By TIOL News Service

MUMBAI, NOV 13, 2018: THE appellant is a unit located in SEZ area and was availing the benefit of Notification No. 17/2011-ST and 40/2012-ST.

Where the services so received by the SEZ assessee are used for authorized operations and are wholly consumed within the SEZ area, the provider of such services or the receiver of such services on reverse charge basis, as the case may be, has the option not to pay the service tax ab initio instead of the unit claiming exemption by way of refund in terms of the notification.

Further, if the service tax stands paid, the SEZ unit would be entitled to the refund of such service tax paid by them in respect of the services utilized for authorized operations in the area. Such refund is subject to certain conditions. One such condition is that the unit will not take the CENVAT credit of the service tax paid on the specified services.

The appellant in the present case opted for the second mode of exemption i.e. filing of refund claim in respect of service tax paid by them on various services.

Incidentally, they were maintaining a record showing the quantum of service tax paid by them in respect of various services so received.

Since the assessee had reflected the said service tax in their ST-3 returns, Revenue entertained a view that they have availed the CENVAT credit of service tax so paid by them and as such, the condition of the notification stands violated by them.

Consequently, proceedings were initiated for denial of the refund claim, resulting in passing of the impugned order which is appealed against.

The appellant submits that they have merely maintained a record of the service tax so paid by them in respect of various input services and the so-called credit of service tax does not stand utilized by them thus satisfying the conditions of the notification.

The Bench considered the submissions and observed -

+ The question required to be decided in the present appeal is as to what exactly is the meaning of the expression "taken" appearing in sub-clause (g) of Explanation (2) appended to the notification [40/2012-ST] in question.

+ A mere maintenance of an account showing the total quantum of service tax paid by the assessee cannot be held to be availment of cenvat credit. The mere entries in such records which are not even prescribed statutory records, cannot lead to the inevitable conclusion that the assessee has taken the credit.

+ Similarly, the reflection of such account in the ST-3 returns so as to let the department know about the total service tax quantum earned by the assessee will also not amount to the fact that the assessee has taken and utilized the credit.

+ Not only that the appellant in their subsequent ST-3 returns has again shown the opening balance of such account maintained by them as zero and has reflected the total service tax earned by them in that period. The appreciation of all the above facts leads to only one inevitable conclusion that no CENVAT credit was availed by the assessee and as such, there was no violation of the condition of the notification.

+ Even the lower authorities in their impugned orders have nowhere disputed the fact that such amount of service tax reflected by them in their ST-3 returns was utilized by them.

+ The underlying crux of the notification is that double benefit of availment and utilization of the cenvat credit as also for refund of the same should not be granted to an SEZ unit.

Concluding that there is no justifiable reason to uphold the impugned order, the same was set aside and the appeal was allowed with consequential relief.

(See 2018-TIOL-3417-CESTAT-MUM)