Relief to Cummins: CESTAT directs Adjudicating Authority to grant Refund of Service Tax paid for Services received in SEZ [Read Order]

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In a relief to Cummins Technologies India Pvt. Limited, the Customs, Excise and Service Taxes Appellate Tribunal ( CESTAT ) directed the Adjudicating Authority to grant the refund of service tax paid for the services received in the Special Economic Zone (SEZ).

The appellant is a unit located in SEZ at Pithampur, M.P. and is engaged in the manufacture of Turbochargers and parts, components, sub assembly of turbochargers, which is the authorised operation under the SEZ scheme.

The appellant has received ‘Customers Support Services’ from its associated enterprise, ‘Wuxi Cummins Turbo Technologies Limited’, China, under Agreement.

The appellant was receiving after sales services and support under warranty from Wuxi CTT and Wuxi CTT was raising monthly invoices on the appellant for their services. On such receipt of services the appellant accounted for the periodical invoices through books of accounts and discharged service tax liability on the same under Reverse Charge Mechanism (RCM) in terms of Section 66A of the Finance Act, for the period July, 2012 to July, 2013 on accrual basis. This agreement was eventually terminated under ‘Agreement of Termination’.

In order to effectuate the mandate of exemption of service tax to a unit or developer in SEZ, the Government has provided for the mechanism of refund of service tax under notification issued under Section 93(1) of the Finance Act.

The appellant claimed the exemption from payment of service tax, applied for a refund of the service tax paid under RCM in terms of Notification No. 42/2012-ST read with amending Notification No. 12/13-ST by filing a refund application on December 17, 2013, for the period July 2012 to July, 2013, for an amount of Rs.15,83,427.

The appellant contended that the Assistant Commissioner has travelled beyond the scope of show cause notice, as no such proportionate disallowance of a refund was proposed on the basis of the payment made.

The Commissioner (Appeals) observed that the service agreement was not solely for the SEZ unit, and hence the said ground was rejected. It was further observed that the appellant has submitted proof of payment of service tax, but has not submitted any evidence to establish that service tax was paid for services received and utilized by them.

The Tribunal consisting of a Judicial Member Anil Chaudhary held that rightly discharged the service tax as recipient of service in terms of 2nd proviso to Rule 7 of the Point of Taxation Rules.

The tribunal found that there is no such essential condition of payment of amount to the service provider.

“The Adjudicating Authority is directed to grant the refund of Rs.11,23,911/- within a period of 45 days from the receipt of this order alongwith interest as per rules,” the CESTAT said.

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