The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Hyderabad Bench ruled that Special Economic Zone (SEZ) Act has an overriding effect over all Service Tax laws, rejection of refund claims not lawful as approval from Unit Approval Committee (UAC) is only procedural and not mandatory.
The Appellant, M/s Divi’s Laboratories Ltd. filed a refund claim electronically claiming refund of service tax of Rs. 4,09,41,510/-, for appeal the refund claim of Rs. 5,20,83,175/- was paid on 21.10.2017. Both claims were paid by them on input services used in their SEZ operations during the period from 01.04.2017 to 30.06.2017 under the provisions of Notification dated 01.07.2013 as amended. Refund was claimed on the various input services used in their SEZ operations as listed in the show cause notice.
The Show Cause Notice proposed rejection of the said refund claim but to the extent of Rs. 3,15,93,377/- in appeal and to the extent of Rs.4,95,72,796/- in appeal on the ground that the said services are not approved by the Development Commissioner, VSEZ except for partial refund as shown in the list of invoices as per the provisions of Notification dated 01.07.2013. The said prayer was confirmed but only for the amount of Rs. 37,21,746/-. However the refund claim of Rs. 3,72,19,764/-was sanctioned.
It is submitted on behalf of appellant that appellant is an SEZ Unit. The chief contention of the Department for the part-rejection of the refund claim relates to service tax amount paid by the appellant on ocean freight services which is not included/covered under the approved list by the approval committee and hence not included in the appellant’s approved list of services. In this regard, the appellants submit that the issue of “ocean freight” was covered under the negative list until 01.06.2016. Further, the Notification No. 09/2016-Service Tax dated 01.03.2016, air freight was included in Notification No. 25/2012-Service Tax dated 20.06.2012, (Mega Exemption Notification), however, service of ocean freight has become taxable from 01.06.2016.
The coram of judicial member, Rachna Gupta ruled that the findings of the (Appeals) that since ocean freight service has been included in the list of services with SEZ services authorities only on 27.11.2017 i.e. subsequent to their refund application, the retrospective application can not be allowed is not sustainable. The Commissioner is held to have failed to appreciate the judicial precedents. Order under challenge accordingly is hereby set aside.
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