Service Tax Refund Can’t Be Denied On Input Services Wholly Consumed Within SEZ: CESTAT

The Mumbai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that service tax refunds cannot be denied on input services that are wholly consumed within the SEZ.

The bench of Ajay Sharma (Judicial Member) has observed that Section 26(i)(e) of the SEZ Act, 2005 specifically provides that all services imported into the SEZ to carry out authorized operations in the SEZ shall be exempt. In terms of Section 51 of the SEZ Act, the provisions of the SEZ Act shall have overriding effect over all provisions of any other law for the time being in force, and it is settled legal principle that any rule or notification cannot override the SEZ Act.

The issue raised was whether the appellants are eligible for a refund of service tax paid on specified services that are wholly consumed within the SEZ as per notification no. 9/2009-ST dated 03.03.2009 as amended by notification no. 15/2009-ST dated 20.05.2009.

The appellant filed a refund claim for service tax paid on the specified service used in relation to the authorized operations in the SEZ. The adjudicating authority sanctioned a refund claim amounting to Rs. 4,88,315 and rejected the claim for Rs. 1,95,127. Out of the total rejected claim, Rs. 187 was rejected on account of not being mentioned in the list of approved services; Rs. 3863 pertaining to club and association services was rejected on the ground of no nexus with the export; and Rs. 1,91,007 was rejected on the ground that the input services were wholly consumed within SEZ, which were unconditionally exempt from payment of service tax and therefore not eligible for a refund.

Against the rejection of the refund claim, the appellant filed an appeal before the Commissioner (Appeals). The Commissioner (Appeals) rejected the appeal and upheld the order of the adjudicating authority.

The appellant submitted that the claim of a refund that is wholly consumed within the SEZ cannot be denied if the service tax has been paid on it. Once the service tax is paid to the government, the eligibility for a refund cannot be denied. The notification cannot override the substantial benefit available to the assessee under the SEZ Act.

The tribunal set aside the order, and the appeal filed by the appellant was allowed.

Case Title: Vishay Semiconductor India Pvt. Ltd. Versus Commissioner of CGST & Central Excise

Citation: Service Tax Appeal No. 89075 of 2018

Date: 09.02.2023

Counsel For Appellant: CA Kamal Sharma

Counsel For Respondent: DC(AR) Nitin Ranjan

Click Here To Read The Order