The Mumbai bench of the Customs Excise and Service Tax Appellate Tribunal ( CESTAT ) allowed the refund claim, ruling that the absence of prior approval for procuring waste disposal service was not a valid reason to deny the refund.
M/s Portescap India Pvt Ltd is in appeal against the denial of privilege, afforded to them as a unit established under section 15 of Special Economic Zones Act, 2005, and, thereby, to exemption from service tax under the authority of section 26 of Special Economic Zones Act, 2005.
The assessee had paid tax liabilities of ₹50,972 included in an invoice raised by the SEEPZ-SEZ Authority for renting immovable property, and ₹28,686 towards waste disposal, but their claim for refund was denied by the jurisdictional central excise authority, a decision that was upheld in the order of the Commissioner of CGST & Central Excise Service Tax.
Mr Mayur Jain, representing the assessee submitted that the refund was denied on the finding that the two services had not been incorporated in the list, entitled to avail such exemption, as allowed by the ‘Approval Committee’ of the Zone. It was pointed out that Instruction2 of Government of India in Department of Commerce, enumerating ‘default services’ for exemption, includes ‘renting of immovable property’ and that it is only such services as were not contained therein which require separate permission from the Approval Committee of the Zone.
It was further contended that ‘waste management service’ was incorporated in the approval accorded by the ‘Approval Committee’ though ex post facto.
Mr. Ajay Kumar Srivastava, representing the revenue submitted that the said services had not been approved by the Approval Committee of the Zone as on the date of procurement of services which is an essential requirement for eligibility for refund
Section 26 of Special Economic Zones Act, 2005 provides for goods to be exempted from duties of customs or central excise, as the case may be, and for ‘services’ to be exempted from tax to the extant required for carrying out ‘authorized operations’ in a special economic zone ( SEZ ).
Waste disposal’ may be a service but it was a service involving disposal of material which is certainly not unascertainable. It was also an essential, and even statutorily prescribed, requirement for undertaking of industrial activity and it is not in dispute that the said service has been rendered within the zone.
The findings of the lower authorities that approval had not been obtained ahead of procurement of the impugned service may, at best, be a procedural lapse which, in the absence of evidence that the said service has not been utilized in pursuance of carrying out of ‘authorized operations’, is not a valid ground for denial of refund.
The provisions of section 26 of Special Economic Zones Act, 2005 was not to be circumscribed by any procedural, or even any statutory provision, to the contrary as was amply evident from section 51 of Special Economic Zones Act, 2005.
The single member bench of the tribunal comprising C.J Mathew ( Technical member ) observed that the denial of refund by the lower authorities was not consistent with law and the assessee was entitled to refund of the entire claim. Appeal was accordingly allowed.
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