Service Tax Refund Admissible On Trenching Pipeline Installed Partly In SEZ And Partly Outside But For Use In Operation Of The SEZ: CESTAT

The Ahmedabad Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that service tax refunds on trenching pipelines installed partly in SEZ and partly outside but for use in the operation of the SEZ are admissible.

The two-member bench of Ramesh Nair (Judicial Member) and Raju (Technical Member) has observed that the construction service received in relation to trenching and pipeline construction was exclusively for SEZ only. A part of the same will be outside the premises of the SEZ, but that does not mean that service was received for anything other than authorised operations in the SEZ.

The appellant/assessee has received services such as construction service and CHA service in their SEZ on payment of service tax. Subsequently, a refund claim was filed under Notification No. 09/2009-ST as amended by 15/2009-ST.

The adjudicating authority rejected the refund claim on the ground that, as regards construction services, the service was wholly consumed within the SEZ. Therefore, it is not governed by Notification No. 09/2009.

As regards the Custom House Agent (CHA) Service, the refund was rejected by the adjudicating authority on the premise and assumption that mention of various costs and expenses such as staff salary, office rent, electricity, security services, etc. in the invoice of CHA meant that services rendered related to the costs and expenses were not CHA services.

As regards the construction service, the refund was rejected on the ground that trenching work for an irrigation network was not fully within the SEZ and partly outside the SEZ, therefore the refund was claimed and rejected under Notification No. 09/2009-ST.

The Commissioner (Appeals) upheld the rejection of the refund claims.

The appellant contended that the services were availed wholly within the SEZ; therefore, he should have allowed the refund. Even though service tax was paid, which was otherwise not payable, it should have been refunded. As regards the CHA service, even though CHA has charged service charges and rendered the different costs, salaries, and other expenses, etc. to the overall service, the same was provided by CHA towards the CHA service only.

The appellant contended that service was received for the authorised operation of SEZ. The irrigation project line was installed within the SEZ; however, part of it was installed outside but for the purpose of the SEZ only. Therefore, even though the entire construction was not carried out within the SEZ but was for the SEZ, the refund is admissible.

The tribunal held that once it is admitted that service tax is payable on the service received and consumed within the SEZ, it is not taxable, and the same is to be refunded even without applying Notification No. 09/2009.

The tribunal has held that it is not a CHA service as the invoice shows various costs such as salaries and other expenses. Even though the total service charge of CHA was split into different heads, the fact remains that service was provided by CHA for CHA service only. As a result, simply because the invoice is for an amount related to various expenses but not to the CHA service, the refund cannot be denied.

Case Title: Reliance Jamnagar Infrastructure Limited Versus Commissioner of Central Excise & ST

Citation: Service Tax Appeal No. 447 of 2012-DB

Date: 28.11.2022

Counsel For Appellant: Advocate Dimple Gohil

Counsel For Respondent: Superintendent (AR) Rajesh K Agarwal

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