CESTAT Confirms Employee Insurance Qualifies as Authorised Service for SEZ Tax Refunds [Read Order]

In a recent ruling, the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Bengaluru, has ruled that employee-related insurance services such as Group Medical and Personal Accident Insurance qualify as authorised operations under Special EconomicZones (SEZ) regulations.

The appeals arose from orders dated 11 February 2019, in which the Commissioner of Central Tax (Appeals-II), Bengaluru, had rejected Appellant ANZ’s refund requests for the quarters April–June 2016 and January–March 2017. The Commissioner reasoned that the insurance services were not listed as “input services” approved by the SEZ’s Unit Approval Committee.

Appearing for the appellant, Preetha Mahadevan argued that Notification No. 12/2013-ST (dated 1 July 2013) does not require that services qualify as “input services” under the Cenvat Credit Rules. The only condition is that they must be used for authorized SEZ operations, she said, making the rejection unsustainable.

On the other hand, the revenue reiterated the Commissioner's findings.

After hearing both sides, the bench comprising P.A. Augustian ( Judicial Member)and R. Bhagya Devi (Technical Member )agreed, observing that the notification provides exemption or refund for services used in authorized operations, and that General Insurance Services—already approved by the Development Commissioner include employee-related insurance.

The tribunal, citing precedents such as Lowe’s Services India Pvt. Ltd. (2021) and Barclays Global Service Centre Pvt. Ltd., noted that medical and accident insurance are recognized as part of the general insurance business and that non-inclusion in the approval list cannot be a ground for denial. It also stated that the SEZ Act, 2005, has an overriding effect over other laws, including the Cenvat Credit Rules.

The bench observed that “In view of the above, we do not find any merit in the impugned order in rejecting the refund claims filed by the appellant, hence the same is set aside”.

Accordingly, the Tribunal set aside the Commissioner’s order and directed that the refund be granted to Appellant, ANZ Support Services India, with consequential relief as per law.

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