CESTAT allows Service Tax Refund for Nokia, Denial on Rent-a-Cab, Outdoor Catering & Security Services Set Aside [Read Order]
SEZ Approval Committee has approved services like Rent-a-Cab, Outdoor Catering, CHA services and Security services as authorised services, refund cannot be denied merely because the department considers them unrelated to manufacturing.
The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT ) has allowed refund of service tax amounting to Rs. 46 lakhs denied to Nokia Solutions and Networks India Pvt. Ltd.
Nokia filed refund claims related to service tax paid on specified services used in its SEZ operations at its Sriperumbudur unit. However the same was rejected.
The rejected refund related to three categories: (i) Rent-a-Cab, Outdoor Catering and DTA clearance-related services including CHA services (₹44,45,035), (ii) Security Agency services consumed within the SEZ (₹1,70,998), and (iii)invoices raised on the Gurgaon unit instead of the SEZ unit (₹4,220).
The department asserted that these services were not directly linked to “manufacture” and hence could not be treated as eligible for refund under the SEZ service tax exemption notifications.
Before the Tribunal, the appellant-Nokia submitted that the services in question were already approved by the SEZ Approval Committee as “specified services” for authorised operations, and therefore refund cannot be denied merely by questioning their essentiality or by treating them as welfare-related services.
Nokia relied on Hexaware Technologies Ltd., where it was held that once services are approved and tax payment is established, refund should be granted, subject to verification of conditions such as non-availment of CENVAT credit and use for authorised operations.
The appellant also said that under the SEZ Act, supplies/services for authorised operations enjoy a statutory tax immunity, and refund notifications cannot be interpreted to impose restrictions that defeat the SEZ exemption intent
The denial by claiming that Rent-a-Cab and Outdoor Catering were primarily staff welfare services and not part of authorised operations, and that DTA clearance-related services were not required for manufacturing activity within the SEZ, contended the Revenue.
On the issue of Security Agency services, the department contended that since services consumed wholly within SEZ are “unconditionally exempt” under the amended notification framework, refund route should not be available, and hence the claim was rightly rejected.
It was also argued that invoices issued to a different unit (Gurgaon) could not be treated as services received by the SEZ unit for refund purposes.
The bench of Vasa Seshagiri Rao (Technical member) confirmed that where the SEZ Approval Committee has approved services like Rent-a-Cab, Outdoor Catering, CHA services and Security services as authorised services, refund cannot be denied merely because the department considers them unrelated to manufacturing.
It further rejected the reasoning that refund is barred simply because the services were consumed entirely within the SEZ, relying on settled jurisprudence that the SEZ Act provides an overriding tax exemption and the notification mechanism is only procedural to operationalise the benefit.
Accordingly, CESTAT set aside the rejection of refund for the major portion and allowed Nokia’s refund claims relating to Rent-a-Cab, Outdoor Catering, DTA clearance-related services and Security Agency services.
However, the Tribunal upheld the denial of ₹4,220, holding that invoices were not raised on the SEZ unit. Therefore the bench granted partial relief to Nokia.
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