Order Date – 30 October 2023

Parties: M/s. Cummins Turbo Technology(a division of Cummins Technologies India Ltd.) Vs Commissioner of Customs, Central Excise & Central Tax, Indore

Facts –

• The Appellant, M/s. Cummins Turbo Technology, is a unit located in Special Economic Zone. They also have a domestic unit and corporate office which is registered as an Input Service Distributor. The corporate office distributes the CENVAT credit of service tax paid on such services to its two units through ISD invoices as per the Service Tax Rules.
• They filed refund claim under the Service Tax exemption notification No. 12/2013-ST issued for services provided to the developers and units located in the SEZs.
• Four of the claims were rejected since they had been filed after one year from the date on which the service tax was paid to the service provider and hence they did not meet the time limit set in the exemption notification. Another four refund were sanctioned but no interest were allowed. On an appeal by the department these claim also rejected on the ground that the applications were filed beyond one year.

Issue –

• Whether the appellant is entitled to refund of service tax paid on various input services which it had received from its corporate office through ISD invoices? Whether they are eligible to interest?

Order –

• The Tribunal observed that Section 51 of the SEZ Act overrides the provisions of the other Acts and therefore, service tax is always exempted for the services provided to developers and units in SEZ regardless of any provisions of the Finance Act, 1994.
• Thus, the charge of excise duty under section 3 of the Central Excise Act, the charge of customs duty under section 12 of the Customs Act and the charge of service tax under sections 66, 66A and 66B of the Finance Act, 1994 will not apply to goods and services supplied to developers and units for authorized operations in the SEZ areas by virtue of the overriding provisions of the SEZ Act. 
• Hence it was held that the exemption notifications issued under the Finance Act, 1994 are redundant because service tax was already exempted by the Parliament by section 26 of the SEZ Act. Any conditions in such notifications are also, therefore, irrelevant and need not be fulfilled.
• Any amount paid as representing service tax either in the services provided directly to the SEZ units under invoices issued by the service providers or indirectly through the ISD invoices issued by the input service distributor are merely deposits and need to be refunded.
• Further it was found that once the SEZ unit is out of the purview of the Finance Act, 1994 itself, the provisions for payment of interest under it also do not apply to the refunds in question.