SEZ developer is eligible for refund of service tax paid on various input services like company secretary, chartered accountant, security, legal consultancy etc.

[In the matter of AMRL Hitech City Ltd v. Commissioner of Central Excise & ST Tirunelveli]

Appeal No.ST/40661/2015

Date of hearing/decision: March 17, 2016 

BRIEF FACTS

1. The Appellant is registered as Multi Product Special Economic Zone (MPSEZ) as a developer of AMRL Hi-Tech City. The Appellant claimed the refund of credit paid on various input services under Rule 5 of CENVAT Credit Rules, 2004 (“CC Rules”) read with Notification No. 12/2013-ST dated July 01, 2013.
2. The Appellant claimed refund of Rs.89,82,783/- towards Service Tax paid on various input services. While scrutinizing the refund, it was found by the Department that Appellant was not eligible for refund on certain services amounting to Rs.18,13,434/- for which a Show Cause Notice was issued for denying refund claim to that extent mainly on the services viz. Company Secretary Service, Chartered Accountant Service, Security Service, Legal Consultancy services etc.
3. The adjudicating authority in his order sanctioned the refund claim of Rs.71,69,349/-, however rejected the refund of Rs.18,13,434/- on the ground that no evidence was available supporting that these services were used towards authorized operation of SEZ.
4. Being aggrieved, the Appellant filed an appeal before the Commissioner (Appeals). However, the Commissioner (Appeals) upheld the order of the adjudicating authority.
5. Hence, the Appeal was filed before the Hon’ble Tribunal Chennai against the order-in-appeal passed by the Commissioner (Appeals).

APPELLANT’s SUBMISSIONS

6. The Appellant submitted that eligibility of refund under Notification No.12/2003 and under Rule 5 of CC Rules is not in dispute as the adjudicating authority already sanctioned the refund for majority of the input services but rejected the claim on CA service, legal services and submits that majority amount of input services relates to legal services.
7. The Appellant also submitted that in respect of legal services, security services and GTA services they have paid Service Tax under reverse charge mechanism. The Appellant produced copy of bills, invoices raised by various clients towards legal fees under Company Secretary Service and under GTA service.
8. The Appellant submitted that as a developer of 2520 acres, the land was to be developed as a SEZ however it went into litigation and the Appellant had associated as a developer with TIDCO as joint venture and they had to pay legal fees for that litigation i.e. Appeal Suit filed before the Madurai Bench of Hon’ble High Court of Madras. The legal fees were paid to various advocates, Additional Solicitor General.
9. The Appellant also proved that all expenses incurred as a part of developing the SEZ. Therefore, they are input services for a developer. 

DEPARTMENT’s CONTENTION

10. The Departmental representative reiterated the findings of the adjudicating authority wherein the Appellate Authority has recorded that Appellant has not produced any evidence to show that these services were used in relation to authorized operation of SEZ as a developer. 

TRIBUNAL’s ORDER

11. The Hon’ble Tribunal observed that there was no dispute on the fact that Appellant being a developer was registered with Development Commissioner, MEPZ, Special Economic Zone, Chennai. On perusal of the Development Commissioner’s letter wherein the unit of Approval committee had approved the list of specified services for claiming the benefit under Notification 12/2013.
12. On perusal of the list of services which contained 47 services (also annexed with the Memorandum of Appeal) vide Sl.No.7, 11, 21, 22, 26 & 32 which relates to approval list of specified services viz. Chartered Accountant service, Company Secretary Services, GTA service, ITS service, Legal Consultancy Service and Security Agency services respectively.
13. The committee had approved the said list of services and the Appellant is eligible for claiming the benefit under Rule 5 of CCR. On perusal of the SCN and the impugned order, the only ground on which the refund has been rejected was that no evidence was submitted by the Appellant in supporting that these services were used in the operation of SEZ developer.
14. On perusal of various bills, and invoice submitted before the Bench, the Hon’ble Tribunal observed that there was Invoice dated 3.12.2013 issued by a Company Secretaries towards Retainer-ship fee and another Invoice dated 31.10.2013 issued by a Chartered Accountant for conducting the statutory audit of the Financial Year 2012-13.
15. Similarly, GTA for transport of goods service had been paid and the Appellant had used the services as a developer. Therefore, they are eligible for service tax on Chartered Accountant, Security Agency service, GTA service and Company Secretary Service and IT service.
16. As regards legal services on perusal of various bills, and invoice, the Hon’ble Tribunal observed that one invoice has been raised by the Additional Solicitor General of India for appearing before Hon’ble Madurai Bench of Madras High Court on 13.1.2013 wherein Rs.10,00,000/- was paid. There is also one Invoice raised on AMRL Hitech City Ltd. towards professional charges in connection with appearing before Hon’ble Madurai Bench of High Court, wherein the Appellant has paid legal fees of Rs.10,05,000/-.
17. The Hon’ble Tribunal observed that a perusal of these invoices clearly show that fees have been paid for the appeal suit. The Tribunal also observed that from the bills, wherein it has been clearly mentioned that amount has been paid in connection with Appeal Suit (A.S.No.191 to 193/2006 and A.S. No.191 and 192/2008) which was related to Madurai Land Acquisition matters pending before Madurai Bench of the Hon’ble Madras High Court. The Appellant has remitted the Service Tax under reverse charge under the services of legal consultancy service.
18. The Hon’ble Tribunal observed that bills and remittances of Service Tax clearly confirm that Appellant being a developer of AMRL Hi-Tech City has to fight legal case. It is informed by the consultant that ultimately Hon’ble Madurai Bench of High Court allowed the appeal in their favour. Since the case relates to land acquisition of 2520 acres the input services in dispute were used as authorized operation of SEZ as a developer. In view of above, the Hon’ble Tribunal held that Appellant is eligible for refund under Rule 5 of CCR read with Notification No.12/2003 as amended on the input services i.e. Company Secretary Service, Chartered Accountant service, Security service, Legal Consultancy service, ITS service, GTA service.
19. The Hon’ble Tribunal allowed the appeal with consequential relief and held that Appellant is eligible for refund of Rs.18,13,434/- subject to verification by the original authority and Hon’ble Tribunal directed the Appellant to produce all the original invoice documents, High Court orders, if any before original authority.

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