No.9/2009-ST (supra). He submits that this issue is squarely covered in their favour in their own case [Zydus Tech. Ltd Vs CST Ahmedabad - 2013 (30) STR 616 (Tri-Ahmd)] which was upheld by Honble Gujarat High Court in the case of CST Vs Zydus Technologies Ltd 2014 (35) STR 515 (Guj). He further submits that in some cases, they have paid the service tax, but the refund was denied on the ground that the services were wholly rendered within the SEZ and therefore, the payment of service tax was not required. He submits that this issue is also covered in their favour in the case of Intas Pharma Ltd Vs CST Ahmedabad - 2013 (32) STR 543 (Tri-Ahmd) and Tata Consultancy Services Ltd Vs CCE (LTU) Mumbai 2013 (29) STR 393 (Tri). He further submits that the refund was also denied on the ground that the appellant failed to produce the proof that the service was consumed by them. In this context, it is submitted that the service provider raised the bills in the appellants name and it is clearly evident that they have consumed the service in SEZ. It is further submitted that there is no contrary evidence placed by the Revenue that it was not consumed by them. It is also submitted that the service is intangible nature and therefore, there is no presumption that the service was not used in SEZ. It is submitted that whatever the services were used in the SEZ, it would be eligible for refund as per the SEZ Act and Rules as observed by the Tribunal in the case of Intas Pharma Ltd (supra) and it has a over-riding effect to the Act by the Notification.
4. On the other hand, the ld.Authorised Representative for the Revenue drew our attention of the Bench to the relevant portion of the Notification No.9/2009. He submits that Clause (a) and (b) to the proviso of the said notification provides that the service should be used in the authorized operation in SEZ. He submits that Clause (a) of proviso to Para 2 of the said notification provides that the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise, as the case may be, after sufficient satisfaction that the said services have been actually used in relation to authorized operation in SEZ, refund of service tax paid in SEZ service used in relation to the authorized operation in the SEZ, would be allowed. In the present appeals, the appellants failed to demonstrate as to how the certain services were used in SEZ. He submits that in some cases, the refund was filed beyond the stipulated period. He further submits that the appellant claimed the benefit of exemption notification and the onus lies with the assessee to establish that the service used in SEZ. It is also contended that Section 26 and 31 of SEZ Act provides exemption subject to the services used for the authorized operation. The refund in respect of certain services beyond the list of the Development Commissioner are in clear violation of the condition of SEZ Act.
5. After hearing both the sides and on perusal of the records, we find that the main issue involved in these appeals are that the appellants filed the refund claim in terms of Notification No.9/2009-ST (supra) in respect of certain services which were used prior to commercial production. Both sides agreed that this issue is covered by the appellants own case as reported in 2013 (30) STR 616 (Tri-Ahmd), which was upheld by Honble Gujarat High Court. So, in our considered view, the denial of refund on this ground cannot be sustained. In this context, we reproduce below the relevant portion of the decision of Honble Gujarat High Court as under:
5.?Having heard Mr. Ravani, learned counsel appearing on behalf of the appellant-revenue and Mr. Mihir Joshi, learned Senior Advocate appearing on behalf of the respondent-assessee and considering the proposed substantial question of law and controversy raised, we are of the opinion that the controversy involved in the present appeal is now not res integra in view of the decision of this Court in the case of Cadila Healthcare Ltd. (supra). Identical question came to be considered by the Division Bench of this Court that any services rendered even for the period prior to the actual manufacture of final product can be said to be commercial activity/production or not and in para 5.1(xix), the Division Bench has observed and held as under :-
(xix)?In the facts of the present case the assessee is engaged in the manufacture of medicaments. By their very nature, the drugs manufactured by the assessee prior to final production thereof are required to be subjected to technical testing and analysis before entering into commercial production. For such purpose, the products are manufactured in small trial batches and thereafter, sent for testing and analysis purpose. Undisputedly, when the goods are removed for testing and analysis, excise duty has been paid thereon. Since production of medicaments are subject to approval by the regulatory authorities of various countries to which such drugs are exported, the assessee is required to obtain approval before starting commercial production. Thus the final product can be manufactured only upon approval of the regulatory authority after the product undergoes technical testing and analysis. Under the circumstances, it cannot be gainsaid that the activity of testing and analysis of the trial batches is in relation to the manufacture of final product. Unless such testing and analysis is carried out, it would not be possible to produce the final product inasmuch as unless the trial batches are sent for testing and analysis and approval is obtained, the final product cannot be manufactured. Under the circumstances, the services availed in respect of technical testing and analysis services are directly related to the manufacture of the final product. The contention of the department that unless the goods have reached the commercial production stage, CENVAT credit is not admissible in respect of the technical testing and analysis services availed in respect of the product at trial production stage, does not merit acceptance. Besides, the learned counsel for the assessee is justified in contending that when the product which is sent for testing and analysis is subject to payment of excise duty, the respondents cannot be heard to contend that CENVAT credit is not admissible on the service tax paid in respect of such service. Under the circumstances, the Tribunal was justified in holding that the assessee was entitled to avail of CENVAT credit in relation to service tax paid in relation to technical testing and analysis services availed by it. Considering the aforesaid facts and decision of this Court in the case of Cadila Healthcare Ltd. (supra), no error has been committed by the learned Tribunal in holding that the respondent shall be entitled to refund as claimed. No question of law much less any substantial question of law arise in the present appeal and the same deserves to be dismissed and is accordingly dismissed. However, it is clarified that in the present appeal we have not considered any other issue except the referred to hereinabove. With these present appeal is dismissed. In view of dismissal of the main Tax Appeal, no order in the OJ Civil Application No. 368 of 2013 for stay and the same is also consequently dismissed.
6. We also noticed that the Tribunal in the case of Intas Pharma Ltd (supra) held that under Section 7 and 26 of the SEZ Act 2005, the taxable service provided to developer or unit to carry out authorized operation in SEZ is exempted from service tax. The Notification No.9/2009-ST, cannot disentitle the immunity enjoyed by SEZ Act. The relevant portion of the said decision is reproduced below:-
11.?On true and fair construction of Notifications 9/2009 and 15/2009 issued under Section 93(1) of the Act, considered in the light of the overarching provisions of Sections 7 and 26(e) of the 2005 Act, the conclusion appears compelling that neither Notification 9/2009 nor 15/2009 disentitle immunity to Service Tax enjoined by the provisions of the 2005 Act. It therefore appears that Notification Nos. 9/2009 and 15/2009 merely contour the process by which the benefit of exemption/immunity to tax is operationalised. Notification Nos. 9/2009 and 15/2009 have provided a facilitative regime whereby a developer or units of SEZ, as recipients of taxable service are enabled the facility of claiming refund of Service Tax, remitted by taxable service providers in relation to the taxable services provided to a unit in a SEZ. On this harmonious construction, the immunity to Service Tax provided under Section 7 or 26 of the 2005 Act cannot be so interpreted as to be eclipsed the procedural prescriptions of Notification No. 9/2009 or 15/2009. These Notifications are calibrated to enable recipients of taxable services (exempt from liability to tax under the provisions of the 2005 Act), to claim refund of the Service Tax, wherever assessed and collected by Revenue or remitted otherwise by the taxable service provider, inadvertently. Considered in the light of this analysis, the substituted provisions, of clause/sub-paragraph c of Notification No. 15/2009 cannot be inferred to have imposed any disability on the recipient of services consumed wholly within the SEZ, from seeking refund of Service Tax remitted on such transactions, by the providers of such services.
12.?Therefore, the rejection of the appellants claim by the adjudicating authority and affirmation of such rejection by the Commissioner (Appeals), to the extent Rs. 56,650/-, in relation to Architect, Interior Decorators and Consulting Engineer services provided by M/s. Venkataramanan Associates, is unsustainable and is so declared. The order impugned herein namely the Order-in-Appeal dated 29-10-2012 is set aside. Appellant shall be entitled to refund of Rs. 56,650/-.
7. On the other issues, on a query from the Bench, the ld.Advocate placed a statement/chart before the Bench. But, all other issues are not clear from the said statement, as stated by the ld.Authorised Representative. Both sides failed to demonstrate and clarify the other issues, where the refund claims were denied and it is difficult for the Bench to decide the other issues.
8. In our considered view, the other issues should be examined by the Adjudicating Authority in the light of the decisions placed by ld.Advocate. It is seen that in the impugned orders, the Commissioner (Appeals) also had not split up the issues pertaining to admissibility of refunds in respect of individual service for reason other than the reasons covered in the judgment of CST Zydus Vs Technologies Ltd (supra) and Intas Pharma Ltd Vs CST and Tata Consultancy Services Ltd.
9. In view of above discussions, we set aside the impugned orders and direct the Adjudicating authority to decide the matters afresh as under:
(a) The appellants are eligible to get the refund in respect of services rendered prior to commercial production in the light of the decision of Honble Gujarat High Court in the appellants own case.
(b) The appellant is also entitled to get the refund for the services wholly consumed within the SEZ in the authorized operation in the light of the decision of Tata Consultancy Services Ltd (supra) and Intas Pharma Ltd (supra).
(c) Other issues would be decided on the basis of facts and case laws as placed by the ld.Advocate in accordance with the law.
10. As the appeals are of refund claim of SEZ unit, we direct the Adjudicating authority to decide this matter within 3 months from the date of receipt of this order, and the ld.Advocate undertakes to co-operate in the de-novo proceedings.
(Dictated & Pronounced in Court)
(R.K. Singh) (P.K. Das)
Member (Technical) Member (Judicial)
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