CESTAT grants relief to Reliance: Delay in Filing Refund Claim, simply a Procedural Pause, benefit Exemption Notification

CESTAT grants relief to Reliance: Delay in Filing Refund Claim, simply a Procedural Pause, benefit Exemption Notification

Reliance Industries was granted relief by the Ahmedabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) after it ruled that delay in filing the refund claim was simply a procedural lapse and that the substantial benefit of the exemption notification cannot be denied.

Respondent, Reliance Industries is an SEZ Unit that had filed refund claims under Notification No.12/2013-ST dated 1st July, 2013. It claimed refund of service tax paid to service providers of taxable services received by them in carrying out authorized operations within their SEZ unit. It was paid under reverse charge mechanism for taxable services received for authorized activities within their SEZ unit and refunded under Rule 7 of the Cenvat Credit Rules, 2004 by service tax on ISD invoices distributed to their SEZ unit. Refund claims for the full amount requested by the respondent were sanctioned by the adjudicating authority via Order-in-Original.

The developer or SEZ Unit must file the refund claim within one year from the end of the month in which service tax was paid to the registered service provider, as stipulated in Paragraph 3(III)(e) of the notification. Due to this condition, the payment of service tax must be made by SEZ units. In the present case, only are services covered by invoices that are exclusive to the SEZ unit(s) and of which a refund is claimed under table-I Payment of service tax is made directly to the service provider by the SEZ.

Nevertheless, if all the services attributed to the SEZ Unit and the DTA Unit of the respondent company were paid by the Head Office of the respondent's SEZ Unit and the credit for the services attributed to the SEZ Unit was distributed to the respondent's SEZ Unit through one ISD invoice. Due to the non-payment of this service tax by the respondent's SEZ Unit, the condition of clause (e) of paragraph (III) of the notification shall not apply, owing to the fact that said clause applies only when payment is made directly to the service provider by the SEZ when the services are exclusively used by the SEZ.

There is no doubt in legislators' minds that the one-year period is only applicable in the case of direct payments made by an SEZ unit and not when the unit's Head Office makes the payment.

Moreover, Ramesh Nair, the Judicial Member and Raju, the Technical Member, found that there had been a delay in the refund claim, which they hold to be in violation of Clause (e), Para 3 (III). It cannot be argued that a procedural lapse will undermine the substantial benefit of the exemption notification, which is granted by way of a refund of service tax in a SEZ.