Syntel Wins Key Tax Refund Case as CESTAT Backs SEZ Unit on Input Service Classification [Read Order]
The company emphasised that all services received by an SEZ unit are exempt under the SEZ Act, 2005, which has an overriding effect
SEZ - Unit - taxscan
SEZ - Unit - taxscan
The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Mumbai Bench has allowed an appeal filed by Syntel Solutions (India) Pvt. Ltd., directing the tax authorities to refund an amount of ₹4,20,215 along with applicable interest. The order sets aside the earlier decision of the Commissioner (Appeals) that had denied the refund claim related to input services used by the company’s Special Economic Zone (SEZ) unit in Pune.
The dispute concerned the rejection of a portion of Syntel’s service tax refund claim. The company, an SEZ unit providing software services treated as exports, had filed for a refund of ₹40,18,518.
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The refund sanctioning authority and later the Commissioner (Appeals) denied ₹4,20,215 on the grounds that the invoices for certain input services did not specifically describe them as 'Business Auxiliary Services' as approved by the DGFT for authorised operations. Instead, the authorities reclassified them as 'Support Services of Business or Commerce', contending they were ineligible for credit under Service Tax Rules.
Syntel contested this, arguing that the classification of services by the recipient should not be questioned and that since the introduction of the negative list regime in 2012, detailed classification on duty documents was no longer mandatory. The company emphasised that all services received by an SEZ unit are exempt under the SEZ Act, 2005, which has an overriding effect.
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The CESTAT bench, after hearing both sides, found merit in Syntel’s arguments. The Tribunal took note of a crucial Instruction No. 83 issued by the Department of Commerce, which provides a uniform default list of services eligible for SEZ units. This list includes ‘Business Support Service’ as an approved service.
The bench concluded that even if the services were classified as ‘Business Support Service’ and not ‘Business Auxiliary Service’, they were still entitled to be treated as valid input services for the SEZ unit, making the refund denial unjustified.
The bench comprising Dr. Suvendu Kumar Pati, Member (Judicial), and Mr. Anil G. Shakkarwar, Member (Technical), allowed the appeal. The Tribunal ordered the respondent department to pay the denied refund amount of ₹4,20,215 along with interest as per law within two months of receiving the order.
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