Splitting Invoices for Furniture and Building Rent Should Not Deny Legitimate Refund When Service Tax is Properly Paid: CESTAT [Read Order]

The Ahmedabad Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that splitting invoices between furniture and building rent should not lead to denial of a refund when service tax has been properly paid under the category of “Renting of Immovable Property.”

Swan Defence and Heavy Industries Limited, the appellant, is a Special Economic Zone(SEZ) unit engaged in authorized operations from Pipavav Port, Gujarat. The appellant had filed a refund claim under Notification No. 12/2013-ST for service tax paid on input services.

Part of the refund amount was denied on the ground that the invoices were issued separately for renting of furniture and renting of the building, and that furniture did not qualify as immovable property.

The appellant’s counsel argued that the refund should not be denied merely because the invoice mentioned furniture separately. They pointed out that the service provider had classified the service as “Renting of Immovable Property” and paid service tax accordingly.

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They also explained that the renting service, including furniture, was approved by the SEZ Unit Approval Committee for use in authorized operations.

The revenue counsel argued that furniture does not fall under immovable property and therefore cannot be covered under the Renting of Immovable Property service category. They maintained that the refund was not admissible since the service was incorrectly claimed.

The two-member bench comprising Somesh Arora (Judicial Member) and Satendra Vikram Singh (Technical Member) observed that when a service is classified and taxed by the service provider under a valid service category, and is duly approved for SEZ use, refund cannot be denied solely on the basis of how the invoice is structured.

The tribunal explained that artificial splitting of charges should not be a reason to reject the refund if the service was used for authorized SEZ operations and tax was correctly paid.

The tribunal held that the denial of refund on this ground was not justified and remanded the matter to the original authority for verification of tax payment and sanctioning of the refund. The appeal was allowed.

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