The Kolkata bench of Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ) has allowed the refund of accumulated CENVAT Credit to Larsen & Toubro, which was accrued while rendering services to SEZ developers. The bench ruled the appellant is entitled to interest on delayed refund payment.
The case involved two appeals—one filed by Larsen & Toubro Ltd. and the other by Shapoorji Pallonji & Co. Ltd.—both challenging the rejection of refund claims related to input CENVAT credit accumulated while providing services to Tata Consultancy Services at SEZ New Town, Kolkata. The refund claims were initially denied on the grounds of non-fulfillment of conditions under Notification No. 27/2012 CE [N.T.] dated 18.06.2012.
The appellants argued that the authorities wrongly applied certain provisions, including Rule 6A and references to the Foreign Trade Policy (FTP) and a public notice issued by the Ministry of Commerce, which were irrelevant to their case.
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They stated that similar refund claims for earlier periods were accepted by the Commissioner of Central Excise (CCE) of Kolkata , and no further appeals were filed by the Department, thus setting a precedent.
The bench of Ashok Jindal (Judicial member) and K. Anpazhakan (Technical member) concluded that the services provided to SEZ developers are treated as exports under the SEZ Act and are entitled to rebates and refunds without the requirement of receiving payment in foreign exchange.
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It further held that the reliance on Rule 6A by the lower authorities was misplaced, as Rule 5 of the CENVAT Credit Rules did not necessitate its application.
Additionally, the tribunal pointed out that public notices regarding the Export Promotion Capital Goods (EPCG) licence, which were cited by the authorities, had no bearing on the case at hand.
The bench noted that Rule 6(7) of the CENVAT Credit Rules exempts the need to follow sub-rules [1] to [4] when taxable services are provided to an SEZ or its developer for authorised operations without paying tax. This means that the refund of accumulated credits is allowed, and it doesn’t depend on the export of services or receiving payment in foreign currency.
It added that the government had exempted the services supplied to SEZ in terms of notification no. 12/2013 ST dated 01.07.2013. Accordingly, the appellant is entitled to the refund of CENVAT Credit accumulated while providing services to the developer of the SEZ.
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Thus, the CESTAT set aside the orders denying the refund claims, granted the refund of CENVAT Credit, and ruled that the appellant is also entitled to interest on delayed payments.
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